<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 8, 1999
REGISTRATION NO. 333-69535
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
THE BOYDS COLLECTION, LTD.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 5199 52-1418730
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation) Classification Code Number) Identification Number)
</TABLE>
350 SOUTH STREET
MCSHERRYSTOWN, PENNSYLVANIA 17344
(717) 633-9898
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------
C/O CHRISTINE L. BELL
THE BOYDS COLLECTION, LTD.
350 SOUTH STREET
MCSHERRYSTOWN, PENNSYLVANIA 17344
(717) 633-9898
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES OF ALL CORRESPONDENCE TO:
<TABLE>
<S> <C>
JOHN B. TEHAN, ESQ. PHILIP E. COVIELLO, ESQ.
SIMPSON THACHER & BARTLETT LATHAM & WATKINS
425 LEXINGTON AVENUE 885 THIRD AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10022
(212) 455-2000 (212) 906-1200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
TITLE OF MAXIMUM
SECURITIES TO AGGREGATE AMOUNT OF
BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
<S> <C> <C>
Common Stock, par value $.0001 per share........................ $320,000,000 $88,960
</TABLE>
(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.
(2) The Registrant previously paid $69,500 upon the original filing of this
Registration Statement on December 23, 1998 and so is submitting herewith
the net amount of $19,460.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SEC RELATING TO THESE SECURITIES IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
SUBJECT TO COMPLETION -- FEBRUARY 8, 1999
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PROSPECTUS
, 1999
[LOGO]
THE BOYDS COLLECTION, LTD.
16,000,000 SHARES OF COMMON STOCK
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THE BOYDS COLLECTION, LTD.
- We are a leading domestic designer, importer and distributor of branded,
high-quality, hand-crafted collectibles and other specialty giftware
products.
- We sell our products through an extensive network of independent gift and
collectibles retailers, premier department stores, selected catalogue
retailers and other electronic and retail channels.
- The Boyds Collection, Ltd.
350 South Street
McSherrystown, PA 17344
(717) 633-9898
PROPOSED SYMBOL & MARKET:
- FOB / NYSE
THE OFFERING:
- We are offering 9,250,000 of the shares and the selling stockholders
identified on page 10 of this prospectus are offering 6,750,000 of the
shares.
- The underwriters have an option to purchase an additional 2,400,000 shares
from the selling stockholders to cover over-allotments.
- We currently estimate that the price of the shares will be between $18 and
$20.
- This is our initial public offering, and no public market currently exists
for our shares.
- We plan to use the proceeds from the offering to redeem part of our
outstanding notes and to repay part of our bank term loan. We will not
receive any proceeds from the shares sold by the selling stockholders.
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<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
</TABLE>
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<TABLE>
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Boyds:
Proceeds to selling
stockholders:
</TABLE>
<TABLE>
<S> <C> <C>
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</TABLE>
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 13.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO.
<PAGE>
[PICTURES OF PRODUCTS]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................... 4
Risk Factors..................................... 13
Use of Proceeds.................................. 17
Dividend Policy.................................. 17
Capitalization................................... 18
Dilution......................................... 19
Selected Financial and Other Data................ 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 21
Business......................................... 28
Management....................................... 36
Certain Relationships and Related Transactions... 40
<CAPTION>
PAGE
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<S> <C>
Principal and Selling Stockholders............... 41
Description of Certain Indebtedness.............. 43
Description of Capital Stock..................... 45
Selected Provisions of Maryland Law and of Boyds'
Charter and Bylaws............................. 46
Shares Eligible for Future Sale.................. 48
Underwriters..................................... 50
Legal Matters.................................... 52
Experts.......................................... 53
Available Information............................ 53
Index to Consolidated Financial Statements....... F-1
Unaudited Pro Forma Consolidated Condensed
Financial Statements........................... P-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SECTION HIGHLIGHTS THE KEY INFORMATION CONTAINED IN THIS
PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING THE "RISK FACTORS,"
AND THE FINANCIAL STATEMENTS AND ALL NOTES. UNLESS THE CONTEXT OTHERWISE
SUGGESTS, "WE," "US," "OUR" AND SIMILAR TERMS, AS WELL AS REFERENCES TO "BOYDS,"
ALL REFER TO THE BOYDS COLLECTION, LTD. PRIOR TO THE RECAPITALIZATION OF BOYDS
IN APRIL 1998 IN WHICH BOYDS WAS CONVERTED TO A "C" CORPORATION FOR TAX
PURPOSES, WE OPERATED AS AN "S" CORPORATION AND ALL TAXABLE EARNINGS WERE TAXED
DIRECTLY TO OUR THEN-EXISTING STOCKHOLDERS. REFERENCES TO "PRO FORMA" PERTAIN TO
CERTAIN ADJUSTMENTS MADE TO OUR HISTORICAL FINANCIAL STATEMENTS THAT PRESENT OUR
FINANCIAL INFORMATION AS IF BOYDS WAS TAXED AS A C CORPORATION IN ALL PERIODS
PRESENTED. THE APRIL 1998 RECAPITALIZATION IS DESCRIBED LATER IN THIS SUMMARY
UNDER THE HEADING "THE RECAPITALIZATION."
THE COMPANY
We are a leading domestic designer, importer and distributor of branded,
high-quality, hand-crafted collectibles and other specialty giftware products.
We sell our products through a large and diverse network comprised of
independent gift and collectibles retailers, premier department stores, selected
catalogue retailers and other electronic and retail channels. We have
successfully developed a strong niche and brand identity in our markets because
of our affordably priced, high-quality, "Folksy With Attitude-SM-" collectibles.
Our products, which include resin figurines, plush animals, porcelain dolls
and boxes and related clothing and accessories, incorporate year-round themes.
Our three major resin figurine lines are THE BEARSTONE
COLLECTION-REGISTERED TRADEMARK-, THE DOLLSTONE COLLECTION-TM- and THE FOLKSTONE
COLLECTION-REGISTERED TRADEMARK-, which together encompass over 420 different
items. Each of our resin figurines is inscribed with Boyds' distinctive symbol
of authenticity, a hidden bear paw and a bottom stamp indicating the name,
edition and piece number of the figurine. Many of our resin figurines also
contain famous quotes, which help customers identify with the piece. Our plush
animal lines include dressed and non-dressed bears and other animals, which are
made of assorted materials and incorporate varying, whimsical themes. Most of
our plush animals are fully jointed with sewn-in joints for arms, legs and
heads. Our plush line has grown to encompass over 430 different items ranging
from 2 1/2" miniatures to 21" large animals.
The following chart provides additional information about our products:
<TABLE>
<CAPTION>
% OF FISCAL 1998 NET APPROXIMATE RECENT PRODUCT
PRODUCT PRODUCT WEIGHTED AVERAGE MAJOR PRODUCT LINES LINE INTRODUCTIONS
CATEGORIES SALES RETAIL PRICE (YEAR INTRODUCED) (YEAR INTRODUCED)
- ----------------- --------------------- ------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Resin Figurines 44.6% $ 16.00 THE BEARSTONE COLLECTION WEE FOLKSTONES-TM- (1997)
(1993) Porcelain Dolls (1997)
THE FOLKSTONE COLLECTION LE BEARMOGE-TM- (1998)
(1994) CARVER'S CHOICE-TM- (1998)
THE DOLLSTONE COLLECTION DESKANIMALS-TM- (1998)
(1995) GLASSSMITH ORNAMENTS-TM-
(1998)
Plush Animals 52.0% $ 14.50 Original non-dressed plush MOHAIR BEARS-TM- (1997)
(1982) T.F. WUZZIES-TM- (1997)
J.B. BEAN & ASSOCIATES-TM-
(1987)
Custom designed plush (1990)
T.J.'S BEST DRESSED-TM- (1992)
Other Products 3.4% $ 11.50 BEAR NECESSITIES-TM- (1992) BEARWARE POTTERYWORKS-TM-
(1997)
</TABLE>
Boyds reported fiscal 1998 net sales, income from operations and pro forma
net income of $197.8 million, $120.8 million and $53.6 million, respectively.
Pro forma net income before extraordinary item, as adjusted for this offering
and the April 1998 recapitalization, was $55.5 million in fiscal 1998. Our net
sales and income from operations have grown rapidly from fiscal 1993 to fiscal
1998 at compound annual growth rates of approximately 61% and 65%, respectively.
During this time, we steadily
4
<PAGE>
increased our operating income margins from 54.3% in fiscal 1993 to 61.1% in
fiscal 1998. Our growth and high operating margins have resulted from:
- the establishment of Boyds as a premier collectibles brand name
- the development of strong relationships with a large distribution network
of dealers
- our process for developing, designing, sourcing and marketing products
- our focus on maintaining low selling, marketing and overhead costs
Our distribution network includes approximately 19,950 independent gift and
collectibles accounts, representing approximately 26,000 individual retail
outlets. We selectively choose our resin figurine dealers and require them to
meet annual performance criteria to retain dealership status. There is currently
a waiting list of over 5,500 retailers, consisting primarily of our plush-only
dealers, that have expressed an interest in carrying our resin figurines.
We also sell both resin figurines and plush animals through approximately
150 major accounts, including department stores, catalogue retailers and QVC, a
television and electronic retailer.
Our nationwide dealer network is currently divided into five major
categories: three PAW-SM- designations (GOLD, SILVER and BRONZE), other resin
and plush dealers and plush-only dealers. We encourage our resin figurine
dealers to obtain the highest PAW qualification because it affords them
additional benefits including priority delivery of our products and special
consideration when ordering limited editions, new product offerings and items in
particularly high demand. Differences in PAW designations are based primarily on
annual order volume.
The following chart provides additional detail about our distribution
network:
<TABLE>
<CAPTION>
APPROXIMATE % OF FISCAL 1998 NET
TYPE NUMBER PRODUCT SALES
- --------------------------------------- ------------- -----------------------
<S> <C> <C>
PAW Dealers............................ 2,250 48%
Other Resin and Plush Dealers.......... 3,750 21
Major Accounts......................... 150 15
------ -----
Resin and Plush Dealers.............. 6,150 84
Plush-Only Dealers..................... 13,800 17
------ -----
Total Dealers........................ 19,950 100%
------ -----
------ -----
</TABLE>
UNITY MARKETING, a market research firm which specializes in the
collectibles industry and is not affiliated with Boyds, estimates that consumer
sales of collectibles in the United States in 1997 totaled $10.0 billion.
Figurines, which represented approximately 45% of our net product sales in
fiscal 1998, are estimated by UNITY MARKETING to represent the largest segment
of the U.S. collectibles industry, with an estimated $3.9 billion in total sales
in 1997. UNITY MARKETING currently estimates that women between the ages of 35
and 64 encompass the majority of collectors. This group, which we believe
constitutes a substantial portion of our collectors, is projected by the U.S.
Census Bureau to grow approximately 12% from 1998 to 2005. UNITY MARKETING
expects that growth in the collectibles industry will be driven by the increased
number of middle-aged female collectors and higher spending habits of the baby
boom generation.
5
<PAGE>
The following chart illustrates the strong historical growth of the
collectibles market:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. CONSUMER SALES OF COLLECTIBLES, 1993-1997
<S> <C>
(IN BILLIONS)
11% Compound Annual Growth
1993 $6.6
1994 $7.2
1995 $8.2
1996 $9.1
1997 $10.0
</TABLE>
(1) Source: UNITY MARKETING
OUR COMPETITIVE STRENGTHS
WE HAVE A PROVEN BUSINESS MODEL
We have established a business model that lets us avoid many costs incurred
by other collectibles companies. Our ability to realize substantial margins is
due primarily to:
- long-term relationships with low-cost foreign manufacturing sources
- limited price discounts to retailers
- limited seasonality in most product offerings
- use of a salaried, in-house salesforce that results in low selling and
marketing costs
- minimal required investment in developing and test-marketing new products
We believe that the way we operate our business results in operating margins
which are approximately 25% to 45% higher than those of giftware and
collectibles companies of similar or larger size.
BOYDS IS A RECOGNIZED BRAND NAME
Our success is largely due to the established strength of the Boyds brand
name, which we have built through consistently offering affordably priced,
high-quality collectibles. The Boyds name is associated with consistent product
quality and our award-winning "Folksy With Attitude" product design and
craftsmanship. Our recognized brand name makes it easier for us to successfully
introduce new products. Our collectors club, THE LOYAL ORDER OF FRIENDS OF
BOYDS-TM-, which was started in July 1996 and currently has approximately
120,000 paying members, also strengthens Boyds' brand-name recognition.
WE PROVIDE A HIGH-QUALITY AND AFFORDABLE PRODUCT
We believe that our award-winning and distinctively designed products appeal
to a broad range of consumers due to their high-quality craftsmanship and offer
significant value to our retailers and consumers. We believe that our strategy
of selectively choosing resin figurine dealers, our use of limited
6
<PAGE>
editions, and our selective retirement of certain pieces have helped to both
maintain the collectibility of, and increase the demand for, our products. There
are independently published price guides printed each year that report the
secondary market value of Boyds products, which show that many of our products
trade at prices substantially higher than their original retail prices. While we
do not participate in this market, we believe its existence reinforces the
demand for our products.
WE SELL OUR PRODUCTS THROUGH AN EXTENSIVE AND LOYAL DEALER NETWORK
We have established a large, national distribution network of approximately
19,950 independent retail accounts, high-end department stores and selected
catalogue retailers. Our products generally sell quickly, which enhances store
traffic and allows for substantial retail mark-ups. We have built dealer loyalty
and trust and have minimized dealer turnover by not selling to mass
merchandisers and limiting the number of stores that carry our resin figurines.
We believe this network has contributed to new product successes, significant
retailer demand, and a waiting list of over 5,500 prospective resin dealers.
However, as our distribution network grows, we may be challenged to maintain our
current levels of customer service.
WE HAVE WELL-ESTABLISHED SOURCING RELATIONSHIPS WITH OUR SUPPLIERS
We coordinate our production and cooperative development efforts primarily
through two buying agencies with whom we have established long-term
relationships. These buying agencies perform a number of functions for us,
including collaborating in our product design and development process,
identifying suitable manufacturers for our products and supervising our
manufacturers to assure the proper quality and timing of our orders. We
represent the vast majority of orders of both of our primary buying agencies. In
conjunction with our buying agencies, we source most of our merchandise from a
select group of 19 independently-owned manufacturers in China, which allows us
to offer detailed, high-quality products at a low cost. We typically represent
the majority of orders at our manufacturers. We are therefore able to
significantly influence the schedule, quality and timing of our orders. However,
because primarily two buying agencies coordinate the efforts of our
manufacturers, the loss of either may disrupt our business.
WE HAVE EXPERIENCE DEVELOPING NEW PRODUCTS
Our continued success depends on the acceptance of our new products. As a
result, we have developed a successful process for identifying, designing and
marketing unique products for our target markets. Our development process
includes researching, developing and effectively merchandising and packaging our
products in a manner consistent with our product image. We enhance our product
development process by giving careful attention to design and price points and
through our proven method of testing new products with selected retailers and
consumers prior to introduction. We believe that our close relationships with
our suppliers, retailers and customers allow us to quickly introduce new
products, accurately estimate consumer demand, promptly identify both new
product categories and trends regarding existing lines, and substantially reduce
development costs.
OUR OPERATING AND GROWTH STRATEGY
WE PLAN TO INCREASE SALES TO EXISTING ACCOUNTS
We plan to increase sales volume in our existing accounts by increasing
sales support, implementing additional telemarketing to our retail accounts,
expanding product offerings within existing lines and introducing new product
lines. Many of our resin dealers carry BEARSTONES but may not carry our other
resin lines such as FOLKSTONES, DOLLSTONES, WEE FOLKSTONES and CARVER'S CHOICE.
Based on our experience, we believe that retailers who expand their product and
product line offerings experience significant revenue growth in our products.
For example, our GOLD PAW-TM- dealers, who carry
7
<PAGE>
a broad selection of our resin and plush product lines and receive the greatest
level of sales support, sell on average five times more than our other resin
dealers. We plan to hire additional sales staff and open additional showrooms in
order to further increase existing account volume. From fiscal 1995 to fiscal
1998, our average net product sales per account grew from approximately $3,700
to approximately $9,000, a 34% compound annual growth rate.
WE PLAN TO EXPAND SALES TO NEW ACCOUNTS
We plan to selectively expand our resin dealer network while maintaining the
high quality and affordability of our products. New resin dealers will be
selected primarily from our 13,800 existing plush-only dealers, which make up
the majority of our current waiting list of over 5,500 retailers. We believe we
can continue to selectively add additional retail channels such as collectible
doll stores, high-end toy stores, stores located on military bases and other
select specialty retailers as part of a managed retail expansion plan.
WE PLAN TO PENETRATE NEW DISTRIBUTION CHANNELS
We are continuing to pursue corporate and retail partners to expand our
distribution channels. These corporate arrangements provide the client with a
product designed exclusively for them or in conjunction with them. In either
case, these products are for exclusive distribution by the corporate partner.
For example, we produced plush ornaments of well-known animated characters in
conjunction with a large media conglomerate. We believe this relationship may
result in the production of additional products in the future with that
corporate partner. We have also produced customized products for Barnes & Noble
and San Francisco Music Box stores, QVC and several of our larger resin dealers.
We believe that these efforts increase Boyds' brand recognition while
maintaining our emphasis on quality.
WE PLAN TO INCREASE LICENSING AND INTERNATIONAL SALES
Due to Boyds' popularity, we selectively license our images for other
products including stationery, afghans, throw pillows, rubber stamps and
clothing. For example, we currently license some of our product images to
Interart Holding Corporation, a subsidiary of Hallmark Cards, to produce gift
cards, package wrap and other assorted paper items. Though our royalty income is
currently small relative to our net sales, we expect to increase the number of
our licensed products through additional licensing arrangements in the future.
We will also seek to increase international sales, which currently represent
approximately 2% of our net sales. We believe that Asia, Europe and Canada offer
significant long-term potential for our products.
WE STRIVE TO CONTINUALLY DEVELOP AND INTRODUCE NEW PRODUCTS
One of our strategies for maintaining the demand for and collectibility of
our products is to constantly develop and introduce new designs and themes
within existing product lines, while selectively retiring pieces within each
product line. We typically refresh approximately 40% of our existing product
lines each year. In addition to our ongoing line extensions, we also regularly
develop and introduce completely new product line concepts that maintain Boyds'
whimsical and "Folksy With Attitude" themes. Our recently introduced product
lines include:
- CARVER'S CHOICE, a line of resin figurines, picture frames and accessories
resembling hand-carved and painted wooden sculptures
- GLASSSMITH ORNAMENTS, blown glass antique-style ornaments based on popular
Boyds themes
- Porcelain Dolls, a line of traditional high-quality porcelain dolls
8
<PAGE>
- LE BEARMOGE, small porcelain figurines, based on popular Boyds resin
characters, placed decoratively atop an ornamental box containing a
miniature porcelain figurine
For fiscal 1999, we plan to introduce the following new lines:
- UPTOWN BEARS, upscale dressed bears
- PURRSTONES, a new line of resin figurines
- BABYBOYDS, plush animals targeted for the childrens market
- THE BEATRICE COLLECTION-TM-, fine porcelain hinged boxes with designs
reproduced from original works of art made exclusively for Boyds
WE PLAN TO PURSUE STRATEGIC ACQUISITIONS
While we have historically grown primarily through internal expansion, we
believe that the collectibles industry is highly fragmented. Because other
giftware and collectibles companies typically realize margins significantly
lower than we do, we believe that our successful business model can, in many
cases, be transferred to other giftware and collectibles companies and product
lines. For example, in November 1998 we completed the acquisition of H.C.
Accents, a company without an extensive distribution network whose product lines
complement those of Boyds. H.C. Accents was acquired for approximately $4
million, including the forgiveness of debt.
THE RECAPITALIZATION
On April 21, 1998, the stockholders of Boyds prior to the April 1998
recapitalization and Bear Acquisition, Inc., together completed a
recapitalization of Boyds. Bear Acquisition is an affiliate of Kohlberg Kravis
Roberts & Co. L.P. ("KKR"), and an investment fund controlled by an affiliate of
KKR owns a substantial majority of Bear Acquisition's common stock. The
recapitalization consisted of the purchase by Bear Acquisition of a portion of
the shares of common stock of Boyds held by the original stockholders of Boyds
for approximately $184 million and the redemption by Boyds of a portion of the
shares of common stock held by the original stockholders for approximately $473
million. Boyds financed the redemption with $325.0 million of bank borrowings
and the issuance of $165.0 million principal amount of senior subordinated
notes. Immediately after the recapitalization, Bear Acquisition owned
approximately 80% of the common stock and the original stockholders retained
approximately 20% of the common stock. On April 22, 1998, Bear Acquisition
acquired 843,385 additional shares of newly-issued Boyds common stock for $3.8
million with the proceeds from the sale of Bear Acquisition common stock. At
February 8, 1999, Bear Acquisition and the original stockholders owned
approximately 81% and 19%, respectively, of the outstanding common stock.
After the recapitalization, Boyds transferred substantially all of its
assets to The Boyds Collection, Ltd., L.P., a Delaware limited partnership
wholly owned by us. We are the sole limited partner of Boyds L.P. and the sole
general partner of Boyds L.P. is Boyds Operations, Inc., a Delaware corporation
and our direct wholly owned subsidiary.
Prior to the offering, the current stockholders of Boyds will transfer all
of their shares of Boyds common stock to Boyds in exchange for newly-issued
shares of Boyds common stock. Each old share of Boyds common stock will be
exchanged for 1.1230165 new shares of Boyds common stock. After receiving the
newly-issued Boyds shares, Bear Acquisition will distribute these shares in
liquidation to its stockholders (the "Bear Acquisition Transaction"). Bear
Acquisition's only asset is its investment in Boyds common stock. As a result,
KKR 1996 Fund L.P. and KKR Partners II, L.P. will collectively own approximately
79% and the original stockholders will retain approximately 19%, respectively,
of the outstanding common stock immediately prior to the offering.
9
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THE OFFERING
<TABLE>
<S> <C>
Common stock offered by:
Boyds......................... 9,250,000 shares
The selling stockholders
(1)......................... 6,750,000 shares (2)
Total....................... 16,000,000 shares (2)
Common stock to be outstanding
after the offering............ 61,838,246 shares (3)
Use of proceeds................. To redeem $66.0 million principal amount of Boyds'
outstanding 9% senior subordinated notes and to repay
approximately $90.8 million of bank indebtedness. Boyds
will receive no proceeds from the sale of common stock in
the offering by the selling stockholders. See "Use of
Proceeds."
Proposed NYSE symbol............ FOB
</TABLE>
- ------------------------
(1) The selling stockholders in the offering will be KKR 1996 Fund L.P., KKR
Partners II, L.P. and Parthenon 1998 Deferred Compensation LLC, an affiliate
of The Parthenon Group Inc.
(2) Excludes 2,400,000 shares to be sold by the KKR selling stockholders if the
underwriters' over-allotment option is exercised in full. See
"Underwriters."
(3) Shares of common stock, par value $.0001, outstanding at December 31, 1998.
This number of shares excludes
- 1,133,124 shares of common stock issuable upon exercise of stock options
outstanding as of December 31, 1998, of which 269,524 options to purchase
shares of common stock were then exercisable
- 1,112,909 shares of common stock reserved for future issuance under Boyds'
option plan
See "Management--Benefit Plans for Boyds' Employees"
* * *
EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES
THAT THE COMMON STOCK BEING OFFERED WILL BE SOLD AT $19.00 PER SHARE, WHICH IS
THE MID-POINT OF THE RANGE SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS AND
THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. ALL OF THE
INFORMATION IN THIS PROSPECTUS, INCLUDING ALL REFERENCES TO THE NUMBER OF SHARES
OF COMMON STOCK, ASSUMES THE 1.1230165 FOR 1 EXCHANGE OF BOYDS' COMMON STOCK TO
BE EFFECTED PRIOR TO THIS OFFERING.
10
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
You should read the summary consolidated financial and other data below in
conjunction with the Consolidated Financial Statements and the Unaudited Pro
Forma Consolidated Condensed Financial Statements and the accompanying notes to
each, which are contained later in this prospectus. You should also read the
Selected Financial and Other Data and the accompanying Management's Discussion
and Analysis of Financial Condition and Results of Operations, also contained
later in this prospectus. The historical financial data for the three years
ended December 31, 1998 have been derived from the audited Consolidated
Financial Statements and the accompanying notes, which are contained later in
this prospectus. The historical financial data for the year ended December 31,
1995 have been derived from audited financial statements for such period, which
are not contained in this prospectus. The historical financial data for the year
ended December 31, 1994 have been derived from unaudited financial statements,
which are also not contained in this prospectus. The pro forma data as adjusted
for the recapitalization and the offering have been derived from the Unaudited
Pro Forma Consolidated Condensed Financial Statements and the accompanying
notes, which are contained later in this prospectus.
Prior to the recapitalization on April 21, 1998, Boyds was operated as an S
Corporation for federal and state income tax purposes. As a result, Boyds'
taxable earnings were taxed directly to its then-existing stockholders. After
the recapitalization, Boyds became subject to federal and state income taxes.
The pro forma provision for income taxes, pro forma net income and pro forma
statement of income data assume that Boyds was subject to federal and state
income taxes and was taxed as a C Corporation at the effective tax rates that
would have applied for all periods. Pro forma statement of income data, as
adjusted for the recapitalization and the offering, also gives effect to the
recapitalization and the offering as if they had occurred on January 1, 1998.
The balance sheet data, as adjusted for the offering, give effect to the
offering as if it had occurred on December 31, 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales........................................................ $ 34,833 $ 70,147 $ 98,365 $ 129,841 $ 197,806
Cost of goods sold............................................... 12,450 24,221 33,022 43,278 63,852
--------- --------- --------- --------- ---------
Gross profit..................................................... 22,383 45,926 65,343 86,563 133,954
Selling, general and administrative expenses..................... 2,675 4,332 6,314 8,528 14,446
Other operating income, net...................................... 78 31 387 1,171 1,280
--------- --------- --------- --------- ---------
Income from operations........................................... 19,786 41,625 59,416 79,206 120,788
Interest expense................................................. (39) (89) (187) (242) (29,618)
Other income (expense), net including $3,248 of other expenses in
1998 related to the recapitalization........................... 88 578 868 166 (2,885)
--------- --------- --------- --------- ---------
Income before provision for income taxes......................... 19,835 42,114 60,097 79,130 88,285
Provision for income taxes....................................... -- -- -- -- 22,007
--------- --------- --------- --------- ---------
Net income....................................................... $ 19,835 $ 42,114 $ 60,097 $ 79,130 $ 66,278
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma provision for income taxes............................. $ 8,033 $ 17,455 $ 25,045 $ 33,152 $ 34,732
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income............................................. $ 11,802 $ 24,659 $ 35,052 $ 45,978 $ 53,553
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma basic earnings per common share (1).................... $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.64
Pro forma diluted earnings per common share (1).................. $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.63
PRO FORMA STATEMENT OF INCOME DATA, AS ADJUSTED FOR THE
RECAPITALIZATION AND THE OFFERING:
Net income before extraordinary item............................. $ 55,483
Interest expense................................................. 26,078
Basic and diluted earnings per common share (1).................. $ 0.90
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
(CONTINUED FROM PREVIOUS PAGE)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross profit margin.............................................. 64.3% 65.5% 66.4% 66.7% 67.7%
Operating income margin.......................................... 56.8% 59.3% 60.4% 61.0% 61.1%
Depreciation and amortization.................................... $ 46 $ 131 $ 221 $ 254 $ 2,260
Capital expenditures............................................. 132 545 269 367 1,247
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-------------------------
AS ADJUSTED
FOR THE
ACTUAL OFFERING
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................... $ 11,606 $ 11,606
Working capital (excluding cash and cash equivalents)............................... 22,262 26,008
Total assets........................................................................ 298,410 293,944
Total debt.......................................................................... 443,000 286,235
Total stockholders' equity (deficit)................................................ (158,766) (2,721)
</TABLE>
- ------------------------
(1) Pro forma basic earnings per common share is calculated based on weighted
average common shares outstanding of 157,671,516 for the four fiscal years
ended December 31, 1997 and 84,142,163 for the fiscal year ended December
31, 1998. Pro forma diluted earnings per common share is calculated based on
weighted average diluted shares outstanding of 84,484,571 for the year ended
December 31, 1998. Pro forma basic and diluted earnings per common share, as
adjusted for the recapitalization and the offering, is calculated based on
weighted average basic and diluted shares outstanding of 61,375,424 and
61,717,832, respectively.
12
<PAGE>
RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE OF VARIOUS RISKS,
INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER THESE RISK
FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS,
BEFORE YOU DECIDE WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK.
WE MAY NOT BE ABLE TO GROW OUR BUSINESS AS PLANNED
We intend to continue to pursue a business strategy of increasing sales and
earnings by expanding our existing brands and distribution channels. Our ability
to implement this growth strategy successfully will be in part dependent on
factors beyond our control. These factors include prevailing economic
conditions, changes in consumer preferences and changes in our competitive
environment.
Our ability to anticipate changes in the collectibles market and identify
industry trends will be a critical factor in our ability to grow and remain
competitive. We will also need to successfully develop and introduce new
products on a timely basis. Our new products may not be completed on a timely
basis and may not enjoy market acceptance following their introduction. In
addition, we may not be able to accurately predict the anticipated development
schedules for new or refreshed products and product lines.
WE ARE DEPENDENT UPON TWO INDEPENDENT BUYING AGENCIES AND A SMALL NUMBER OF
MANUFACTURING SOURCES
Substantially all of the products that we sell are purchased through two
independent buying agencies. One buying agency is located in Hong Kong and the
other buying agency is located in the United States. These two buying agencies,
which contract with a total of 19 independent manufacturers, account for
approximately 91% of our total imports. These two buying agencies also perform a
number of functions for us, including collaborating in our product design and
development process. As a result, we are substantially dependent on these buying
agencies and the manufacturers with which they contract. We do not have
long-term contracts with either of our primary buying agencies. We believe that
the loss of either of our primary buying agencies would:
- have a material adverse effect on our financial condition and results of
operations
- cause disruptions in our orders
- affect the quality of our products
- possibly require us to select alternative manufacturers
ALL OF OUR SIGNIFICANT MANUFACTURERS ARE LOCATED IN CHINA
All of our significant manufacturers are located in China. Although we have
identified alternate manufacturers which could meet our quality and reliability
standards at similar costs in China and in other countries, the loss of any one
or more of our manufacturers could have a material adverse effect on our
business.
Because we rely primarily on Chinese manufacturers, we are subject to the
following risks:
- economic and political instability in China
- transportation delays
- restrictive actions by the Chinese government
- the laws and policies of the United States affecting importation of goods,
including duties, quotas and taxes
- Chinese trade and tax laws
13
<PAGE>
In particular, we could be adversely affected if the Chinese renminbi
appreciates significantly relative to the United States dollar. This is because
the cost of our products fluctuates with the value of the Chinese renminbi.
WE ARE CONTROLLED BY KKR
Following the offering, KKR 1996 Fund L.P. and KKR Partners II, L.P.
(together, the "KKR Partnerships") will own approximately 56% of our outstanding
common stock on a fully diluted basis and will continue to control us.
Accordingly, affiliates of KKR will be able to:
- elect the entire Board of Directors of Boyds
- control the management and policies of Boyds
- determine, without the consent of other Boyds stockholders, the outcome of
any corporate transaction or other matter submitted to the Boyds
stockholders for approval, including mergers, consolidations and the sale
of all or substantially all of Boyds' assets
Affiliates of KKR will also be able to prevent or cause a change in control
of Boyds and will be able to amend our charter or bylaws at any time. The
interests of KKR may also conflict with the interests of the other holders of
common stock.
WE IMPORT SUBSTANTIALLY ALL OF OUR PRODUCTS
Boyds does not own or operate any manufacturing facilities. Instead, we
import substantially all of our retail products from independent foreign
manufacturers, primarily in China. As a result, substantially all of our
products are subject to United States Customs Service duties and regulations.
These regulations include requirements that we disclose certain information
regarding the country of origin on our products, such as "Handmade in China."
Within its discretion, the United States Customs Service may also set new
regulations regarding the amount of duty to be paid, the value of merchandise to
be reported or other customs regulations relating to our imported products.
Failure to comply with these regulations may result in the imposition of
additional duties or penalties or, in certain cases, forfeiture of merchandise.
The countries in which our products are manufactured may impose new quotas,
duties, tariffs or other charges or restrictions. This could adversely affect
our financial condition, results of operations or our ability to continue to
import products at current or increased levels. In particular, our costs could
increase, or the mix of countries from which we import our products may be
changed, if the Generalized System of Preferences program is not renewed or
extended each year. The Generalized System of Preferences allows selected
products of beneficiary countries to enter the United States duty free. In
addition, if countries that are currently accorded "Most Favored Nation" status
by the United States, such as China, cease to have such status, we could be
adversely affected. We cannot predict what regulatory changes may occur or the
type or amount of any financial impact these changes may have on us in the
future.
WE ARE DEPENDENT ON THE ACCEPTANCE OF OUR NEW PRODUCTS
The demand for our products may be quickly affected by changing consumer
tastes and interests. Our long-term results of operations depend substantially
upon our ability to continue to conceive, design, source and market new pieces
and upon continuing market acceptance of our existing and future product lines.
If we fail or are significantly delayed in introducing new pieces to our
existing product lines or creating new product line concepts or if our new
products do not meet with market acceptance, our results of operations may be
impaired. A number of companies who participate in the giftware and collectibles
industries are part of large, diversified companies that have greater financial
resources than us and offer a wider range of products and may be less affected
by changing consumer tastes.
14
<PAGE>
WE ARE DEPENDENT ON OUR SENIOR MANAGEMENT
Our success is substantially dependent upon the retention of our senior
management team, including Gary M. Lowenthal, our founder, Chairman and Chief
Executive Officer. If any member of our senior management team becomes unable or
unwilling to participate in the business and operations of Boyds, our future
business and operations could be materially and adversely effected.
WE BELIEVE OUR INTELLECTUAL PROPERTY IS MATERIAL TO OUR SUCCESS
We believe that our trademarks and other proprietary rights are material to
our success and competitive position. Accordingly, we devote resources to the
establishment and protection of our intellectual property on a worldwide basis.
The actions we take to establish and protect our trademarks and other
proprietary rights may not be adequate to protect our intellectual property or
to prevent imitation of our products by others. Moreover, while we have not
experienced any proprietary license infringements or legal actions that have had
a material impact on our financial condition or results of operations, other
persons have and will likely in the future assert rights in, or ownership of,
our trademarks and other proprietary rights. We may not be able to successfully
resolve such conflicts. In addition, the laws of certain foreign countries may
not protect intellectual property to the same extent as do the laws of the
United States. See "Business--Boyds' Intellectual Property."
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK AND THE MARKET PRICE OF THE
SHARES WILL FLUCTUATE
Prior to the offering, there has been no market for our common stock. The
initial public offering price of the common stock will be determined by
negotiations among Boyds, the KKR selling stockholders and the representatives
of the underwriters. The common stock may trade at prices significantly below
the initial public offering price.
The price of the common stock after the offering may fluctuate widely,
depending upon many factors. These factors include:
- the perceived prospects of Boyds
- differences between our actual financial and operating results and those
expected by investors and analysts,
- changes in analysts' recommendations or projections and
- changes in general economic or market conditions.
We have applied to list the common stock on The New York Stock Exchange. The
NYSE listing does not, however, guarantee that a trading market for the common
stock will develop or, if a market does develop, the depth of the trading market
for the common stock.
EXISTING STOCKHOLDERS MAY SELL THEIR COMMON STOCK
As of February 8, 1999, there were 52,588,246 shares of common stock
outstanding, excluding shares to be sold in this offering. After the offering,
persons who currently hold common stock will be entitled to register their
common stock under the Securities Act of 1933 at our expense. These shares may
also be sold under Rule 144 of the Securities Act, depending on the holding
period of such securities and subject to significant restrictions in the case of
shares held by persons deemed to be affiliates of Boyds. We cannot predict the
effect, if any, that future sales of shares, or the availability of shares for
future sale, will have on the market price of the common stock. Sales of
substantial amounts of common stock, or the perception that such sales could
occur, may adversely affect prevailing market prices for the common stock.
Boyds, the selling stockholders and our officers and directors, which in the
aggregate owned 52,052,938 shares at February 8, 1999, have agreed not to offer,
sell, contract to
15
<PAGE>
sell or otherwise dispose of any common stock for a period of 180 days after the
date of this prospectus without the written consent of the underwriters.
WE MAY BE ADVERSELY AFFECTED BY THE YEAR 2000 PROBLEM
We believe we have replaced all of our systems that are not Year 2000
compliant. However, if any of our systems are not compliant or if our customers,
buying agencies, manufacturers or shippers fail to achieve Year 2000 compliance,
we may experience the following adverse consequences:
- We may be unable to receive our products due to failures by our
manufacturers, buying agencies or shippers
- Our customers may be unable to place orders with us due either to our
system failures or those of our customers
- We may be unable to deliver our products on a timely basis
For a description of our Year 2000 compliance efforts you should read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS
Some of the matters discussed under the captions "Summary," "Risk Factors,"
"Unaudited Pro Forma Consolidated Financial Statements," "The Company" and
elsewhere in this prospectus include forward-looking statements. Statements that
are predictive in nature, that depend upon or refer to future events or
conditions or that include words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates" and similar expressions are forward-looking
statements. Although we believe that these statements are based upon reasonable
assumptions, we can give no assurance that our goals will be achieved. These
forward-looking statements are made as of the date of this prospectus, and we
assume no obligation to update them or the reasons why actual results may
differ.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to Boyds from the sale of the 9,250,000 shares of common
stock offered by it, after deducting the underwriting discount and estimated
offering expenses, are estimated to be approximately $162.7 million. These
proceeds will be used to redeem $66.0 million principal amount of Boyds' 9%
Senior Subordinated Notes due 2008 at a redemption price of 109% of the
principal amount and repay $90.8 million of indebtedness under Boyds' credit
facility with DLJ Capital Funding, Inc. and other lenders. The credit facility
consists of a $325.0 million term loan facility and a $40.0 million revolving
credit facility. At December 31, 1998, $278.0 million of loans under the term
loan facility were outstanding, none of the revolving credit facility was drawn
down and the weighted average interest rate on the credit facility was 7.38%.
Indebtedness under the credit facility and the notes was incurred in connection
with the recapitalization to (1) redeem common stock of Boyds and (2) pay
transaction fees and expenses. See "The Recapitalization."
Boyds will receive no proceeds from the sale of common stock in the offering
by the selling stockholders.
DIVIDEND POLICY
Boyds does not intend to pay any cash dividends for the foreseeable future
but instead intends to retain earnings, if any, for the future operation and
expansion of its business. Any determination to pay dividends in the future will
be at the discretion of Boyds' Board of Directors and will be dependent upon
Boyds' results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors deemed relevant by the
Board of Directors. In addition, both the credit facility and the indenture
governing the notes currently contain limitations on Boyds' ability to declare
or pay cash dividends on the common stock. Future indebtedness or loan
arrangements incurred by Boyds may also prohibit or restrict the ability of
Boyds to pay dividends and make distributions to its stockholders.
17
<PAGE>
CAPITALIZATION
The following table sets forth the debt and capitalization of Boyds at
December 31, 1998, and as adjusted to give effect to:
- the receipt by Boyds of the net proceeds from the sale of 9,250,000 shares
of common stock offered by Boyds hereby at an assumed initial public
offering price of $19.00 per share, after deducting the underwriting
discount and estimated offering expenses payable by Boyds in the offering
- the application of the net proceeds therefrom as described under "Use of
Proceeds"
In addition, the following table should be read in conjunction with the
Unaudited Pro Forma Consolidated Condensed Financial Statements and the
Consolidated Financial Statements and the accompanying notes to each, which are
contained later in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------
AS ADJUSTED
FOR THE
ACTUAL OFFERING
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Total debt:
Revolver.......................................................................... $ -- $ --
Term Loan A....................................................................... 88,250 88,250
Term Loan B....................................................................... 189,750 98,985
9% Senior Subordinated Notes...................................................... 165,000 99,000
----------- --------------
Total debt...................................................................... 443,000 286,235
Total stockholders' equity (deficit)................................................ (158,766) (2,721)
----------- --------------
Total capitalization............................................................ $ 284,234 $ 283,514
----------- --------------
----------- --------------
</TABLE>
18
<PAGE>
DILUTION
The tangible book deficit of Boyds at December 31, 1998 was $161.2 million,
or $3.07 per outstanding share of common stock. The net tangible book deficit
per share of common stock is equal to Boyds' total tangible assets, which is
defined as total assets less intangible assets, less its total liabilities,
divided by the number of shares of common stock outstanding, all on a pro forma
basis. After giving effect to the sale of 9,250,000 shares of common stock to be
sold by Boyds in the offering at an assumed initial public offering price of
$19.00 per share, which is the midpoint of the estimated range of the initial
public offering price, and the application by Boyds of the estimated net
proceeds to it as described in "Use of Proceeds," the net tangible book deficit
of Boyds at December 31, 1998 would have been $5.1 million, or $0.08 per share
of common stock. This represents an immediate increase in net tangible book
value of $2.99 per share of common stock and an immediate dilution in net
tangible book value of $19.08 per share of common stock to new investors of
common stock in this offering.
The following table illustrates the per share dilution that would have
occurred if this offering had been consummated on December 31, 1998:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of common stock........................ $ 19.00
Net tangible book deficit per share before the offering.............................. (3.07)
Increase per share attributable to the offering (1).................................. 2.99
---------
Net tangible book deficit per share of common stock after the offering................. (0.08)
---------
Dilution per share to new investors (2)................................................ $ 19.08
---------
---------
</TABLE>
- ------------------------
(1) After deducting the underwriting discounts and estimated expenses payable by
Boyds in the offering.
(2) Dilution is determined by subtracting net tangible book deficit per share
after giving effect to the offering from the assumed initial public offering
price paid by new investors.
The following table summarizes the differences, as of December 31, 1998,
between the existing stockholders and the new investors with respect to the
number of shares purchased from Boyds, the total consideration paid and the
average price per share paid. For the purpose of the following table only, the
shares purchased from Boyds exclude shares retained by the original stockholders
in the recapitalization and the shares sold by the selling stockholders in this
offering.
<TABLE>
<CAPTION>
TOTAL CONSIDERATION (2)
SHARES PURCHASED (1) --------------------------
------------------------------ AMOUNT AVERAGE
NUMBER (IN PRICE
(IN THOUSANDS) PERCENT THOUSANDS) PERCENT PER SHARE
--------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 35,709 58% $ 158,985 34% $ 4.45
New investors....................... 16,000 26 304,000 66 19.00
--
------ ------------- ---
Total............................... 51,709 84% $ 462,985 100%
--
--
------ ------------- ---
------ ------------- ---
</TABLE>
- ------------------------------
(1) Includes shares purchased by officers and directors. Does not include shares
of common stock retained by the original stockholders in the
recapitalization.
(2) Does not include the consideration for the common stock retained by the
original stockholders in the recapitalization.
The foregoing computations do not give effect to either of the following:
- 1,133,124 shares of common stock issuable upon exercise of stock options
outstanding as of December 31, 1998, of which 269,524 options to purchase
shares of common stock were then exercisable
- 1,112,909 shares of common stock reserved for future issuance under Boyds'
option plan
To the extent that shares are issued in connection with the foregoing, there
will be further dilution to new investors. In addition, sales by the selling
stockholders in this offering will reduce the number of shares held by current
stockholders, including the original stockholders, to 45,838,246, or 74.1% of
the total number of shares outstanding after this offering, and will increase
the number of shares of common stock held by new investors to 16,000,000, or
25.9% of the total number of shares of common stock outstanding after this
offering. See "Principal and Selling Stockholders."
19
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The following table sets forth selected historical financial and other data
of Boyds. The historical financial data as of December 31, 1997 and 1998 and for
the three years ended December 31, 1998 have been derived from, and should be
read in conjunction with, the audited Consolidated Financial Statements and the
accompanying notes, which are contained later in this prospectus. The historical
financial data as of December 31, 1995 and 1996 and for the year ended December
31, 1995 have been derived from audited financial statements for such periods,
which are not contained in this prospectus. The historical data as of and for
the year ended December 31, 1994 have been derived from unaudited financial
statements which are not contained in this prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and the accompanying notes, which are
contained later in this prospectus.
Prior to the recapitalization on April 21, 1998, Boyds was operated as an S
Corporation for federal and state income tax purposes. As a result, Boyds'
taxable earnings were taxed directly to its then-existing stockholders. After
the recapitalization, Boyds became subject to federal and state income taxes.
The pro forma provision for income taxes and pro forma net income assume that
Boyds was subject to federal and state income taxes and was taxed as a C
Corporation at the effective tax rates that would have applied for all periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales........................................................ $ 34,833 $ 70,147 $ 98,365 $ 129,841 $ 197,806
Cost of goods sold............................................... 12,450 24,221 33,022 43,278 63,852
--------- --------- --------- --------- ---------
Gross profit..................................................... 22,383 45,926 65,343 86,563 133,954
Selling, general and administrative expenses..................... 2,675 4,332 6,314 8,528 14,446
Other operating income, net...................................... 78 31 387 1,171 1,280
--------- --------- --------- --------- ---------
Income from operations........................................... 19,786 41,625 59,416 79,206 120,788
Interest expense................................................. (39) (89) (187) (242) (29,618)
Other income (expense), net including $3,248 of other expenses in
1998 related to the recapitalization........................... 88 578 868 166 (2,885)
--------- --------- --------- --------- ---------
Income before provision for income taxes......................... 19,835 42,114 60,097 79,130 88,285
Provision for income taxes....................................... -- -- -- -- 22,007
--------- --------- --------- --------- ---------
Net income....................................................... $ 19,835 $ 42,114 $ 60,097 $ 79,130 $ 66,278
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma provision for income taxes............................. $ 8,033 $ 17,445 $ 25,045 $ 33,152 $ 34,732
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income............................................. $ 11,802 $ 24,659 $ 35,052 $ 45,978 $ 53,553
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma basic earnings per common share (1).................... $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.64
Pro forma diluted earnings per common share (1).................. $ 0.07 $ 0.16 $ 0.22 $ 0.29 $ 0.63
OTHER DATA:
Gross profit margin.............................................. 64.3% 65.5% 66.4% 66.7% 67.7%
Operating income margin.......................................... 56.8% 59.3% 60.4% 61.0% 61.1%
Depreciation and amortization.................................... $ 46 $ 131 $ 221 $ 254 $ 2,260
Capital expenditures............................................. 132 545 269 367 1,247
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........................................ $ 1,700 $ 4,279 $ 6,083 $ 11,210 $ 11,606
Working capital (excluding cash and cash equivalents)............ 5,856 13,384 13,250 23,398 22,262
Total assets..................................................... 8,526 19,943 22,582 38,936 298,410
Total debt....................................................... 7,500 17,700 19,300 30,000 443,000
Total stockholders' equity (deficit)............................. 250 916 1,191 5,272 (158,766)
</TABLE>
- ------------------------------
(1) Pro forma basic earnings per common share is calculated based on weighted
average common shares outstanding of 157,671,516 for the four fiscal years
ended December 31, 1998 and 84,142,163 for the year ended December 31, 1998.
Pro forma diluted earnings per common share is calculated based on weighted
average diluted shares outstanding of 84,484,571 for the year ended December
31, 1998.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Boyds has grown significantly to become a leading domestic designer,
importer and distributor of branded, high-quality, hand-crafted collectibles and
other specialty giftware products. Boyds sells its products through an extensive
network of approximately 19,950 accounts comprised of independent gift and
collectibles retailers, premier department stores, selected catalogue retailers
and other electronic and retail channels. Boyds has a demonstrated history of
strong sales growth with net sales increasing from $18.2 million in fiscal 1993
to $197.8 million in fiscal 1998, a compound annual growth rate of approximately
61%. Substantially all sales growth has resulted from increases in unit volumes
sold.
As a result of developing a strong brand image and a high level of consumer
awareness, Boyds believes its sales growth has outpaced the giftware and
collectibles industries and allowed it to gain market share. Boyds also believes
it is one of the most profitable companies in terms of both gross profit and
operating income margins in the giftware and collectibles industries for
companies of similar or larger size. Boyds' fiscal 1998 gross and operating
income margins were 67.7% and 61.1%, respectively.
Boyds' products include resin figurines, plush animals, porcelain dolls and
boxes and related clothing and accessories. The following table sets forth
Boyds' resin figurine, plush animal and other sales and their percentage of
Boyds' net sales:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- -------------------------------
1996 1997 1998 1996 1997 1998
(DOLLARS IN MILLIONS) (PERCENT OF NET SALES)
<S> <C> <C> <C> <C> <C> <C>
Resin figurines................................... $ 42.1 $ 54.9 $ 80.2 42.8% 42.3% 40.6%
Plush animals..................................... 46.4 58.1 93.4 47.2 44.8 47.2
Other............................................. 9.9 16.8 24.2 10.0 12.9 12.2
--------- --------- --------- --------- --------- ---------
Net sales....................................... $ 98.4 $ 129.8 $ 197.8 100.0% 100.0% 100.0%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
Growth in resin figurines has been primarily driven by the substantial
growth of Boyds' three major resin figurine product lines, BEARSTONES,
FOLKSTONES and DOLLSTONES, all of which have exhibited growth each year since
their introduction. In late 1993, Boyds introduced its BEARSTONES product line,
which was an immediate success. In early 1994, Boyds introduced another resin
figurine line known as FOLKSTONES, followed by DOLLSTONES in late 1995. Boyds
also established a network of dealers in 1994, selected primarily from Boyds'
plush-only dealers, that were authorized to carry Boyds' resin figurine product
lines. These dealers have grown in number to 6,000 accounts and accounted for
approximately 63% of Boyds' net sales in fiscal 1998. Boyds currently has a
waiting list of over 5,500 retailers that have expressed interest in becoming
resin figurine dealers.
Growth in plush animals for the period from fiscal 1993 through fiscal 1998
has been largely attributable to the growth of Boyds' line of dressed animals in
the T.J.'S BEST DRESSED collection, introduced in 1992, and in other
custom-designed plush animals. Boyds began selling non-dressed plush animals in
1982 and has since introduced product collections which currently include BEARS
IN THE ATTIC-TM-, J.B. BEAN & ASSOCIATES, the ARCHIVE COLLECTION-TM- and MOHAIR
BEARS.
Boyds' resin figurine and plush animal sales accounted for 87.8% of fiscal
1998 net sales with other product sales, freight sales, collectors club sales
and distributor sales comprising the remainder. Freight sales represent shipping
and handling charges assessed on each order based on order size. Collectors club
sales are generated from annual dues collected directly from consumers who
become members of
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<PAGE>
Boyds' collectors club, THE LOYAL ORDER OF FRIENDS OF BOYDS, which began in July
1996 and currently has approximately 120,000 paying members. Distributor sales
represent sales of Boyds' products to independent distributors in other
countries and to certain accounts in the U.S., which are shipped directly from
overseas suppliers.
Boyds believes its gross profit and operating income margins are higher than
giftware and collectibles companies of similar or larger size, even though it
serves similar markets, retail distribution channels and consumers, due to its
avoidance of substantial volume purchase discounts, its use of in-house
development teams, limited royalties paid to outside artists, and relatively low
warehousing, distribution and obsolescence costs.
Selling, general and administrative expenses are comprised of overhead,
selling and marketing costs, administration, professional fees and Pennsylvania
capital stock taxes. For fiscal 1998, Boyds' SG&A expenses were $14.4 million,
representing 7.3% of net sales. Boyds believes it has one of the lowest SG&A
levels, as a percentage of net sales, among giftware and collectibles companies
of similar or larger size. Unlike many of its competitors, Boyds does not
utilize a network of internal or independent commissioned sales personnel, but
relies instead on an in-house team of non-commissioned telemarketing and sales
professionals. In addition, Boyds exhibits its products at many national and
regional tradeshows where orders are taken by Boyds' employees and part-time
help. Boyds operates almost exclusively out of a leased office/distribution
facility in McSherrystown, Pennsylvania where it believes both labor and rental
costs are attractive. These factors, combined with Boyds' access to low-cost
manufacturing sources located primarily in China, have resulted in an operating
income margin that Boyds believes is among the highest in the industry.
Boyds licenses certain of its product designs to other companies for
products including stationery, greeting cards and home textiles. Boyds believes
such licensing, in addition to providing royalty income, helps to increase
consumer awareness of Boyds' designs and brand image. Boyds reports royalty
income as other operating income.
Boyds has substantial operating income margins and has experienced
significant growth in income from operations. Its operating income margins have
increased from 56.8% in fiscal 1994 to 61.1% for fiscal 1998, which Boyds
believes is approximately 25% to 45% higher than giftware and collectibles
companies of similar or larger size. Historically, Boyds has funded its cash
needs from operations and has not found it necessary to make substantial capital
investments.
RESULTS OF OPERATIONS
The following table sets forth the components of net income as a percentage
of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
<S> <C> <C> <C>
Net sales................................................................................ 100.0% 100.0% 100.0%
Gross profit............................................................................. 66.4 66.7 67.7
Selling, general and administrative expenses............................................. 6.4 6.6 7.3
Other operating income, net.............................................................. 0.4 0.9 0.7
Income from operations................................................................. 60.4 61.0 61.1
Interest expense......................................................................... (0.2) (0.2) 15.0
Other income, net........................................................................ 0.9 0.1 (0.1)
Expenses related to the recapitalization................................................. -- -- 1.6
Provision for income taxes............................................................... -- -- 11.1
--------- --------- ---------
Net income............................................................................. 61.1% 60.9% 33.5%
--------- --------- ---------
--------- --------- ---------
</TABLE>
22
<PAGE>
FISCAL YEAR ENDED DECEMBER 31, 1998 VS. FISCAL YEAR ENDED DECEMBER 31, 1997
NET SALES. Net sales increased 52.4% to $197.8 million in fiscal 1998 from
$129.8 million in fiscal 1997. Net sales of resin figurines were $80.2 million
in fiscal 1998, an increase of 46.1% as compared to resin figurine net sales of
$54.9 million in fiscal 1997. The increase in net sales of resin figurines was
primarily attributable to increased sales of BEARSTONES, FOLKSTONES and
Porcelain Dolls, which resulted from strong consumer and retailer demand, and
the introduction of CARVER'S CHOICE. Net sales of plush animals were $93.4
million in fiscal 1998, an increase of 60.8% as compared to plush animal net
sales of $58.1 million in fiscal 1997. The increase in net sales of plush
animals was primarily attributable to increased sales of T.J.'S BEST DRESSED,
along with sales of T.F. WUZZIES mini-bears and MOHAIR BEARS, which were
introduced in the fall of 1997.
GROSS PROFIT. Gross profit increased 54.7% to $134 million in fiscal 1998
from $86.6 million in fiscal 1997. Gross profit as a percent of sales increased
to 67.7% for fiscal 1998 from 66.7% for fiscal 1997. The increase in gross
profit was primarily attributable to the increase in sales for both the plush
animal and resin figurine categories for fiscal 1998 as compared to fiscal 1997.
SG&A. SG&A expenses increased 69.4% to $14.4 million in fiscal 1998 from
$8.5 million in fiscal 1997. SG&A expenses as a percent of net sales increased
to 7.3% in fiscal 1998 from 6.6% in fiscal 1997. The increase in SG&A expenses
was primarily attributable to increased administrative costs due to Boyds' net
sales increase during the periods. The increase in SG&A expenses as a percent of
net sales was attributable to increased wages of $750,000 incurred due to an
increased provision for Boyds' employee incentive program and an increase in
professional fees of $1.5 million.
INCOME FROM OPERATIONS. Income from operations increased 52.5% to $120.8
million in fiscal 1998 from $79.2 million in fiscal 1997. The operating income
margin increased to 61.1% in fiscal 1998 from 61.0% in fiscal 1997. The increase
in operating income margin was due to an increase in net sales for the period.
The increase in income from operations was primarily attributable to the
increase in net sales for the period.
INTEREST EXPENSE. Interest expense increased to $29.6 million in fiscal
1998 from $242,000 in fiscal 1997. The increase in interest expense was due to
indebtedness incurred in connection with the recapitalization.
EXPENSES RELATED TO THE RECAPITALIZATION. Transaction costs for fiscal 1998
were $3.2 million, representing 1.6% of net sales. Transaction costs consisted
of non-recurring bonuses paid to key employees in connection with the
recapitalization.
NET INCOME. Net income decreased 16.2% to $66.3 million in fiscal 1998 from
$79.1 million in fiscal 1997. The decrease in net income was attributable to
$54.6 million of additional costs in 1998 that did not occur in 1997, including:
- interest expense of $29.4 million
- income tax expense of $22.0 million due to Boyds becoming a tax paying
entity
- expenses related to the recapitalization of $3.2 million
The net income margin decreased to 33.5% in fiscal 1998 from 60.9% in fiscal
1997. The decrease in net income margin was attributable to the tax and interest
expenses as discussed above.
FISCAL YEAR ENDED DECEMBER 31, 1997 VS. FISCAL YEAR ENDED DECEMBER 31, 1996
NET SALES. Net sales increased 31.9% to $129.8 million in fiscal 1997 from
$98.4 million in fiscal 1996. Net sales of resin figurines were $54.9 million in
fiscal 1997, an increase of 30.4% as compared to resin figurine net sales of
$42.1 million in fiscal 1996. The increase in net sales of resin figurines was
23
<PAGE>
primarily attributable to increased sales of BEARSTONES and FOLKSTONES, which
resulted from strong consumer and retailer demand. Net sales of plush animals
were $58.1 million in fiscal 1997, an increase of 25.2% as compared to plush
animal net sales of $46.4 million in fiscal 1996. The increase in net sales of
plush animals was primarily attributable to increased sales of T.J.'S BEST
DRESSED, as well as increased sales of other specialty dressed plush animals.
GROSS PROFIT. Gross profit increased 32.6% to $86.6 million in fiscal 1997
from $65.3 million in fiscal 1996. Gross profit as a percent of net sales
increased slightly to 66.7% in fiscal 1997 from 66.4% in fiscal 1996. The
increase in gross profit was primarily attributable to the increase in sales for
both the plush animal and resin figurine categories for fiscal 1997 as compared
to fiscal 1996.
SG&A. SG&A expenses increased 34.9% to $8.5 million in fiscal 1997 from
$6.3 million in fiscal 1996. SG&A expenses as a percent of net sales increased
to 6.6% in fiscal 1997 from 6.4% in fiscal 1996. The increase in SG&A expenses
as a percent of net sales in fiscal 1997 as compared to fiscal 1996 was
primarily due to an increase in Boyds' capital stock tax. In general, SG&A
expenses grew in line with Boyds' net sales increase for fiscal 1997 as compared
to fiscal 1996.
INCOME FROM OPERATIONS. Income from operations increased 33.3% to $79.2
million in fiscal 1997 from $59.4 million in fiscal 1996. The operating income
margin also increased to 61.0% in fiscal 1997 from 60.4% in fiscal 1996
primarily due to the increase in royalty income reflected in other operating
income.
INTEREST EXPENSE. There was no material change in interest expense between
fiscal 1997 and fiscal 1996.
NET INCOME. Net income increased 31.6% to $79.1 million in fiscal 1997 from
$60.1 million in fiscal 1996. The increase in net income was primarily
attributable to the increase in net sales. The net income margin decreased
slightly to 60.9% in fiscal 1997 from 61.1% in fiscal 1996. The slight decrease
in net income margin was attributable to increased SG&A expenses.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Boyds utilized its operating cash flow to support working
capital and ongoing capital expenditures. Cash flow from operations increased
18.3% to $82.6 million for fiscal 1998 from $69.8 million for fiscal 1997. The
cash flow increase was primarily attributable to the increase in amortization,
interest payable and accruals, partially offset by increases in accounts
receivable and inventory. Net cash used in financing activities was $77.5
million and $64.3 million for fiscal 1998 and fiscal 1997, respectively. The
funds were used to repay notes to the stockholders, reduce outstanding debt and
fund the costs of the recapitalization.
Boyds' primary sources of liquidity are cash flow from operations and
borrowings under the credit facility. Boyds has elected to treat the
recapitalization as an asset acquisition for federal income tax purposes,
thereby creating tax deductible goodwill. Boyds expects that this deductible
goodwill will reduce cash taxes by approximately $16.3 million per year for the
next 15 years, assuming sufficient income to realize the full benefit of this
reduction. Boyds' primary uses of cash are to fund working capital and to
service debt.
On April 21, 1998 Boyds issued the senior subordinated notes and entered
into the credit facility. The term loans were for an aggregate principal amount
of $325.0 million. Boyds has repaid $47.0 million of the term loans through
December 31, 1998. The revolving credit facility provides revolving loans in an
aggregate amount of up to $40.0 million. Boyds has not borrowed under the
revolving credit facility. Thus, the amount available under the revolving credit
facility will be available to fund Boyds' working capital requirements.
24
<PAGE>
Borrowings under the credit facility bear interest at a rate per year equal
to a margin over either a base rate or LIBOR. The revolving loan commitment will
terminate seven years after the date of the initial funding of the credit
facility. The term loans will be amortized over an eight-year period with no
amortization in the first two years. The credit facility contains customary
covenants and events of default, including substantial restrictions on Boyds'
ability to declare dividends or make distributions. The term loans are subject
to mandatory prepayment with the proceeds of certain asset sales and a portion
of Boyds' excess cash flow. See "Description of Certain Indebtedness."
Boyds plans to use the net proceeds of the offering to redeem $66.0 million
aggregate principal amount of the notes and to repay $90.8 million of its term
loans.
Boyds does not incur significant capital expenditures due to its sourcing
arrangements with its buying agencies. As a result of these arrangements, other
companies manufacture Boyds' products and Boyds is therefore able to avoid
related capital expenditures. Boyds does not expect to incur significant capital
expenditures for the foreseeable future.
Management believes that cash flow from operations and availability under
the revolving credit facility will provide adequate funds for Boyds' foreseeable
working capital needs, planned capital expenditures and debt service
obligations. Any future acquisitions, joint ventures or other similar
transactions may require additional capital and there can be no assurance that
any such capital will be available to Boyds on acceptable terms or at all.
Boyds' ability to fund its working capital needs, planned capital expenditures
and scheduled debt payments, to refinance indebtedness and to comply with all of
the financial covenants under its debt agreements, depends on its future
operating performance and cash flow, which in turn are subject to prevailing
economic conditions and to financial, business and other factors, some of which
are beyond Boyds' control.
SEASONALITY
Boyds does not have the significant seasonal variation in its orders that it
believes is experienced by many other giftware and collectibles companies. Boyds
receives orders throughout the year and generally ships merchandise out on a
first-in, first-out basis. Approximately 40% of orders are taken between
November and April while approximately 60% of orders are placed between May and
October in anticipation of the holiday season. Boyds does not build a large
receivables balance relative to sales because it typically does not offer its
customers long payment terms or dating programs.
EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income."
Comprehensive income includes net income and several other items that current
accounting standards require to be recognized outside of net income. This
standard requires enterprises to display comprehensive income and its components
in financial statements, to classify items of comprehensive income by their
nature in financial statements, and to display the accumulated balances of other
comprehensive income in stockholders' equity separately from retained earnings
and additional paid-in capital. Boyds adopted SFAS No. 130 for the year ended
December 31, 1998. There were no items of other comprehensive income for all
periods presented.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This statement is effective for fiscal
years beginning after December 15, 1997. As provided by SFAS No. 131,
disclosures are not required for interim periods of the initial year of
application, but comparative information will be reported in financial
statements for interim periods during the second year of application. Management
has determined that Boyds operates in a single industry segment.
25
<PAGE>
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for periods beginning
after June 15, 1999. Boyds is currently evaluating the impact, if any, of this
statement.
FOREIGN EXCHANGE
The dollar value of Boyds' assets abroad is not significant. Boyds' sales
are denominated in United States dollars and, as a result, are not subject to
changes in exchange rates.
Boyds imports most of its products from manufacturers in China. Boyds' costs
could be adversely affected on a short-term basis if the Chinese renminbi
appreciates significantly relative to the United States dollar. Conversely, its
costs would be favorably affected on a short-term basis if the Chinese renminbi
depreciates significantly relative to the the United States dollar. Although
Boyds generally pays for its products in United States dollars, the cost of such
products fluctuates with the value of the Chinese renminbi. In the future Boyds
may, from time to time, enter into foreign exchange contracts or prepay
inventory purchases as a partial hedge against currency fluctuations.
Differences between the amounts of such contracts and costs of specific material
purchases are included in inventory and cost of sales. Boyds intends to manage
foreign exchange risks to the extent appropriate.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written to use
two digits to define year dates. Computer programs running date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in systems failure or miscalculations causing
disruptions of operations. Boyds currently uses information technology for
processing orders and tracking inventory.
Management believes that Boyds' systems are Year 2000 compliant. Boyds has
purchased Year 2000 compliant software and currently has Year 2000 compliance
certificates from its key software suppliers. In addition, Boyds has
substantially completed the internal testing of its information technology
systems and will continue to monitor such systems through the summer of 1999.
Boyds has also specifically addressed internally its non-information technology
related systems and believes that there will be no significant operational
problems relating to the Year 2000 issue. Boyds has not obtained, and does not
intend to obtain, an independent verification and validation of its Year 2000
compliance.
Other than system replacements due to planned upgrades, Boyds has not
replaced any of its information technology or non-information technology systems
as a result of the Year 2000 issue.
Boyds depends heavily on its relationships with customers, buying agencies,
manufacturers and shippers. It is communicating with customers, buying agencies,
manufacturers and shippers to determine the extent to which these third parties
are moving toward Year 2000 compliance. To assess Year 2000 compliance and any
potential exposure to the Year 2000 problem, Boyds is in the process of sending
surveys to such third parties. Boyds is also seeking Year 2000 compliance
certificates from third parties it has indentified as "critical" to its
operations, which include all of its buying agencies and manufacturers and its
most important customers and shippers. To date, all of these critical third
parties have been contacted, and Boyds has not been made aware of any Year 2000
compliance problems.
Boyds believes that any adverse effect on its relationship with customers,
buying agencies, manufacturers and shippers due to the Year 2000 problem will be
lessened by the fact that it does not share information technology. However,
failure of any of these parties to have their systems timely converted may have
a material adverse effect on Boyds' business and operations.
Boyds believes it has substantially completed its Year 2000 project. Boyds
did not incur significant incremental costs specifically in connection with
seeking to achieve Year 2000 compliance and all
26
<PAGE>
upgrades and system replacements made in connection with its Year 2000 project
were part of previously planned software and hardware upgrades. Furthermore, in
order to achieve Year 2000 compliance, Boyds has needed, and expects that it
will continue to need, only existing employees who otherwise have been assigned
to the planned upgrade of Boyds' software and hardware.
Notwithstanding Boyds' progress to date, there are several ways in which its
systems could still be affected by the Year 2000 problem. First, the software
code Boyds uses in its information systems may not in fact be Year 2000
compliant in all instances. Second, Boyds may be unable to complete the
remaining upgrades to its information technology systems by the Year 2000.
Third, even if Boyds completes the system upgrade by the Year 2000, it may be
unable to fully test and monitor the upgrades, making it difficult for Boyds to
identify and remedy any problems that might exist. Fourth, Boyds' customers,
buying agencies, independent manufacturers and shippers may be unable to achieve
Year 2000 compliance in time.
The most reasonably likely worst-case scenario resulting from Boyds'
inability, or the inability of its customers, buying agencies, manufacturers or
shippers, to become Year 2000 compliant, includes the following adverse effects:
- SUPPLY PROBLEMS. Boyds would be unable to receive products due to year
2000-related failures on the part of its manufacturers and suppliers
causing Boyds to be unable to fulfill the orders of many of its customers
for Boyds' products.
- ORDER DIFFICULTIES. Boyds' customers would be unable to place their
orders with Boyds because of its own system failures or those of its
customers resulting in delayed or potentially lost orders for Boyds'
products.
- DELIVERY DELAYS. Boyds would be unable to deliver ordered products to its
customers on a timely basis due to a system failure at Boyds or at one of
its product shippers leading to delays in arrival of Boyds' products and
possibly dissatisfied customers.
Boyds has not developed, and does not intend to develop, contingency plans
relating to the Year 2000 problem unless Boyds becomes aware of a Year 2000
compliance problem in its own systems or those of its manufacturers, buying
agencies, customers or shippers.
Boyds' assessment of its Year 2000 compliance is based on numerous
assumptions about future events, including third party modification plans and
other factors. However, there can be no guarantee that this assessment is
correct and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.
INFLATION
Boyds does not believe that inflation has had a material impact on its
operations.
27
<PAGE>
BUSINESS
HISTORY OF BOYDS
Boyds was founded in 1979 by Gary and Justina Lowenthal as a small antique
business in Boyds, Maryland. By 1984, Boyds had begun to reproduce and sell
miniature houses, duck decoys and merino wool teddy bears to selected retail
outlets. In 1984, Boyds also introduced its first major plush product, a unique,
fully-jointed wool teddy bear named MATTHEW-TM-, and the GNOMES HOMES-TM-, a
small collection of hand-sculpted miniature cast resin houses. Boyds relocated
from Maryland to southern Pennsylvania in 1987 in order to take advantage of
more favorable labor markets. The product line was expanded to include other
plush animals and related accessories including miniature clothes, furniture and
ornaments. Boyds began distributing its plush animal lines to department stores
and gift retailers, opting against selling to mass merchandisers, major discount
stores and toy chains. This strategy strengthened Boyds' relationship with its
retailers, a competitive advantage which exists today. In 1993, Boyds began
selling cast resin figurines with the introduction of its BEARSTONES line.
THE COLLECTIBLES INDUSTRY
UNITY MARKETING, an independent market research firm which specializes in
the collectibles industry and is not affiliated with Boyds, estimates that
consumer sales of collectibles in the United States in 1997 totaled $10.0
billion. The industry grew at a compound annual growth rate of approximately 11%
from 1993 to 1997. Figurines, which represent approximately 45% of Boyds' net
product sales, are estimated by UNITY MARKETING to represent the largest
category within the U.S. collectibles industry with an estimated $3.9 billion in
total sales in 1997. Within the collectibles industry, figurine sales have grown
at a compound annual growth rate of approximately 10% since 1993, though
management believes that low- to mid-priced figurines have grown at a faster
rate. According to UNITY MARKETING, women between the ages of 35 and 64
encompass the majority of collectors. Boyds also believes that this group
constitutes a substantial portion of its collectors. The U.S. Census Bureau
reports that the number of women in this age group is expected to grow
approximately 12% by the year 2005. UNITY MARKETING expects that strong growth
in the collectibles industry will be driven by the increased number of
middle-aged female collectors and higher spending habits of the baby boom
generation.
BOYDS' PRODUCT LINES
Since 1982, Boyds' product lines have expanded from plush bears to include
other plush animals (e.g., hares, moose and cats), resin figurines, porcelain
dolls and boxes and related clothing and accessories. Boyds' continuous new
product development efforts incorporating traditional, enduring concepts have
resulted in strong brand awareness and broad appeal for Boyds' products. Boyds'
products have been consistently recognized for excellence in product design.
Boyds' industry and consumer awards include Toby awards, Golden Teddy awards,
Collectors Jubilee awards and NALED (National Association of Limited Edition
Dealers) awards.
One of Boyds' strategies for maintaining the demand for and collectibility
of its existing resin figurine and plush animal product lines is to constantly
develop and introduce new designs and themes while selectively retiring others.
In further building existing product lines, Boyds applies its formula of
developing high-quality, whimsical in nature products to new animals and
concepts, such as the introduction of dressed animals in the case of the plush
lines and to new situations and concepts in the case of the resin figurines.
Boyds is able to keep the categories familiar, yet fresh, with new ideas by
keeping annual product turnover near 40%, further strengthening the image and
collectibility of its products.
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<PAGE>
RESIN FIGURINES
Net product sales of resin figurines for fiscal 1998 were $80.2 million,
representing 44.6% of net product sales. Pieces in the resin figurine category
are generally priced between $9 and $60 at retail. Each figurine is inscribed
with Boyds' distinctive symbol of authenticity, a hidden bear paw, and a bottom
stamp indicating the name, edition and piece number. Many figurines contain
famous quotes which help the customers identify with the piece. The items are
packaged individually with a certificate of authenticity describing the product.
Boyds' resin figurine category currently consists of three main collections,
BEARSTONES, FOLKSTONES and DOLLSTONES, and two sub-collections, SHOEBOX
BEARS-TM- and WEE FOLKSTONES. Together, these categories include over 420 styles
of finely detailed, hand-painted miniature cast resin bears, other animals and
people.
Boyds introduced the BEARSTONES in 1993 with ten different styles. Since its
introduction, Boyds has expanded the offerings to include additional figurines,
resin jewelry, ornaments, waterballs, SHOEBOX BEARS, votive holders, ceramics,
picture frames and wooden clocks. The ceramics, frames and clocks were
introduced in 1997.
Boyds also produces a collection of ceramic pieces which it is expanding and
currently considers part of its BEARSTONES family of products. The ceramic line,
entitled BEARWARE POTTERYWORKS, was introduced in the fall of 1997 and includes
ceramic cookie jars and salt and pepper shakers.
The FOLKSTONES line of products, introduced in 1994, includes
non-traditional, whimsical figurines of traditional folk art themes, other
figurines, jewelry, ornaments, waterballs, WEE FOLKSTONES and votive holders.
The votive holders and WEE FOLKSTONES, depicting faeries, angels, elves and
other characters, were introduced in 1997.
The DOLLSTONES line of products, introduced in 1995, is based on nostalgic
themes and includes figurines of children depicted with animals, waterballs,
votive holders and musicals. In the fall of 1997, Boyds introduced two limited
edition porcelain dolls within the DOLLSTONES product category. Due to the
success of this introduction, several more limited edition porcelain dolls were
introduced during 1998 and Boyds plans to further expand this category in 1999.
PLUSH ANIMALS
Net product sales of plush animals for fiscal 1998 were $93.4 million,
representing 52.0% of net product sales. Retail prices for the plush animals
generally range from $4 to $95. The plush animal category consists of both
dressed and non-dressed animals which are made of various materials. The outer
covering ranges from acrylic plush to custom-dyed chenille and wool; the
interior is filled with plastic pellets for the beanbag animals or 100% acrylic
fiberfill for the other animals. Most of the animals are fully jointed with
sewn-in joints for arms, legs and heads. Boyds began selling its plush animals
in 1982. Today the plush animal category has grown to encompass over 430
different items ranging from 2 1/2" miniatures to 21" large animals.
Introduced in 1992, the popularity of Boyds' T.J.'S BEST DRESSED line,
characterized by fully jointed bears, cats, moose and other animals dressed in
stylish, hand-sewn outfits, has helped create additional brand awareness for
Boyds.
Boyds' non-dressed plush animal lines include the BEARS IN THE ATTIC, the
ARTISAN SERIES-TM-, J.B. BEAN & ASSOCIATES, the ARCHIVE COLLECTION and ANGELS
AND FRIENDS-TM- ornaments. The largest revenue-generating line in this plush
category is Boyds' J.B. BEAN & ASSOCIATES, featuring fully-jointed bears, hares,
moose, lambs and other animals.
In the fall of 1997, Boyds introduced MOHAIR BEARS, which are fully-jointed,
high-quality bears with mohair bodies, suede paws and hand-embroidered paws and
faces. Boyds believes its MOHAIR BEARS are
29
<PAGE>
comparable in quality to bears manufactured by certain competitors, but at
wholesale prices which are significantly lower.
OTHER PRODUCTS
In addition to Boyds' resin figurine and plush animal lines, Boyds sells
over 150 additional items which generally generate margins comparable to its
resin figurine and plush animal lines. The majority of the revenues generated by
these products are from the sale of Boyds' BEAR NECESSITIES line that includes
miniature knit clothing, miniature furniture, wooden accessories, glasses, cast
iron products and resin accessories. Boyds also sells various printed and
promotional materials to support its product lines.
NEW PRODUCT INTRODUCTIONS
Boyds continually develops and introduces new products and product line
concepts. For example, its MOHAIR BEARS, introduced in the fall of 1997,
represent an important new plush animal line. In 1998, the MOHAIR BEARS line was
expanded to include other animals. In addition, in late 1997 Boyds introduced
its first line of porcelain dolls under the DOLLSTONES line. The demand for
Boyds' first editions of porcelain dolls was high and the dolls sold out almost
immediately. This successful entry into the porcelain doll category extends the
Boyds brand name into the doll segment of the collectibles and giftware markets.
Boyds intends to further expand its Porcelain Doll line in 1999. Also in late
1997, Boyds introduced BEARWARE POTTERYWORKS under the BEARSTONES line.
Boyds introduced four new product lines for sale in 1998: CARVER'S CHOICE,
GLASSSMITH ORNAMENTS, DESKANIMALS and LE BEARMOGE. CARVER'S CHOICE is a new line
of resin figures, picture frames and related accessories based on hand-carved
wooden sculptures. These items capture the same whimsical spirit Boyds has
become known for in the giftware and collectibles industries. GLASSSMITH
ORNAMENTS is a new category consisting of three blown glass antique-style
ornaments that are based on some of Boyds' most popular themes. DESKANIMALS is a
new concept in resin sculptures containing multiple piece depictions of animals
that can be placed on a desk or other flat surface and appear to go under the
surface and reappear as though they were swimming in water. LE BEARMOGE is a new
category consisting of ornamental porcelain boxes. Each box is adorned with a
porcelain figurine based on popular Boyds' characters and contains a miniature
porcelain figurine.
Boyds continually evaluates new product line ideas and plans to regularly
introduce new product lines over the next several years. For fiscal 1999, Boyds'
emphasis is to further expand its resin and plush product lines that have been
successfully introduced in the last two years, including Porcelain Dolls, LE
BEARMOGE and MOHAIR BEARS. Also in fiscal 1999, Boyds plans to introduce the
following new lines:
- UPTOWN BEARS, upscale dressed bears
- PURRSTONES, a new line of resin figurines
- BABYBOYDS, plush animals targeted for the childrens market
- THE BEATRICE COLLECTION-TM-, fine porcelain hinged boxes with designs
reproduced from original works of art made exclusively for Boyds
PRODUCT DESIGN AND DEVELOPMENT
Boyds has developed a process of designing and sourcing which has enabled it
to:
- consistently develop award-winning designs prized by collectors
- maintain demand for Boyds' products without compromising high quality
standards
- maintain high gross margins due to Boyds' established sourcing network
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Although certain elements of Boyds' design process are proprietary, Boyds
typically
- researches the general giftware and collectibles markets to identify
specific product areas that are large or have the potential to grow due to
evolving consumer trends
- focuses on developing a specific niche within the identified product area
- develops several items that are tested in the marketplace
- tailors the product line to properly position it with retailers if market
reception is positive
The time-to-market for a new product within an existing line, from idea
generation to shipping, can be as short as five months, but typically takes one
year. New product line concepts normally take one to two years to fully develop
for market entry.
Boyds' in-house creative design team consists of seven full-time, salaried
design professionals and senior management. Once a design has been created,
Boyds, together with its buying agencies, works with outside artists and
sculptors, primarily in China, who are responsible for creating a prototype and
refining the product's appearance for review by Boyds. Boyds also works with its
buying agencies and manufacturers in order to ensure the product can be produced
at an acceptable cost per unit, without compromising quality, given a certain
level of production. A product will not be produced unless the Boyds formula for
high quality and affordability can be maintained.
Boyds' resin figurines are developed into designs and clay models by artists
and modelmakers overseas under the guidance and direction of Boyds' creative
design team. Whether designed and/or conceptualized in-house or externally,
Boyds strives for an overall "Boyds image" to achieve product consistency.
LICENSING OF BOYDS' IMAGES AND PRODUCT DESIGNS
Due to Boyds' popularity, it has begun to license its images for other
products including stationery, afghans, throw pillows, rubber stamps and
clothing. For example, Boyds currently licenses certain product images to
Interart Holding Corporation, a subsidiary of Hallmark Cards, to produce gift
cards, package wrap and other assorted paper items. Interart Holding
Corporation's Boyds line is expected to consist of over 150 SKUs.
BOYDS' INTELLECTUAL PROPERTY
TRADEMARKS. Boyds has obtained 17 U.S. trademark registrations for
trademarks and logos related to its resin figurines and plush animals. These
registrations allow Boyds to use on an exclusive basis these trademarks and
logos in the United States in connection with its products. If Boyds continues
to use such trademarks and logos, makes timely filings with, and pays all
required fees to, the U.S. Patent and Trademark Office, its trademark
registrations can exist in perpetuity. Boyds also has common-law trademark
rights to the extent it uses unregistered names and logos on its various
products. The strength and scope of these rights is determined by the geographic
extent and duration of their use. Additionally, to the extent that the packaging
and overall visual impact of Boyds' products is inherently distinctive or has
acquired distinctiveness through sales in the marketplace, Boyds has proprietary
rights in such "trade dress" of its products.
COPYRIGHTS. Boyds has secured more than 300 copyright registrations for its
products with the U.S. Copyright Office. Boyds may enforce these rights in U.S.
courts with regard to infringements occurring in the United States and also, to
varying extents, in foreign jurisdictions with regard to infringements occurring
outside the United States. In addition, Boyds has copyrights in the original
expression contained in other products that it has created, whether or not those
copyrights have been registered. In all events, Boyds' copyright in its products
is limited in scope to the original, creative expression embodied in them and
does not extend to elements drawn from public sources or to functional
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elements. For all products created by or on behalf of Boyds since its founding
date, the U.S. copyright currently runs for a term of 95 years from the date of
their creation.
Boyds protects its intellectual property rights, both through policing any
potential infringement by third parties and registering such rights, when
appropriate, with applicable government authorities.
SPECIALTY PRODUCTS FOR BOYDS' CORPORATE AND RETAIL PARTNERS
Boyds is pursuing corporate and retail partners as an expanded distribution
channel. These corporate arrangements provide the client with a customized or
co-branded product for exclusive distribution by the corporate partner. Each
product has the potential to enhance Boyds brand recognition while maintaining
the same degree of quality found in traditional Boyds products. For example,
Boyds produced co-branded plush ornaments of well-known animated characters
under an agreement with a large media conglomerate. Boyds believes this
relationship may result in the introduction of additional co-branded products in
the future. Boyds is also working with other major corporations in the
stationery, toy and entertainment industries to develop long-term co-branding
relationships for Boyds products. Boyds has also produced customized products
for Barnes & Noble and San Francisco Music Box stores, QVC and several of its
larger resin dealers.
SOURCING AND DISTRIBUTION
Boyds coordinates its production and cooperative development efforts
primarily through two buying agencies with whom it has established long-term
business relationships. These buying agencies perform a number of functions for
Boyds, including collaborating in its product design and development process,
identifying suitable manufacturers for its products and supervising its
manufacturers to assure the proper quality and timing of Boyds' orders. Each of
Boyds' two primary buying agencies is responsible for assisting Boyds in the
design and production of one of its two major product categories, resin
figurines and plush animals. Boyds and its plush animal buying agency have
collaborated for over 15 years while Boyds and its resin figurine buying agency
have collaborated since 1993, the first year in which Boyds' resin figurines
were offered. Boyds' two primary buying agencies, which contract with a number
of manufacturers, represent approximately 91% of its total imports.
Although Boyds believes that the loss of either of its two primary buying
agencies would have a short-term material adverse effect on its financial
condition and results of operations, it believes that alternative buying
agencies would be available in the long-term and such alternative buying
agencies would be able to work directly with Boyds' manufacturers.
In conjunction with Boyds' buying agencies, Boyds sources most of its
merchandise from a select group of 19 independently-owned manufacturers in
China, which allows Boyds to offer detailed, high-quality products at a low
cost.
Boyds believes that its relationships with its buying agencies and foreign
manufacturers have allowed Boyds to provide quality craftsmanship at a
relatively low cost. Boyds represents the vast majority of orders of both of its
primary buying agencies and the majority of orders of its manufacturers. Boyds
is therefore able to significantly influence the schedule, quality and timing of
its orders.
Boyds' domestic products are shipped by ocean freight to the United States
and then by truck to Boyds' 155,000 square-foot distribution center in
McSherrystown, Pennsylvania. Boyds ships the majority of its products to its
nationwide retailer network via United Parcel Service.
BOYDS' CUSTOMERS AND DEALER NETWORK
Boyds' distribution network includes approximately 19,950 independent gift
and collectibles accounts which represent approximately 26,000 individual retail
outlets. The largest portion of its net
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sales are generated by a specially selected resin dealer network of
approximately 6,000 accounts which include card and gift shops, country stores
and specialty collectibles stores which are authorized to carry Boyds' resin
figurine products. Most resin figurine dealers also carry Boyds' plush animals.
These resin dealers accounted for approximately 69% of net product sales in
fiscal 1998. Resin figurine dealers are selectively chosen by Boyds and must
meet annual performance criteria to retain dealership status. There is currently
a waiting list of over 5,500 retailers, consisting primarily of Boyds'
plush-only dealers, that have expressed interest in carrying Boyds' resin
figurines. In total, approximately 13,800 retail accounts, which are not resin
figurine dealers, carry Boyds' plush animals and other non-resin products and
accounted for approximately 17% of net product sales in fiscal 1998. Boyds also
sells both resin figurines and plush animals through approximately 150 major
accounts, including department stores, catalogue retailers and QVC, a television
and electronic retailer. Sales to these accounts comprised approximately 15% of
net product sales in fiscal 1998. No single customer account represented more
than 6% of net product sales in fiscal 1998. The top ten accounts comprised
approximately 17% of net product sales during the same period. Boyds does not
sell to mass merchandisers or discount chains other than an occasional disposal
of obsolescent merchandise which Boyds estimates to be less than 1% of total
inventory.
Boyds believes it has very low annual customer account turnover among its
resin dealers and normal turnover for its other dealers. Turnover among
non-resin dealers occurs primarily in small accounts, which become inactive due
to ownership changes, poor credit, or lack of commitment to Boyds' products.
Accounts which became inactive in fiscal 1998 represented approximately 2% of
Boyds' fiscal 1997 net sales. Boyds generally does not offer dating terms or
volume discounts.
PAW DEALERS
Boyds' nationwide resin figurine dealer network is divided into four major
categories, GOLD, SILVER and BRONZE PAW distinctions and other resin dealers,
which are primarily based upon the amount of merchandise ordered annually from
Boyds. Boyds encourages resin dealers to obtain the highest PAW qualification
because it affords them additional benefits including priority delivery of Boyds
products and special consideration when ordering limited editions, certain new
product offerings and items in particularly high demand. Each PAW dealer, among
other things, must consistently meet stringent credit criteria, designate a
Boyds in-store "specialist," offer pieces from each resin figurine line and a
significant portion of the plush animal lines of Boyds, actively solicit members
for Boyds' collectors club, THE LOYAL ORDER OF FRIENDS OF BOYDS, and promote the
brand name by sponsoring at least one Boyds event annually.
THE LOYAL ORDER OF FRIENDS OF BOYDS
Boyds' collectors club, THE LOYAL ORDER OF FRIENDS OF BOYDS, has gained
strong popularity among Boyds' growing customer base. Formed in July 1996 to
further enhance consumer awareness and loyalty, the club currently has
approximately 120,000 paying members.
Upon payment of the annual membership fee, which is currently $32.50,
members receive a special product kit typically containing a resin figurine, a
plush animal and a resin pin. These items are limited edition pieces, are not
available in stores and, taken together, would retail for more than the
membership fee. In addition, certain of Boyds' products are limited editions
offered exclusively to members.
SALES & MARKETING OF BOYDS' PRODUCTS
Boyds sends catalogues and promotional mailings to all retailers twice a
year for its spring and fall product offerings. Boyds generates its order volume
through its team of telemarketers and internal sales personnel, catalogue
mailings to its retailers and from trade show sales. Boyds leases showroom
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space in Atlanta, Chicago, Dallas, Denver, Los Angeles and New York.
Approximately 40% of orders are taken between November and April, while
approximately 60% of orders are placed between May and October in anticipation
of the holiday season.
Each major segment of Boyds' account base, including resin figurine dealers,
department stores, catalogue retailers and general accounts, is managed by a
different group of sales professionals. Boyds' showrooms, with the exception of
Chicago, are staffed with full-time employees.
All Boyds sales personnel are paid an annual base salary and a
performance-based bonus. Because Boyds does not generally rely on external
commissioned sales personnel, Boyds believes its sales expenses are lower than
its competitors of similar or larger size.
COMPETITION WITH PRODUCERS OF COLLECTIBLES, GIFTWARE AND HOME DECORATIVE
PRODUCTS
Boyds competes generally for the disposable income of consumers and, in
particular, with other producers of fine quality collectibles, specialty
giftware and home decorative accessory products. The collectibles area, in
particular, is affected by changing consumer tastes and interests. The giftware
and collectibles industries are highly competitive, with a large number of both
large and small participants. Boyds' competitors distribute their products
through independent gift retailers, department stores, mass merchandisers and
catalogue retailers or through direct response marketing. Boyds believes the
principal elements of competition in the giftware and collectibles industries
are product design and quality, product and brand name loyalty, product display
and price. Boyds believes its competitive position is enhanced by a variety of
factors, including the innovativeness, quality and enduring themes of Boyds'
products, its reputation among retailers and consumers, its in-house design
expertise, its sourcing and marketing capabilities and the pricing of its
products. Some of Boyds' competitors, however, are part of large, diversified
companies having greater financial resources and a wider range of products than
Boyds.
CURRENT EMPLOYEES AND HIRING PROGRAM
Boyds currently employs a total of 203 full time individuals, 182 of whom
are located in McSherrystown, Pennsylvania. Seven employees are located at
Boyds' showrooms. In addition, fourteen Boyds employees work at the office of
H.C. Accents, Boyds' wholly-owned subsidiary, which is located in Illinois. All
of these employees are non-union. Boyds also uses contract labor to work at the
various trade shows around the nation.
To better manage the anticipated growth in Boyds' product lines, Boyds has
embarked on a hiring program to supplement its existing staff with individuals
having specialized design, marketing and operational skills.
WAREHOUSING, DISTRIBUTION AND SHOWROOM FACILITIES
Boyds leases approximately 155,000 square feet of distribution and warehouse
space in McSherrystown, Pennsylvania. Boyds' existing distribution center
includes two loading docks, two automated conveyor systems and 130,000 square
feet of storage area. Boyds' lease expires in 2009. Boyds is in the process of
building an additional 54,000 square feet of warehouse space. Attached to the
warehouse area is Boyds' 12,000 square-foot corporate headquarters which is
subject to the same lease provisions. Boyds also leases showroom space in
Atlanta, Chicago, Dallas, Denver, Los Angeles and New York. Boyds redesigned and
upgraded its entire distribution system in 1995 with the addition of physical
equipment and computer hardware and software to allow for continued growth of
Boyds. Management anticipates that its current facilities, after the current
warehouse expansion is completed, should be adequate for Boyds' planned growth
needs for the next several years, and vacant land is available on-site for
additional expansion should it be necessary.
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DEVELOPMENT AND UPGRADES OF BOYDS' MANAGEMENT INFORMATION SYSTEMS
Boyds' management information systems have been developed through the
modification of off-the-shelf software programs to serve Boyds' current needs.
Boyds has recently upgraded its computer systems to aid in the management of
Boyds' newly automated warehouse system. Future upgrades will include a system
to assist the telemarketers with their accounts, the automation of the credit
approval system, the enhancement of the ordering systems and other improvements.
Boyds believes that its internal information systems are Year 2000 compliant.
See "Risk Factors--We May Be Adversely Affected By the Year 2000 Problem" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance."
LEGAL PROCEEDINGS INVOLVING BOYDS
Boyds does not believe that there are any pending or threatened legal
proceedings that, if adversely determined, would have a material adverse effect
on Boyds.
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MANAGEMENT
BOYDS' DIRECTORS AND EXECUTIVE OFFICERS
The bylaws of Boyds provide that the directors will be elected annually. All
directors of the Boyds hold office until the election and qualification of their
successors. Executive officers of Boyds are chosen by the Board of Directors of
Boyds and serve at its discretion. The following sets forth certain information
regarding the executive officers and directors of Boyds:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --------- ---------------------------------------------------------------
<S> <C> <C>
Gary M. Lowenthal......................... 49 Chairman and Chief Executive Officer
Robert T. Coccoluto....................... 56 President and Director
Christine L. Bell......................... 43 Chief Operating Officer and Controller
Elizabeth E. Smith........................ 53 Vice President of Product Development
Henry R. Kravis........................... 54 Director
George R. Roberts......................... 55 Director
Scott M. Stuart........................... 39 Director
Marc S. Lipschultz........................ 30 Director
Timothy Brady............................. 30 Director
</TABLE>
GARY M. LOWENTHAL has been a Director and the Chief Executive Officer since
founding Boyds with his wife, Justina, in 1979. Mr. Lowenthal oversees the
executive management of Boyds and collaborates in the design and marketing of
Boyds products.
ROBERT T. COCCOLUTO has been the President since December 1998 and a
director of Boyds since April 1998. Prior to his current role as President, Mr.
Coccoluto had been an outside strategic advisor to Boyds since September 1997.
He has also been the owner and President of Advanced Design Group LLC since
January 1995. Prior to such time, he was an officer of Department 56, Inc. from
December 1989 through December 1994, where he held various positions including
Executive Vice President, Chief Financial Officer and Director.
CHRISTINE L. BELL has been the Chief Operating Officer and Controller since
joining Boyds in 1992.
ELIZABETH E. SMITH has been the Vice President of Product Development since
1996. Ms. Smith joined Boyds in 1990. Prior to her current role, Ms. Smith ran
the Company's import division and coordinated the product development process.
HENRY R. KRAVIS has been a director of Boyds since April 1998. He is a
managing member of KKR & Co. L.L.C., the limited liability company which serves
as the general partner of KKR. He is also a director of Accuride Corporation,
Amphenol Corporation, Borden, Inc., Bruno's, Inc., Evenflo Company, Inc., The
Gillette Company, IDEX Corporation, KinderCare Learning Centers, Inc., KSL
Recreation Group, Inc., Newsquest Capital plc, Owens-Illinois, Inc.,
Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food Markets, Inc.,
Safeway Inc., Sotheby's Holdings Inc., Spalding Holdings Corporation and World
Color Press, Inc.
GEORGE R. ROBERTS has been a director of Boyds since April 1998. He is a
managing member of KKR & Co. L.L.C., the limited liability company which serves
as the general partner of KKR. He is also a director of Accuride Corporation,
Amphenol Corporation, Borden, Inc., Bruno's, Inc., Evenflo Company, Inc., IDEX
Corporation, KinderCare Learning Centers, Inc., KSL Recreation Group, Inc.,
Owens-Illinois, Inc., Owens-Illinois Group, Inc., PRIMEDIA, Inc., Randall's Food
Markets, Inc., Safeway Inc., Spalding Holdings Corporation and World Color
Press, Inc.
SCOTT M. STUART has been a director of Boyds since April 1998. He is a
member of KKR & Co. L.L.C., the limited liability company which serves as the
general partner of KKR. He is also a director of Borden, Inc., KSL Recreation
Group, Inc., Newsquest Capital plc and World Color Press, Inc.
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MARC S. LIPSCHULTZ has been a director of Boyds since April 1998. He has
been an executive at KKR since 1995. Prior thereto, he was an investment banker
with Goldman, Sachs & Co. He is also a director of Amphenol Corporation, Evenflo
Company, Inc. and Spalding Holdings Corporation.
TIMOTHY BRADY has been a director of Boyds since January 1999. He has been
the Executive Producer and Vice President of Production of Yahoo! Inc. since
April 1995. Prior to such time, Mr. Brady was a product marketing manager with
Motorola, Inc. in Tokyo.
Messrs. Kravis and Roberts are first cousins.
The Board of Directors intends to appoint one additional director who is not
affiliated with Boyds or KKR during the one year period after the offering. The
additional director has not yet been identified.
COMMITTEES OF BOYDS' BOARD OF DIRECTORS
Following the offering, the Board of Directors of Boyds will have three
standing committees: (1) an Audit Committee, (2) a Compensation Committee and
(3) an Executive Committee. Messrs. Kravis, Stuart, Lipschultz and Lowenthal
comprise the Executive Committee of the Board of Directors. Currently, the Audit
Committee consists of Mr. Brady. Boyds intends to appoint to the Audit Committee
only persons who qualify as an "independent" director for purposes of the rules
and regulations of the NYSE. The Audit Committee will select and engage, on
behalf of Boyds, the independent public accountants to audit Boyds' annual
financial statements, and will review and approve the planned scope of the
annual audit. Currently, Messrs. Stuart and Lipschultz serve as members of the
Compensation Committee. The Compensation Committee will establish remuneration
levels for certain officers of Boyds and will perform such functions as provided
under Boyds' employee benefit programs and executive compensation programs.
COMPENSATION OF BOYDS' DIRECTORS
Directors of Boyds receive no remuneration for serving as directors. All
directors are reimbursed for reasonable expenses incurred to attend director and
committee meetings.
BENEFIT PLANS FOR BOYDS' EMPLOYEES
1998 STOCK OPTION PLAN
Boyds adopted the 1998 Option Plan for Key Employees of The Boyds
Collection, Ltd. (the "1998 Stock Option Plan") at the closing of the
recapitalization, which provides for the grant of Non-Qualified Stock Options to
purchase shares of authorized but unissued or reacquired shares of common stock,
subject to adjustment to reflect certain events such as stock dividends, stock
splits, recapitalizations, mergers or reorganizations of or by Boyds. The 1998
Stock Option Plan is intended to assist Boyds in attracting and retaining
employees of outstanding ability and to promote the identification of their
interests with those of the stockholders of Boyds. A total of 2,246,033 shares
of common stock have been authorized for issuance under the 1998 Stock Option
Plan. Unless sooner terminated by Boyds' Board of Directors, the 1998 Stock
Option Plan will expire in April 2008. Such termination will not affect the
validity of any grant outstanding on the date of termination.
The Compensation Committee of the Board of Directors administers the 1998
Stock Option Plan, including, without limitation, the determination of the
employees to whom grants will be made, the number of shares of common stock
subject to each grant, and the various terms of such grants. The Compensation
Committee of the Board of Directors may from time to time amend the terms of any
grant, but, except for adjustments made upon a change in the common stock of
Boyds by reason of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization, reorganization, consolidation, change of
control, or similar event, such action shall not adversely affect
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the rights of any participant under the 1998 Stock Option Plan with respect to
the options without such participant's consent. The Board of Directors retains
the right to amend, suspend or terminate the 1998 Stock Option Plan.
LIMITATIONS ON LIABILITY OF BOYDS' DIRECTORS AND OFFICERS AND INDEMNIFICATION BY
BOYDS
Boyds' charter provides that to the fullest extent permitted by the Maryland
General Corporation Law, directors and officers of Boyds shall not be liable to
Boyds or its stockholders for monetary damages for breach of fiduciary duty as a
director or an officer. Under Maryland law, however, these provisions do not
eliminate or limit the personal liability of a director or an officer in either
of the following cases:
- to the extent that it is proved that the director or officer actually
received an improper benefit or profit
- if a judgment or other financial adjudication is entered in a proceeding
based on a finding that the director's or officer's action, or failure to
act, was the result of active and deliberate dishonesty and was material
to the cause of action adjudicated in such proceeding
These provisions also do not affect the ability of Boyds or its stockholders
to obtain equitable relief, such as an injunction or rescission.
As permitted by the MGCL, Boyds' charter obligates Boyds to indemnify its
directors and officers and to pay or reimburse expenses for such individuals in
advance of the final disposition of a proceeding to the maximum extent permitted
by Maryland law. Boyds' bylaws contain indemnification procedures which
implement those of the charter. The MGCL permits a corporation to indemnify its
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities, unless any of the following is established:
- the act or omission of the director of officer was material to the matter
giving rise to such proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty
- the director or officer actually received an improper benefit in money,
property or services
- in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the action or omission was unlawful
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Boyds
pursuant to the foregoing provisions, Boyds has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded or paid to, or
earned by, the Chief Executive Officer of Boyds and Boyds' other three executive
officers (the "Named Executive Officers") during fiscal 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
SECURITIES
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#)
- ----------------------------------------------------------------------------- ----------- --------- -------------
<S> <C> <C> <C>
Gary M. Lowenthal............................................................ 220,800 -- 44,921
Chief Executive Officer
Robert T. Coccoluto (1)...................................................... -- -- 381,826
President
Christine L. Bell............................................................ 122,229 1,815,000 --
Chief Operating Officer and Controller
Elizabeth E. Smith........................................................... 81,486 1,026,000 --
Vice President of Product Development
</TABLE>
- ------------------------------
(1) Mr. Coccoluto became an employee of the Company on December 31, 1998 and
will be paid a base salary of $450,000 for fiscal 1999.
During fiscal 1998, Boyds did not pay any other forms of compensation,
whether annual, long-term or otherwise, to its Named Executive Officers.
STOCK OPTION GRANTS IN FISCAL 1998
The following table sets forth information concerning individual grants of
stock options made by Boyds during fiscal 1998 to each of the Named Executive
Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
---------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN 1998 ($/SHARE) DATE 5% 10%
- -------------------------------------- ----------- ----------------- ------------- ----------------- --------- ---------
Gary M. Lowenthal..................... 44,921(1) 4% $ 4.45 July 21, 2008 $ 125,779 $ 318,748
Robert T. Coccoluto................... 44,921(1) 4% 4.45 July 21, 2008 125,779 318,748
336,905(2) 30% 13.36 December 31, 2008 0 0
</TABLE>
- ------------------------
(1) All of these options, which were granted pursuant to the 1998 Stock Option
Plan, were non-qualified, were granted at exercise prices not less than fair
value on the date of grant, vested immediately, and have a term of ten
years. Any outstanding options will become immediately exercisable upon a
change of control of Boyds.
(2) All of these options, which were granted pursuant to the 1998 Stock Option
Plan, were non-qualified, were granted at exercise prices not less than fair
value on the date of grant, vest ratably over a five year period, and have a
term of ten years. Any outstanding options will become immediately
exercisable upon a change of control of Boyds.
(3) We recommend caution in interpreting the financial significance of these
figures. They are calculated by multiplying the number of options granted by
the difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the Securities and
Exchange Commission. They assume the fair value of common stock, which was
$4.45 at the date of issuance, appreciates 5% or 10% each year, compounded
annually, for ten years (the life of each option). They are not intended to
forecast possible future appreciation, if any, of such stock price or to
establish a present value of options. Also, if appreciation does occur at
the 5% or 10% per year rate, the amounts shown would not be realized by the
recipients until the year 2008. Depending on inflation rates, these amounts
may be worth significantly less in 2008, in real terms, than their value
today.
39
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Affiliates of KKR at February 8, 1999 beneficially owned approximately 80%
of Boyds' outstanding shares of common stock on a fully diluted basis, and after
giving effect to the offering will own approximately 56% on a fully diluted
basis. Accordingly, affiliates of KKR will be able to elect the entire Board of
Directors, control the management and policies of Boyds and, in general,
determine (without the consent of Boyds' other stockholders) the outcome of any
corporate transaction or other matter submitted to the stockholders for
approval, including mergers, consolidations and the sale of all or substantially
all of Boyds' assets. Affiliates of KKR will also be able to prevent or cause a
change in control of Boyds and will be able to amend Boyds' charter or bylaws at
any time. Shares of common stock which are owned beneficially by KKR 1996 GP
L.L.C. and KKR Associates, L.P. ("KKR Associates") are currently held by Bear
Acquisition. After consummation of the Bear Acquisition Transaction and prior to
the consummation of the offering, shares of common stock which are owned
beneficially by KKR 1996 GP L.L.C. and KKR Associates will be held directly by
the KKR Partnerships rather than Bear Acquisition. The managing members of KKR
1996 GP L.L.C. are Messrs. Henry R. Kravis and George R. Roberts and the other
members of which are Messrs. Paul E. Raether, Michael W. Michelson, James H.
Greene, Jr., Michael T. Tokarz, Clifton S. Robbins, Edward A. Gilhuly, Perry
Golkin, Scott M. Stuart and Robert I. MacDonnell. The general partners of KKR
Associates are the same individuals who are the members of KKR 1996 GP L.L.C.
Messrs. Kravis, Roberts and Stuart are also directors of Boyds, as is Marc S.
Lipschultz, who is a limited partner of KKR Associates and an executive of KKR.
KKR received a cash fee of $6.0 million from Boyds for negotiating the
recapitalization and arranging the related financing, plus the reimbursement of
its associated expenses. In addition, KKR has agreed to render management,
consulting and financial services to Boyds for an annual fee of $375,000 plus
expenses, payable quarterly. During fiscal 1998, Boyds paid $251,367 to KKR for
such services and for reimbursement of expenses.
In connection with the recapitalization, Bear Acquisition entered into a
Registration Rights Agreement, dated April 21, 1998 with Boyds. Pursuant to such
agreement, Bear Acquisition has the right, under certain circumstances and
subject to certain conditions, to require Boyds to register under the Securities
Act shares of common stock held by Bear Acquisition. In addition, the
Registration Rights Agreement also provides the KKR Partnerships with certain
piggyback registration rights. The Registration Rights Agreement provides, among
other things, that Boyds will pay all expenses in connection with the first ten
demand registrations requested by Bear Acquisition and in connection with any
registration in which Bear Acquisition participates through piggyback
registration rights granted under such agreement. After the Bear Acquisition
Transaction, the KKR Partnerships will have all of the rights and obligations of
Bear Acquisition under the Registration Rights Agreement.
Prior to the recapitalization, all shares of Boyds' common stock were
beneficially owned by Gary and Justina Lowenthal, a portion of which were
redeemed pursuant to the recapitalization. In connection with the
recapitalization, Boyds and Mr. Lowenthal entered into a registration rights
agreement granting Mr. Lowenthal piggyback registration rights with respect to
shares of common stock currently owned by him.
Advanced Design Group LLC currently renders, and after the closing of the
offering may continue to render, strategic consulting services to Boyds. Robert
T. Coccoluto, who is the President and a director of Boyds, is owner and
President of Advanced Design Group LLC. In connection with the recapitalization,
Mr. Coccoluto rendered advisory services to Boyds and received $1.7 million
therefor. See "Management--Directors and Executive Officers."
DLJ Fund Investment Partners II, L.P., an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation, at February 8, 1999 owned approximately 1% of
the common stock of Bear Acquisition. Such shares of common stock were purchased
from Bear Acquisition immediately after the closing of the recapitalization. In
addition, DLJ has an indirect interest, through an investment by DLJ Fund
Investment Partners II, L.P. in KKR Partners II, L.P., of approximately 1% of
the common stock of Bear Acquisition.
Boyds believes that the material terms of each of the transactions described
above are no more favorable than those that would have been agreed to by third
parties on an arm's length basis.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of Boyds' common stock as of February 8, 1999 by each of the
following:
- each person who is known by Boyds to beneficially own more than 5% of
Boyds' common stock
- each of Boyds' directors
- each of the executive officers of Boyds
- all directors and executive officers as a group
- each selling stockholder
Unless otherwise indicated, the address of each person named in the table
below is The Boyds Collection, Ltd., 350 South Street, McSherrystown,
Pennsylvania 17344. The amounts and percentage of common stock beneficially
owned are reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of securities.
Under the rules of the Commission, a person is deemed to be a "beneficial owner"
of a security if that person has or shares "voting power," which includes the
power to vote or to direct the voting of such security, or "investment power,"
which includes the power to dispose of or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which that person has a right to acquire beneficial ownership within 60 days.
Under these rules, more than one person may be deemed a beneficial owner of the
same securities and a person may be deemed to be a beneficial owner of
securities as to which such person has no economic interest. The information set
forth in the following table (1) assumes that the Bear Acquisition Transaction
has been consummated and the over-allotment option by the underwriters has not
been exercised and (2) excludes any shares purchased in the offering by the
respective beneficial owner:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
--------------------------------------
<S> <C> <C> <C> <C>
SHARES SHARES TO BE
BENEFICIALLY SOLD PERCENT AFTER
NAME AND ADDRESS OWNED IN OFFERING PERCENT BEFORE OFFERING OFFERING
- -------------------------------------- ----------------- ---------------- ----------------------- -------------
KKR 1996 GP L.L.C. (1)................ 39,558,683 6,454,162 74.8% 53.3%
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
KKR Associates, L.P. (2).............. 1,768,324 288,509 3.3 2.4
c/oKohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019
Parthenon 1998 Deferred Compensation 44,921 7,329 * *
LLC (3).............................
c/o The Parthenon Group Inc.
200 State Street
Boston, Massachusetts 02109
The GJL L.L.C. (4).................... 4,492,066 -- 8.5 7.2
Gary M. Lowenthal..................... 5,682,463 -- 10.8 9.2
Robert T. Coccoluto................... 112,302 -- * *
Henry R. Kravis....................... 67,381 -- * *
George R. Roberts..................... 67,381 -- * *
Scott M. Stuart....................... 67,381 -- * *
Marc S. Lipschultz (5)................ 67,381 -- * *
Timothy Brady......................... -- -- -- --
Christine L. Bell..................... 212,250 -- * *
Elizabeth E. Smith.................... 121,286 -- * *
All officers and directors as a group
(11 individuals).................... 6,458,468 -- 12.2 10.4
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
41
<PAGE>
(FOOTNOTES FROM PRECEDING PAGE)
- --------------------------
* Percentage of shares of common stock beneficially owned does not exceed one
percent.
(1) Shares of common stock shown as beneficially owned by KKR 1996 GP L.L.C. are
currently held by Bear Acquisition. After consummation of the Bear
Acquisition Transaction and prior to the consummation of the offering, all
of the shares of common stock shown as beneficially owned by KKR 1996 GP
L.L.C. will be held directly by KKR 1996 Fund L.P. KKR 1996 GP L.L.C. is the
sole general partner of KKR Associates 1996, L.P., which is the sole general
partner of KKR 1996 Fund L.P. KKR 1996 GP L.L.C. is a limited liability
company, the managing members of which are Messrs. Henry R. Kravis and
George R. Roberts, and the other members of which are Messrs. Paul E.
Raether, Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz,
Clifton S. Robbins, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart and
Robert I. MacDonnell. Messrs. Kravis, Roberts and Stuart are directors of
Boyds. Each of the individuals who are the members of KKR 1996 GP L.L.C. may
be deemed to share beneficial ownership of any shares beneficially owned by
KKR 1996 GP L.L.C. Each of such individuals disclaims beneficial ownership.
(2) Shares of common stock shown as beneficially owned by KKR Associates are
currently held by Bear Acquisition. After consummation of the Bear
Acquisition Transaction and prior to the consummation of the offering, all
of the shares of common stock shown as beneficially owned by KKR Associates
will be held directly by KKR Partners II, L.P. KKR Associates is the sole
general partner of KKR Partners II, L.P. The general partners of KKR
Associates are Messrs. Henry R. Kravis, George S. Roberts, Paul E. Raether,
Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz, Clifton S.
Robbins, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart and Robert I.
MacDonnell. Messrs. Kravis, Roberts and Stuart are directors of Boyds. Each
of the individuals who are the general partners of KKR Associates may be
deemed to share beneficial ownership of any shares beneficially owned by KKR
Associates. Each of such individuals disclaims beneficial ownership.
(3) Parthenon 1998 Deferred Compensation LLC is a Delaware limited liability
company, the sole managing member of which is The Parthenon Group Inc.
(4) Gary Lowenthal is the sole managing member of the GJL L.L.C., the other
member of which is Justina Lowenthal.
(5) Mr. Marc S. Lipschultz is a director of Boyds and is also an executive of
KKR and a limited partner of KKR Associates. Mr. Lipschultz disclaims
beneficial ownership of any shares beneficially owned by KKR Associates.
42
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
THE CREDIT FACILITY
In April 1998, in connection with the recapitalization, Boyds entered into
the credit facility with a syndicate of banks and other financial institutions
led by DLJ Capital Funding, Inc., as arranger and syndication agent, Fleet
National Bank as administrative agent and The Fuji Bank, Limited, New York
Branch as documentation agent. The credit facility consists of the $325.0
million of loans under the term loan facility and the $40.0 million revolving
credit facility. The term loans are comprised of the $100.0 million Term Loan A,
which matures on April 21, 2005, and the $225.0 million Term Loan B, which
matures on April 21, 2006.
All of the term loans and the loans under the revolving credit facility bear
interest, at Boyds' option, at either of the following rates:
- the administrative agent's alternative base rate plus
- in the case of Term Loan A and loans under the revolving credit
facility, a debt to EBITDA-dependent rate ranging from 0.00% to 1.00%
per year
- in the case of Term Loan B, a debt to EBITDA-dependent rate ranging
from 0.75% to 1.25% per year
- a LIBOR rate plus
- in the case of Term Loan A and loans under the revolving credit
facility, a debt to EBITDA-dependent rate ranging from 0.625% to
2.25% per year
- in the case of Term Loan B, a debt to EBITDA-dependent rate ranging
from 2.00% to 2.50% per year
At December 31, 1998, the weighted average interest rate on the term loans
was 7.38%.
Boyds also pays a commitment fee calculated at a debt to EBITDA-dependent
rate ranging from 0.25% to 0.50% per year of the available daily average unused
commitment under the credit facility. Such fee is payable quarterly in arrears
and upon the final maturity of the revolving credit facility.
In addition, Boyds pays a letter of credit fee calculated at the rate per
year of the face amount of each letter of credit then applicable to loans under
the revolving credit facility bearing interest based on LIBOR, less a fronting
fee calculated at a rate equal to 0.125% per year of the face amount of each
letter of credit. Such fees are payable quarterly in arrears. In addition, Boyds
will pay customary transaction charges in connection with any letters of credit.
Beginning April 21, 2000, term loans under the credit facility will amortize
in annual installments in the following percentages of aggregate amounts
outstanding:
<TABLE>
<CAPTION>
DATE TERM LOAN A TERM LOAN B
- ------------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
April 21, 2000....................................................................... 7% 1%
April 21, 2001....................................................................... 11 1
April 21, 2002....................................................................... 14 1
April 21, 2003....................................................................... 17 1
April 21, 2004....................................................................... 23 1
April 21, 2005....................................................................... 28 1
April 21, 2006....................................................................... -- 94
</TABLE>
The term loans will be subject to mandatory prepayment with the proceeds of
certain asset sales and on an annual basis with 50% of Boyds' excess cash flow
if the ratio of Boyds' total debt to EBITDA is greater than 4.0:1.0 on the last
day of any fiscal year.
43
<PAGE>
The credit facility contains covenants and provisions that restrict, among
other things, Boyds' ability to change its business, declare dividends, grant
liens, incur additional indebtedness, exceed a leverage ratio, fall below a
minimum interest coverage ratio and make certain capital expenditures. Boyds was
in compliance with these covenants as of December 31, 1998. The credit facility
is secured by a pledge of the limited partnership interests of, and is
guaranteed by, Boyds L.P.
9% SENIOR SUBORDINATED NOTES DUE 2008
On April 21, 1998, Boyds issued $165.0 million aggregate principal amount of
the notes. The notes mature on May 15, 2008 and are general unsecured
obligations of Boyds, subordinated in right of payment to all existing and
future indebtedness of Boyds that is not expressly subordinated to, or made
equal with, the notes.
The notes may be redeemed at any time, in whole or in part, on or after May
15, 2003 at a redemption price equal to 104.5% of the principal amount thereof
in the first year and declining yearly to par at May 15, 2006, plus accrued and
unpaid interest and liquidated damages, if any, to the date of redemption. On or
prior to May 15, 2001, Boyds may also redeem up to 40% of the aggregate
principal amount of the notes originally issued at a redemption price equal to
109% of the aggregate principal amount thereof, plus accrued and unpaid interest
and liquidated damages, if any, to the date of redemption, with the proceeds of
one or more equity offerings of Boyds. Boyds will use a portion of the proceeds
from the offering to redeem $66.0 million aggregate principal amount of the
notes. See "Use of Proceeds."
Upon the occurrence of a change of control, Boyds has the option, at any
time on or prior to May 15, 2003, to redeem the notes, in whole but not in part,
at a redemption price equal to 100% of the aggregate principal amount thereof
plus a premium and accrued and unpaid interest and liquidated damages, if any,
thereon. If a change of control occurs and Boyds does not so redeem the notes or
if the change of control occurs after May 15, 2003, Boyds will be required to
make an offer to repurchase all notes properly tendered at a price equal to 101%
of the principal amount plus accrued and unpaid interest and liquidated damages,
if any, to the date of repurchase.
The indenture governing the notes contains covenants that, among other
things, limit the ability of Boyds and its subsidiaries to:
- incur additional indebtedness or liens
- repay other indebtedness
- pay dividends or make other distributions
- repurchase equity interests
- consummate asset sales
- enter into transactions with affiliates
- enter into sale and leaseback transactions
- merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the
assets of Boyds or its subsidiaries
- enter into guarantees of indebtedness
Pursuant to a registration rights agreement entered into in connection with
the issuance of the notes, Boyds agreed to provide the holders of the notes with
registration rights and in the event that Boyds fails to satisfy such
registration obligations, Boyds will be obligated to pay liquidated damages to
such holders.
44
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The charter of Boyds authorizes 100,000,000 shares of capital stock, par
value $0.0001 per share, all of which is initially classified as common stock,
par value $0.0001 per share. The Board of Directors is authorized to reclassify
any unissued portion of the authorized shares of capital stock to provide for
the issuance of shares in other classes or series, including preferred stock in
one or more series, to establish the number of shares in each class or series
and to fix the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of such class or series. As of February 8, 1999, the
outstanding common stock of Boyds consisted of 52,588,246 shares of common stock
held by 8 stockholders of record. The following summaries of certain provisions
of the capital stock do not purport to be complete and are subject to, and
qualified in their entirety by, the provisions of the charter and bylaws of
Boyds, which are included as exhibits to the registration statement of which
this prospectus forms a part, and by applicable law. See "Selected Provisions of
Maryland Law and of Boyds' Charter and Bylaws."
COMMON STOCK
Holders of common stock are entitled to one vote per share on all matters to
be voted upon by the stockholders of Boyds, and do not have cumulative voting
rights in the election of directors. The holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available for that purpose, subject
to preferences that may be applicable to any outstanding preferred stock and any
other provisions of Boyds' charter. Boyds currently intends to retain any future
earnings for use in its business and does not anticipate paying any cash
dividends in the foreseeable future. The declaration and payment in the future
of any cash dividends will be at the election of Boyds' Board of Directors and
will depend upon the earnings, capital requirements and financial position of
Boyds, future loan covenants, general economic conditions and other pertinent
factors. Holders of common stock have no preemptive or other rights to subscribe
for additional shares. No shares of common stock are subject to redemption or a
sinking fund. In the event of any liquidation, dissolution or winding up of
Boyds, after payment of the debts and other liabilities of Boyds, and subject to
the rights of holders of shares of preferred stock, holders of common stock are
entitled to share pro rata in any distribution to the stockholders. All of the
outstanding shares of common stock are, and the shares offered hereby will be,
fully paid and nonassessable. See "Risk Factors--We Are Controlled By KKR" and
"Certain Relationships and Related Transactions."
ADDITIONAL CLASSES OF STOCK
Additional classes of stock, including preferred stock, may be issued from
time to time, in one or more series, as authorized by the Board of Directors.
Prior to issuance of shares of each series, the Board of Directors is required
by the Maryland General Corporation Law and Boyds' charter to set for each such
series the preferences, conversion or other rights, voting powers, restrictions,
limitations as to the dividends or other distributions, qualifications and terms
or conditions of redemption, as are permitted under Maryland law. The Board of
Directors could authorize the issuance of capital stock with terms and
conditions which could have the effect of discouraging a takeover or other
transaction which holders of some, or a majority, of the common stock might
believe to be in their best interests or in which holders of some, or a
majority, of the common stock might receive a premium for their common stock
over the then market price of such common stock. As of the date hereof, no such
additional classes of stock are outstanding and Boyds has no present plans to
issue any such stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be The Bank of
New York, a New York banking corporation.
45
<PAGE>
SELECTED PROVISIONS OF MARYLAND LAW
AND OF BOYDS' CHARTER AND BYLAWS
The following paragraphs summarize selected provisions of the Maryland
General Corporation Law and Boyds' charter and bylaws. The summary does not
purport to be complete and is subject to and qualified in its entirety by
reference to Maryland law and Boyds' charter and bylaws for complete
information.
STOCKHOLDER PROPOSALS
For any stockholder proposal to be presented in connection with an annual
meeting of stockholders of Boyds, including any proposal relating to the
nomination of a director to be elected to the Board of Directors, the
stockholder must submit written notice to Boyds generally not less than 60 nor
more than 90 days in advance of the first anniversary of the preceding year's
annual meeting.
BUSINESS COMBINATIONS
The MGCL prohibits certain "business combinations," which include a merger,
consolidation, share exchange, or an asset transfer or issuance or
reclassification of equity securities, between a Maryland corporation and an
"Interested Stockholder." Interested Stockholders are either of the following
types of persons:
- anyone who beneficially owns 10% or more of the voting power of the
corporation's shares
- an affiliate or associate of the corporation who, at any time within the
two-year period prior to the date in question, was an Interested
Stockholder or an affiliate or an associate thereof
Such business combinations are prohibited for five years after the most recent
date on which the Interested Stockholder became an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of such corporation and approved by the affirmative vote of at least
both of the following:
- 80% of the votes entitled to be cast by all holders of voting shares of
the corporation
- 66 2/3% of the votes entitled to be cast by all holders of voting shares
of the corporation other than voting shares held by the Interested
Stockholder or an affiliate or associate of the Interested Stockholder,
with whom the business combination is to be effected
However, such votes are not required if the corporation's stockholders receive a
statutorily-defined minimum price for their shares and the consideration is
received in cash or in the same form previously paid by the Interested
Stockholder for its shares.
The business combination statute does not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. A Maryland corporation may adopt an amendment to its
charter electing not to be subject to the special voting requirements of the
foregoing legislation. Any such amendment would have to be approved by the
affirmative vote of at least 80% of the votes entitled to be cast by all holders
of outstanding shares of voting stock and 66 2/3% of the votes entitled to be
case by holders of outstanding shares of voting stock who are not Interested
Stockholders. Although Boyds has not adopted such an amendment to its charter,
the Board of Directors approved the recapitalization and the acquisition of
common stock by the KKR Partnerships.
CONTROL SHARE ACQUISITIONS
The MGCL provides that the "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to the
extent approved by a vote of two-thirds of the
46
<PAGE>
votes entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by the corporation's officers or the corporation's directors who are
employees of the corporation. Control shares are shares of voting stock which,
if aggregated with all other shares of stock previously acquired by such a
person, would entitled the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (a) 20% or more
but less than 33 1/3%; (b) 33 1/3% or more but less than a majority; or (c) a
majority of all voting power. Control shares do not include shares of stock an
acquiring person is entitled to vote as a result of having previously obtained
stockholder approval. A control share acquisition generally means the
acquisitions of, ownership of or the power to direct the exercise of voting
power with respect to, control shares.
A person who has made or proposes to make a "control share acquisition,"
upon satisfaction of conditions, including an undertaking to pay expenses, may
compel the board of directors to call a special meeting of stockholders to be
held within 50 days of demand therefore to consider the voting rights of the
shares. If no request for a meeting is made, the corporation may itself present
the question at any stockholders' meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as permitted by the statute, then
the corporation generally may redeem any or all of the control shares, except
those for which voting rights have previously been approved, for fair value
determined, without regard to voting rights, as of the date of the last control
share acquisition or of any meeting of stockholders at which the voting rights
of such shares are considered and not approved. If voting rights for "control
shares" are approved at a stockholders' meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the stock as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a "control share acquisition."
The control share acquisition statute does not apply to stock acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions previously approved or exempted by a provision
in the charter or bylaws of the corporation. The Boyds charter does not contain
such a provision, but the Boyds bylaws contain a provision exempting all shares
of Boyds' capital stock from the control share acquisition statute to the
fullest extent permitted by Maryland law.
47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
GENERAL
Upon the consummation of the offering, Boyds will have 61,838,246 shares of
common stock issued and outstanding. All of the 16,000,000 shares of common
stock to be sold in the offering and any shares sold upon exercise of the
underwriters' over-allotment option will be freely tradable without restrictions
or further registration under the Securities Act of 1933, except for any shares
purchased by an "affiliate" of Boyds as that term is defined in Rule 144 under
the Securities Act, which will be subject to the resale limitations of Rule 144.
All of the currently outstanding shares of common stock are "restricted
securities" as that term is defined in Rule 144 and are also subject to
restrictions on disposition. Restricted securities may be sold in the public
market only if registered or if qualified for an exemption from registration
under Rule 144 or Rule 701 under the Securities Act. Sales of restricted
securities in the public market, or the availability of such shares for sale,
could have an adverse effect on the price of the common stock. See "Risk
Factors--There has Been No Prior Market for Our Common Stock and the Market
Price of the Shares Will Fluctuate," "--Existing Stockholders May Sell Their
Common Stock" and "Dilution."
REGISTRATION RIGHTS
Boyds and Bear Acquisition have entered into the Registration Rights
Agreement, pursuant to which Boyds has granted to Bear Acquisition demand rights
to cause Boyds to file a registration statement under the Securities Act
covering resales of all shares of common stock held by Bear Acquisition, and to
cause such registration statement to become effective. The Registration Rights
Agreement also grants "piggyback" registration rights permitting Bear
Acquisition to include its registrable securities in a registration of
securities by Boyds. Boyds is obligated to pay the expenses of such
registrations. After the Bear Acquisition Transaction, the KKR Partnerships will
have all of the rights and obligations of Bear Acquisition under the
Registration Rights Agreement.
In addition, pursuant to stockholder agreements, Boyds has granted
"piggyback" registration rights to (1) substantially all of its employees and
directors (including Gary M. Lowenthal) that have purchased shares of common
stock and/or that have been awarded options to purchase shares of common stock
and (2) DLJ Fund Investment Partners II, L.P. Such registration rights are
exercisable only upon registration by the company of shares of common stock held
by Bear Acquisition. The holders of common stock entitled to such registration
rights are entitled to notice of any proposal to register shares held by Bear
Acquisition and to include their shares in such registration, subject to
restrictions including the right of a managing underwriter participating in an
offering to limit the number of shares included in such registration. Boyds is
obligated to pay the expenses of such piggyback registrations. See "Certain
Relationships and Related Transactions."
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of either
of the following:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering
- the average weekly trading volume of the common stock on the New York
Stock Exchange during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
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<PAGE>
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
Each of Boyds, its executive officers and directors and the selling
stockholders has agreed that, for a period of 180 days from the date of this
prospectus, they will not, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation do either of the following:
- offer, pledge, sell, contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of common stock
or any securities convertible into or exercisable or exchangeable for
common stock
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of the common
stock
Either of the foregoing transaction restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of common stock
or such other securities, in cash or otherwise. At February 8, 1999 these
stockholders owned in the aggregate 52,052,938 shares of common stock. In
addition, during such period, Boyds has agreed not to file any registration
statement with respect to, and each of its executive officers and directors and
certain stockholders of Boyds, including the selling stockholders, has agreed
not to make any demand for, or exercise any right with respect to, the
registration of any shares of common stock or any securities convertible into or
exercisable for common stock without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation. See "Underwriters."
49
<PAGE>
UNDERWRITERS
Subject to the terms and conditions contained in an underwriting agreement,
dated , 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, have severally agreed to purchase from Boyds and
the selling stockholders the number of shares set forth opposite their names
below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
------------
<S> <C>
Underwriters:
Donaldson, Lufkin & Jenrette Securities Corporation...............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................................
------------
Total............................................................................................. 16,000,000
------------
------------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of certain legal matters by their counsel and
to certain customary conditions, including the effectiveness of the registration
statement, the continuing correctness of the representations of Boyds and the
selling stockholders, the receipt of a "comfort letter" from Boyds' accountants,
the listing of the common stock on the NYSE and no occurrence of an event that
would have a material adverse effect on Boyds. The underwriters are obligated to
purchase and accept delivery of all the shares, other than those covered by the
over-allotment option described below, if they purchase any of the shares.
The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to certain dealers at the public offering
price less a concession not in excess of $ per share. The underwriters may
allow, and such dealers may re-allow, a concession not in excess of $ per share
on sales to certain other dealers. After the initial offering of the shares to
the public, the representatives of the underwriters may change the public
offering price and such concessions. The underwriters do not intend to confirm
sales to any accounts over which they exercise discretionary authority.
The following table shows the underwriting fees to be paid to the
underwriters by Boyds and the selling stockholders in connection with this
offering. These amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
------------- -------------
<S> <C> <C>
Boyds:
Per share........................................................ $ $
Total............................................................ $ $
Selling Stockholders:
Per share........................................................ $ $
Total............................................................ $ $
</TABLE>
The selling stockholders have granted to the underwriters an option,
exercisable for 30 days from the date of the underwriting agreement, to purchase
up to 2,400,000 additional shares at the public offering price less the
underwriting fees. Boyds has not granted the underwriters any option to
50
<PAGE>
purchase additional shares. The underwriters may exercise such option solely to
cover over-allotments, if any, made in connection with this offering. To the
extent that the underwriters exercise such option, each underwriter will become
obligated, subject to certain conditions, to purchase a number of additional
shares approximately proportionate to such underwriter's initial purchase
commitment. Boyds estimates its expenses relating to the offering to be $ .
Boyds, the selling stockholders and the underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933.
Each of Boyds, its executive officers and directors and the selling
stockholders has agreed that, for a period of 180 days from the date of this
prospectus, they will not, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation do either of the following:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock
- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock
Either of the foregoing transaction restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of common stock
or such other securities, in cash or otherwise. In addition, during such period,
Boyds has agreed not to file any registration statement with respect to, and
each of its executive officers and directors and certain stockholders of Boyds,
including the selling stockholders, has agreed not to make any demand for, or
exercise any right with respect to, the registration of any shares of common
stock or any securities convertible into or exercisable for common stock without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
At Boyds' request, the underwriters have reserved up to five percent of the
shares offered hereby for sale at the initial public offering price to certain
of Boyds' employees, officers, directors and other individuals associated with
Boyds and members of their families. The number of shares of common stock
available for sale to the general public will be reduced to the extent these
individuals purchase such reserved shares. Any reserved shares not purchased
will be offered by the underwriters to the general public on the same basis as
the other shares offered hereby.
Application has been made to list the common stock on the New York Stock
Exchange under the symbol "FOB." In order to meet the requirements for listing
the common stock on the NYSE, the underwriters have undertaken to sell lots of
100 or more shares to a minimum of 2,000 beneficial owners.
Other than in the United States, no action has been taken by Boyds, the
selling stockholders or the underwriters that would permit a public offering of
the shares of common stock included in this offering in any jurisdiction where
action for that purpose is required. The shares included in this offering may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisement in connection with the offer and sale
of any such shares be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock included in this offering in any jurisdiction where that
would not be permitted or legal.
51
<PAGE>
Donaldson, Lufkin & Jenrette Securities Corporation or its affiliates have
provided and may in the future provide investment banking or other financial
advisory services to KKR and its affiliates and/or to Boyds and its affiliates
in the ordinary course of business, for which they have received and are
expected to receive customary fees and expenses. The credit facility was
provided by a group of banks led by DLJCF, an affiliate of Donaldson, Lufkin &
Jenrette Securities Corporation. Donaldson Lufkin & Jenrette Securities
Corporation was the initial purchaser of the notes issued by Boyds in connection
with the recapitalization. See "Certain Relationships and Related Transactions"
and "Description of Certain Indebtedness."
STABILIZATION
In connection with this offering, any of the underwriters may decide to
engage in transactions that stabilize, maintain or otherwise affect the price of
the common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of common stock in the open market to cover syndicate short
positions or to stabilize the price of the common stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members if
Donaldson, Lufkin & Jenrette Securities Corporation repurchases previously
distributed common stock in syndicate covering transactions, in stabilizing
transactions or otherwise or if Donaldson, Lufkin & Jenrette Securities
Corporation receives a report that indicates that the clients of such syndicate
members have "flipped" the common stock. These activities may stabilize or
maintain the market price of the common stock above independent market levels.
The underwriters are not required to engage in these activities and may end any
of these activities at any time.
PRICING OF THE OFFERING
Prior to the offering, there has been no established market for the common
stock. The initial public offering price for the shares of common stock offered
hereby will be determined by negotiation among Boyds, the KKR selling
stockholders and the representatives of the underwriters. The factors to be
considered in determining the initial public offering price include:
- the history of and the prospects for the industry in which Boyds competes
- the past and present operations of Boyds
- the historical results of operations of Boyds
- the prospects for future earnings of Boyds
- the recent market prices of securities of generally comparable companies
- the general conditions of the securities market at the time of the
offering
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Boyds by Simpson Thacher & Bartlett, New York, New York and Piper &
Marbury L.L.P., Baltimore, Maryland and for the Underwriters by Latham &
Watkins, New York, New York. Certain partners of Simpson Thacher & Bartlett,
members of their families, related persons and others, have an indirect
interest, through limited partnerships, who are investors in KKR 1996 Fund L.P.,
in less than 1% of the common stock. Certain partners of Latham & Watkins,
members of their families, related persons and others, have an indirect
interest, through limited partnerships who are investors in KKR 1996 Fund L.P.,
in less than 1% of the common stock. In addition, Latham & Watkins has in the
past provided, and may continue to provide, legal services to KKR and its
affiliates, including KKR 1996 Fund L.P. Simpson Thacher & Bartlett and Latham &
Watkins will each rely upon the opinion of Piper & Marbury L.L.P. as to certain
matters of Maryland law.
52
<PAGE>
EXPERTS
The consolidated financial statements of Boyds as of December 31, 1997 and
1998 and for the years ended December 31, 1996, 1997 and 1998 included in this
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
Boyds has filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, which includes amendments, exhibits, schedules and
supplements, under the Securities Act of 1933 and the rules and regulations
thereunder, for the registration of the common stock offered hereby. Although
this prospectus, which forms a part of the registration statement, contains all
material information included in the registration statement, parts of the
registration statement have been omitted from this prospectus as permitted by
the rules and regulations of the Commission. For further information with
respect to Boyds and the common stock offered hereby, reference is made to the
registration statement. Statements contained in this prospectus as to the
contents of any contracts or other document referred to herein are not
necessarily complete and, where such contract or other document is an exhibit to
the registration statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made. The
registration statement can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Seven World Trade Center, 13(th) Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The public may obtain information regarding the Washington, D.C.
Public Reference Room by calling the Commission at 1-800-SEC-0330. In addition,
the registration statement is publicly available through the Commission's site
on the Internet's World Wide Web, located at: http://www.sec.gov. Following the
offering, Boyds' future public filings are expected to be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
53
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................................................... F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1997 and 1998............................................. F-3
Consolidated Statements of Income for the Years Ended December 31, 1996, 1997 and 1998................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998..... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998............... F-6
Notes to Consolidated Financial Statements............................................................... F-7
</TABLE>
F-1
<PAGE>
The accompanying consolidated financial statements give effect to the
completion of the 1.1230165 for 1 exchange of Boyds' outstanding common stock
which will take place on the effective date of the offering. The following
report is in the form which will be furnished by Deloitte & Touche LLP upon
completion of the exchange of Boyds' outstanding common stock described in Note
13 to the consolidated financial statements and assuming that from January 28,
1999 to the date of such completion no other material events have occurred that
would affect the accompanying consolidated financial statements or required
disclosure therein.
INDEPENDENT AUDITORS' REPORT
"To the Board of Directors and Stockholders of
The Boyds Collection, Ltd.
McSherrystown, Pennsylvania
We have audited the accompanying consolidated balance sheets of The Boyds
Collection, Ltd. ("Boyds") as of December 31, 1997 and 1998 and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of Boyds' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Boyds at December 31, 1997 and 1998 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
January 28, 1999 ( as to Note 13)"
DELOITTE & TOUCHE LLP
New York, New York
February 8, 1999
F-2
<PAGE>
THE BOYDS COLLECTION, LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 11,210 $ 11,606
Accounts receivable, less allowance for doubtful accounts of $150,000 and $180,000 in
1997 and 1998, respectively........................................................... 19,796 24,355
Inventory--primarily finished goods..................................................... 3,403 8,440
Inventory in transit.................................................................... 3,438 3,116
Other current assets.................................................................... 425 527
--------- -----------
Total current assets................................................................ 38,272 48,044
FURNITURE AND EQUIPMENT:
Furniture and equipment................................................................. 1,321 2,662
Less accumulated depreciation........................................................... (680) (1,143)
--------- -----------
Total furniture and equipment........................................................... 641 1,519
OTHER ASSETS:
Deferred debt issuance costs............................................................ -- 12,019
Deferred tax asset...................................................................... -- 234,403
Other assets............................................................................ 23 2,425
--------- -----------
Total other assets.................................................................. 23 248,847
--------- -----------
TOTAL ASSETS.............................................................................. $ 38,936 $ 298,410
--------- -----------
--------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................................ $ 748 $ 1,513
Accrued taxes........................................................................... 1,481 5,364
Accrued expenses........................................................................ 1,412 1,798
Interest payable........................................................................ 23 5,501
--------- -----------
Total current liabilities........................................................... 3,664 14,176
NOTES PAYABLE--Stockholders............................................................... 30,000 --
LONG TERM DEBT............................................................................ -- 443,000
COMMITMENTS AND CONTINGENCIES (Notes 6, 7 and 11)
STOCKHOLDERS' EQUITY:
Capital stock (157,671,516 and 52,588,246 issued and outstanding at December 31, 1997
and 1998, respectively) and paid-in capital in excess of par.......................... 48 (193,043)
Retained earnings....................................................................... 5,224 34,277
--------- -----------
Total stockholders' equity (deficit)................................................ 5,272 (158,766)
--------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................ $ 38,936 $ 298,410
--------- -----------
--------- -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
THE BOYDS COLLECTION, LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
-------------- -------------- -------------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C>
NET SALES........................................................ $ 98,365 $ 129,841 $ 197,806
COST OF GOODS SOLD............................................... 33,022 43,278 63,852
-------------- -------------- -------------
Gross profit................................................. 65,343 86,563 133,954
GENERAL AND ADMINISTRATIVE EXPENSES.............................. 6,314 8,528 14,446
OTHER OPERATING INCOME........................................... 387 1,171 1,280
-------------- -------------- -------------
INCOME FROM OPERATIONS........................................... 59,416 79,206 120,788
-------------- -------------- -------------
OTHER INCOME (EXPENSE):
Interest and dividend income................................... 208 414 399
Other income, (expense)........................................ 660 (248) (36)
Expenses related to recapitalization........................... -- -- (3,248)
-------------- -------------- -------------
Net other income (expense)................................... 868 166 (2,885)
-------------- -------------- -------------
INTEREST EXPENSE:
Interest expense............................................... 187 242 27,764
Amortization of deferred debt issuance costs................... -- -- 1,854
-------------- -------------- -------------
TOTAL INTEREST EXPENSE........................................... 187 242 29,618
-------------- -------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES......................... 60,097 79,130 88,285
PROVISION FOR INCOME TAXES....................................... -- -- 22,007
-------------- -------------- -------------
NET INCOME....................................................... 60,097 79,130 66,278
PRO FORMA INFORMATION
(Unaudited):
HISTORICAL INCOME BEFORE PROVISION FOR INCOME TAXES.............. $ 60,097 $ 79,130 $ 88,285
PRO FORMA PROVISION FOR INCOME TAXES............................. 25,045 33,152 34,732
-------------- -------------- -------------
PRO FORMA NET INCOME............................................. $ 35,052 $ 45,978 $ 53,553
-------------- -------------- -------------
-------------- -------------- -------------
PRO FORMA BASIC EARNINGS PER SHARE............................... $ .22 $ .29 $ .64
-------------- -------------- -------------
-------------- -------------- -------------
PRO FORMA DILUTED EARNINGS PER SHARE............................. $ .22 $ .29 $ .63
-------------- -------------- -------------
-------------- -------------- -------------
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING........................ 157,671,516 157,671,516 84,142,163
-------------- -------------- -------------
-------------- -------------- -------------
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING...................... 157,671,516 157,671,516 84,484,571
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
THE BOYDS COLLECTION, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
AND PAID-IN
CAPITAL
NUMBER OF IN EXCESS RETAINED
SHARES OF PAR EARNINGS
-------------- -------------- ----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
BALANCE, DECEMBER 31, 1995............................................ 157,671,516 48 868
Net income.......................................................... -- -- 60,097
Distributions to stockholders'...................................... -- -- (59,822)
-------------- -------------- ----------
BALANCE, DECEMBER 31, 1996............................................ 157,671,516 48 1,143
Net income.......................................................... -- -- 79,130
Distributions to stockholders'...................................... -- -- (75,049)
-------------- -------------- ----------
BALANCE, DECEMBER 31, 1997............................................ 157,671,516 48 5,224
Net income.......................................................... -- -- 66,278
Capital contribution from stockholder............................... -- 3,500 --
Transfer of retained earnings to additional paid in capital at
termination of sub-S election..................................... -- 37,225 (37,225)
Recognition of deferred tax asset................................... -- 245,854 --
Redemption and retirement of common stock........................... (106,237,360) (484,809) --
Issuance of common stock............................................ 1,154,090 5,139 --
-------------- -------------- ----------
BALANCE, DECEMBER 31, 1998............................................ 52,588,246 $ (193,043) $ 34,277
-------------- -------------- ----------
-------------- -------------- ----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
THE BOYDS COLLECTION, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 60,097 $ 79,130 $ 66,278
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation................................................................... 221 254 406
Amortization of deferred debt issuance costs................................... -- -- 1,854
Deferred taxes................................................................. -- -- 11,451
Loss on sale of equipment...................................................... -- 38 36
Changes in assets and liabilities (net of acquisition):
Accounts receivable--net..................................................... (1,211) (9,030) (3,869)
Inventory.................................................................... (580) (162) (4,008)
Inventory in transit......................................................... 909 (2,195) 322
Other assets................................................................. (170) 160 (298)
Accounts payable............................................................. 140 122 702
Accrued taxes................................................................ 409 539 3,873
Accrued expenses............................................................. 215 912 410
Interest payable............................................................. -- -- 5,467
--------- --------- ---------
Net cash provided by operating activities.................................. 60,030 69,768 82,624
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment............................................................ (269) (367) (1,247)
Dividend distributions from investment in
The Boyds Collection (Hong Kong) Ltd........................................... -- 320 --
Proceeds from sales of equipment................................................. -- 5 --
Issuance of notes receivable..................................................... -- (250) (1,296)
Purchase of business--net of cash acquired....................................... -- -- (2,200)
--------- --------- ---------
Net cash used in investing activities...................................... (269) (292) (4,743)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of note payable--stockholders........................................... 26,000 34,000 --
Repayment of note payable--stockholders.......................................... (24,400) (23,300) (30,000)
Distributions to stockholders.................................................... (59,822) (75,049) --
Issuance of debt................................................................. -- -- 490,000)
Repayment of debt................................................................ -- -- (47,360)
Redemption of common stock....................................................... -- -- (484,809)
Sale of common stock............................................................. -- -- 5,056
Capital contribution............................................................. -- -- 3,500
Deferred debt issuance cost...................................................... -- -- (13,872)
--------- --------- ---------
Net cash used in financing activities...................................... (58,222) (64,349) (77,485)
--------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......................................... 1,539 5,127 396
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..................................... 4,544 6,083 11,210
--------- --------- ---------
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................... $ 6,083 $ 11,210 $ 11,606
--------- --------- ---------
--------- --------- ---------
CASH PAID DURING THE PERIOD FOR INTEREST........................................... $ 183 $ 227 $ 22,208
--------- --------- ---------
--------- --------- ---------
CASH PAID DURING THE PERIOD FOR INCOME TAXES....................................... $ -- $ -- $ 7,886
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL NON-CASH ACTIVITIES:
Pro forma income taxes........................................................... $ 25,045 $ 33,152 $ 34,732
Common stock issued as part of purchase price of business acquired............... 83
Forgiveness of notes receivable in exchange for net assets acquired.............. 1,469
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. HISTORY, RECAPITALIZATION AND FINANCING
The Boyds Collection, Ltd. ("Boyds") is a primary wholesaler and importer of
resin figurines and plush animals that are distributed to retail operations
primarily throughout the United States. Substantially all of its products are
sourced from foreign manufacturers in China through buying agencies. The two
largest buying agencies each represent approximately 46% of Boyds' total
imports.
On March 5, 1998, Boyds entered into a Recapitalization and Stock Purchase
Agreement with Bear Acquisition, Inc. ("Bear Acquisition"). Bear Acquisition is
a subsidiary of KKR 1996 Fund L.P., a limited partnership formed at the
direction of Kohlberg Kravis Roberts & Co. LP ("KKR"). In connection with the
closing of the Recapitalization on April 21, 1998, Boyds used approximately
$490.0 million of aggregate proceeds from certain financing described below (the
"Financing") and approximately $8.0 million of existing cash balances of Boyds
to: (i) redeem (the "Redemption") a portion of Boyds' common stock, par value
$0.0001 per share, held by the original stockholders (the "Original
Stockholders") for approximately $473.0 million and (ii) pay transaction fees
and expenses of approximately $25.0 million. In addition, Bear Acquisition
acquired shares of common stock from the Original Stockholders for approximately
$184.0 million (the "Stock Purchase," and together with the Redemption, the
"Recapitalization"). Upon completion of the Recapitalization, Bear Acquisition
owned approximately 80% of the common stock and the Original Stockholders
retained approximately 20% of the common stock.
The Financing consisted of: (i) an aggregate of $325.0 million of bank
borrowings by Boyds under senior secured term loans (the "Term Loans") and (ii)
$165.0 million aggregate principal amount of senior subordinated notes (the
"Notes"). In addition, Boyds entered into a $40.0 million senior secured
revolving credit facility which is available for Boyds' working capital
requirements and to support trade letters of credit (the "Revolver" and,
together with the Term Loans, the "Credit Facility"). Boyds did not have any
borrowings under the Revolver to consummate the Recapitalization.
In connection with the Recapitalization, Boyds had nonrecurring transaction
related bonuses (including the related payroll taxes) of $3.2 million which was
used by certain key employees to purchase Bear Acquisition common stock. These
transaction related bonuses were paid from the proceeds of capital contributions
from the Original Stockholders. Financing costs of approximately $13.8 million
were classified as deferred debt issuance costs and will be amortized using the
effective interest rate method over the lives of the related debt facilities. In
addition, Boyds incurred approximately $11.8 million of costs associated with
the Redemption, which were charged to paid-in capital in excess of par.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial
statements include the accounts of Boyds and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS--Boyds considers all short-term interest-bearing
investments with original maturities of three months or less to be cash
equivalents.
INVENTORIES--Inventories are stated at the lower of cost or market. Cost is
determined under the first-in, first out method of accounting. Inventory
in-transit consists of purchases from foreign suppliers for which title has
passed to Boyds.
F-7
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FURNITURE, EQUIPMENT AND DEPRECIATION--Furniture and equipment is stated at
cost. Depreciation is computed using the declining balance method over the
estimated useful lives of the various assets. The estimated useful lives of
furniture and fixtures range from five to seven years and the estimated useful
lives of equipment range from three to seven years. The estimated useful lives
of leasehold improvements is the lesser of the estimated life of the improvement
or the term of the lease.
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY--Boyds had a 30% investment in The
Boyds Collection (Hong Kong) Ltd. until such investment was liquidated in 1997.
This investment was accounted for under the equity method of accounting and the
amounts included in the financial statements were not material for any period
presented.
DEFERRED DEBT ISSUANCE COSTS--Boyds amortizes deferred debt issuance costs
using the interest method over the life of debt. Amortization of deferred debt
issuance costs includes amounts charged as a result of prepayments.
IMPAIRMENT ACCOUNTING--Boyds reviews the recoverability of its long-lived
assets, when events or changes in circumstances occur that indicate that the
carrying value of the assets may not be recoverable. The measurement of possible
impairment is based on Boyds' ability to recover the carrying value of the asset
from the expected future undiscounted cash flows generated. The measurement of
impairment requires management to use estimates of expected future cash flows.
If an impairment loss existed, the amount of the loss would be recorded in the
consolidated statements of operations. It is possible that future events or
circumstances could cause these estimates to change.
PRO FORMA ADJUSTMENTS--Boyds had elected to be treated as an S Corporation
for Federal and state income tax purposes. Under this election, income is not
taxed at the corporate level, but is taxed to the stockholders at the individual
level.
On April 21, 1998, Boyds elected to change its tax status from an S
Corporation to a C Corporation. The income statement reflects a provision for
income taxes for the period Boyds was a C Corporation. The objective of the pro
forma financial information is to show what the significant effects on the
historical financial information might have been had Boyds not been treated as
an S Corporation during 1996, 1997 and the portion of 1998 prior to April 21.
INCOME TAXES--Effective April 21, 1998, Boyds accounts for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
ACCOUNTING FOR INCOME TAXES, which requires an asset and liability approach to
accounting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future, based on enacted tax laws and rates applicable to periods in which
the differences are expected to affect taxable income. Income taxes/benefit is
the tax payable/receivable for the period plus or minus the change during the
period in deferred income tax assets and liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS--Management considers that the carrying
amount of financial instruments, including cash, accounts receivable, accounts
payable and accrued expenses, approximates fair value. Interest on long-term
bank debt is payable at variable rates which approximates fair market value. The
fair value of the Notes, face value of $165.0 million, was $176.6 million at
December 31, 1998 and was determined based on the market price on that date as
quoted by Bridge Fixed Income Services.
REVENUE RECOGNITION--Sales revenue is recognized upon shipment of the items,
when title passes to the customer.
F-8
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ADVERTISING--Boyds expenses the costs of advertising as they are incurred.
Advertising expense was $133,001, $179,559 and $199,882 for the years ended
1996, 1997 and 1998, respectively.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS--Certain 1996 and 1997 financial statement amounts have
been reclassified to conform to the 1998 presentation.
NEW ACCOUNTING STANDARDS--In June 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
130, REPORTING COMPREHENSIVE INCOME. Comprehensive income includes net income
and several other items that current accounting standards require to be
recognized outside of net income. This standard requires enterprises to display
comprehensive income and its components in financial statements, to classify
items of comprehensive income by their nature in financial statements, and to
display the accumulated balances of other comprehensive income in stockholders'
equity separately from retained earnings and additional paid-in capital. Boyds
adopted SFAS No. 130 for the year ended December 31, 1998. There were no items
of other comprehensive income for all periods presented.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, replacing SFAS No. 14 and its amendments.
This standard requires enterprises to report certain information about products
and services, activities in different geographic areas, and reliance on major
customers and to disclose certain segment information in their interim financial
statements. The basis for determining an enterprise's operating segments is the
manner in which financial information is used internally by the enterprise's
chief operating decision maker. Boyds adopted SFAS No. 131 for the year ended
December 31, 1998. Boyds has determined that it operates in one segment,
collectibles. In addition, less than 2% of total revenue is derived from
customers outside the United States and all long lived assets are located in the
United States. No customer represents more than 10% of total revenue.
During 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which is effective for periods beginning
after June 15, 1999. Boyds is currently evaluating the impact, if any, of this
statement.
3. FURNITURE AND EQUIPMENT
The components of property, plant and equipment at December 31, 1997 and
1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Equipment................................................................... $ 833 $ 997
Furniture and fixtures...................................................... 478 1,399
Leasehold improvements...................................................... 10 266
--------- ---------
Total................................................................... 1,321 2,662
--------- ---------
Less accumulated depreciation and amortization.............................. (680) (1,143)
--------- ---------
$ 641 1,519
--------- ---------
--------- ---------
</TABLE>
F-9
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS
In September 1998, Boyds agreed in principal with the stockholders of H.C.
Accents to acquire all of the issued and outstanding shares of capital stock of
H.C. Accents, an Illinois corporation. H.C. Accents is a designer, importer and
distributor of collectibles and other specialty giftware products. The
transaction was consummated on November 3, 1998. The aggregate purchase price
was approximately $4.0 million, consisting of $2.3 million cash paid, the
forgiveness of notes receivable due to Boyds of approximately $1.5 million and
18,721 shares of common stock issued valued at $83,000. The purchase price was
assigned to the acquired assets, primarily inventory and accounts receivable,
based on their fair market values. In addition, Boyds has recorded goodwill of
approximately $2.4 million, included in other assets, related to the excess of
the purchase price over the fair value of assets acquired which it will amortize
using the straight line method over 20 years. The results of operations and net
assets acquired are not material to Boyds. The purchase agreement requires
future contingent payments through 2002 provided H.C. Accents achieves minimum
levels of EBITDA. Such payments will range from 1.0 to 1.6 times threshold H.C.
Accents' EBITDA amounts, and will be recorded as additional purchase costs if
and when H.C. Accents achieves the minimum EBITDA thresholds.
5. CONCENTRATION OF CREDIT RISK
Boyds maintains cash balances at several financial institutions located in
Pennsylvania. Accounts at each institution are secured by the Federal Deposit
Insurance Corporation up to $100,000. Uninsured balances aggregated $9.4 million
and $11.2 million at December 31, 1997 and 1998, respectively.
6. LEASE COMMITMENTS
Boyds conducts its operations and warehouses inventory in a leased facility
classified as an operating lease. In May 1996, Boyds signed an addendum to its
original lease agreement dated March 1, 1995. The addendum permitted Boyds to
lease additional space, increasing the monthly payment from $13,211 to $22,735.
Effective January 1, 1998, Boyds also has exercised an option to lease the
remaining space of the warehouse for an additional monthly payment of $8,717.
The term of this lease expires in December 2009. The future minimum annual lease
commitments for the facilities are as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
1999........................................................................... $ 379
2000........................................................................... 379
2001........................................................................... 377
2002........................................................................... 377
2003........................................................................... 377
Thereafter..................................................................... 2,265
------
$ 4,154
------
------
</TABLE>
Rent expense amounted to $238,059, $273,220 and $497,158 for 1996, 1997 and
1998, respectively.
F-10
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
At December 31, 1998, Boyds had letters of credit outstanding under the
Credit Facility, amounting to $11.2 million. See Notes 1 and 9. At December 31,
1997, Boyds had letters of credit outstanding under a line of credit of $6.4
million, which expired on April 21, 1998. These letters of credit represent
Boyds' commitment to purchase inventory, which is to be produced and/or shipped.
8. RELATED PARTY TRANSACTIONS AND NOTES PAYABLE - STOCKHOLDERS
The stockholders loaned $30.0 million to Boyds at December 31, 1997, at an
interest rate of 5.0%. These notes payable were repaid in 1998. Interest
amounting to $182,705, $226,616 and $310,237 was paid to the stockholders during
the years ended 1996, 1997 and 1998, respectively. The stockholders' notes
payable was subordinated to the line of credit described in Note 7.
During 1998, Boyds paid fees in the amount of $6.0 million and $1.7 million
to KKR and a director, respectively, for consulting services in connection with
the Recapitalization which are included in transaction-related expenses charged
directly to paid-in capital in excess of par. In addition, the director was paid
$140,000 of consulting fees which are included in expenses. KKR has also agreed
to render management, consulting and financial services to Boyds for an annual
fee of $375,000 plus expenses. During the year ended December 31, 1998, Boyds
paid $251,367 to KKR for such services.
9. LONG-TERM DEBT
In connection with the Recapitalization, Boyds issued $165.0 million
principal of senior subordinated notes. In addition, on April 21, 1998 Boyds
entered into a Credit Facility with a syndicate of banks and other financial
institutions, consisting of $325.0 million in Term Loans and a $40.0 million
Revolver. Net proceeds to Boyds after deducting $13.8 million of deferred debt
issuance costs, were $476.2 million.
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
-----------------
<S> <C>
(IN THOUSANDS)
9% Senior Subordinated Notes due May 15, 2008.............................. $ 165,000
Credit Facility:
Secured Tranche A Term Loans due April 2005. Interest based on LIBOR or
base rate as defined................................................... 88,250
Secured Tranche B Term Loans due April 2006. Interest based on LIBOR or
base rate as defined................................................... 189,750
Secured revolving loan commitment of $40,000,000. Interest based on LIBOR
or base rate as defined................................................ --
--------
$ 443,000
--------
--------
</TABLE>
At December 31, 1998, the weighted average interest rate in effect for the
Term Loans was 7.38%.
The Notes have an optional redemption feature exercisable by Boyds any time
on or after May 15, 2003. Boyds may also redeem up to 40% of the Notes with the
proceeds of one or more equity offerings at any time on or prior to May 15,
2001. Interest on the Notes is payable semiannually on May 15 and November 15.
F-11
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Credit Facility contains certain covenants, including the requirement of
a minimum interest coverage ratio as defined in the agreement (effective for the
first quarter of 1999) and substantial restrictions as to dividends and
distributions. Boyds is in compliance with all applicable covenants as of
December 31, 1998. The Credit Facility also provides that the Term Loans and
Revolver will be secured by the capital stock of Boyds' future subsidiaries. In
addition, the Term Loans are subject to mandatory prepayment with the proceeds
of certain asset sales and a portion of Boyds' excess cash flow as defined in
the Credit Facility. Boyds has the option of selecting its own interest period
at one, two, three, six, nine or twelve month periods.
The scheduled maturities of the long-term debt are as follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
1999............................................................................... $ --
2000............................................................................... --
2001............................................................................... 6,250
2002............................................................................... 14,000
2003............................................................................... 17,000
Thereafter......................................................................... 405,750
</TABLE>
10. PROVISION FOR INCOME TAXES
Prior to April 21, 1998 Boyds had elected to be treated as an S Corporation
for federal and state income tax purposes. Therefore, there is no income tax
provision for 1996 and 1997.
The 1998 income tax expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
-------------
<S> <C>
(IN
THOUSANDS)
Federal:
Current...................................................................... $ 8,879
Deferred..................................................................... 9,237
-------------
Total Federal.................................................................. 18,116
State:
Current...................................................................... 1,677
Deferred..................................................................... 2,214
-------------
Total State.................................................................... 3,891
-------------
Total Income Tax Provision..................................................... $ 22,007
-------------
-------------
</TABLE>
For federal income tax purposes, Boyds has elected to treat the
Recapitalization and Stock Purchase as an asset acquisition by making a Section
338(h)(10) election. As a result, there is a difference between the financial
reporting and tax bases of Boyds' assets. The difference creates deductible
goodwill for tax purposes, which creates a deferred tax asset for financial
reporting purposes. The deferred tax asset will be realized as the tax goodwill
is deducted over a period of fifteen years. In the opinion of management, Boyds
believes it will have sufficient profits in the future to realize the deferred
tax asset.
F-12
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the statutory federal income tax rate and the effective
rate of the provision for income taxes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
---------------
<S> <C>
Statutory federal income tax rate............................................... 35.0%
State income taxes--net of federal income tax benefit........................... 2.8
Sub-chapter S income............................................................ (12.8)
-----
Effective income tax rate....................................................... 25.0%
-----
-----
</TABLE>
11. CONTINGENCIES
Boyds is engaged in various lawsuits, either as plaintiff or defendant,
involving alleged patent infringement and breaches of contract. In the opinion
of management, based upon advice of counsel, the ultimate outcome of these
lawsuits will not have a material impact on Boyds' financial condition or
results of operations.
12. STOCKHOLDERS' EQUITY
CAPITAL STOCK--As of December 31, 1997 and 1998 Boyds had 351 million, and
100 million shares of capital stock (par value $.0001), respectively, authorized
and 157.7 million and 52.6 million, respectively, shares issued as common stock.
The Board of Directors is authorized to issue the unissued portion of the
authorized shares in another class or series of stock, including preferred
stock.
During 1998, the Original Stockholders made capital contributions of $3.5
million. In connection with the Recapitalization, Boyds redeemed, and
subsequently retired, 106,237,360 shares of common stock from the original
stockholders (see Note 1). Boyds issued 1,154,090 shares of common stock, of
which 18,721 shares were issued in connection with the acquisition of H.C.
Accents.
STOCK OPTION PLAN--On April 21, 1998, Boyds implemented an incentive stock
plan (the "1998 Stock Option Plan") which provides for the granting to certain
employees and directors of options to acquire Boyds' common stock. The option
prices of stock which may be purchased under the incentive stock plan are not
less than the fair value of common stock on the dates of the grants.
Outstanding options issued to employees during 1998 vest and become
exercisable over a five-year period from the date of grant. The outstanding
options expire ten years from the date of grant or upon an employee's retirement
or termination from Boyds, and are contingent upon continued employment during
the applicable five-year period.
On July 21, 1998, Boyds issued 44,921 options to each of its six directors.
These options vested immediately, expire 10 years from the date of grant and the
option prices of the stock which may be purchased were not less than the fair
value of common stock on the dates of the grants.
Boyds has reserved a total of 2,246,033 shares for issuance under the 1998
Stock Option Plan, of which 1,112,909 remains reserved at December 31, 1998 for
future issuances.
Effective with the adoption of the 1998 Stock Option Plan, Boyds adopted
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS 123 establishes a
fair value based method of accounting for stock-based employee compensation
plans; however, it also allows an entity to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO
F-13
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EMPLOYEES. Under the fair value method, compensation cost is measured at the
grant date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price of
the stock at the grant date or other measurement date over the amount an
employee must pay to acquire the stock. Boyds has elected to continue to account
for its employee compensation plans under APB Opinion No. 25 with pro forma
disclosures of net earnings and earnings per share, as if the fair value based
method of accounting defined in SFAS No. 123 had been applied.
If compensation cost for stock option grants had been determined based on
the fair value on the grant dates for the year ended December 31, 1998
consistent with the method prescribed by SFAS No. 123, Boyds' pro forma net
earnings and diluted earnings per share would have been $53.2 million and $.63,
respectively.
Under FASB No. 123, the fair value of each option grant is estimated on the
date of grant. The following weighted average assumptions were used for grants
under the 1998 Stock Option Plan in 1998: volatility of 10%, dividend yield of
0%, risk-free interest rate of 6.1%, and expected lives of 6.5 years.
A summary of the status of stock option grants as of December 31, 1998 and
changes during the period ending on that date is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
PRICE
OPTIONS PER SHARE
---------- -----------
<S> <C> <C>
Outstanding at December 31, 1997...................................... -- --
Granted............................................................... 1,133,124 $ 7.10
Forfeited............................................................. -- --
---------- -----
Outstanding at December 31, 1998...................................... 1,133,124 $ 7.10
---------- -----
---------- -----
</TABLE>
The fair value of options granted during 1998 was $1.0 million for options
issued with an exercise price of $4.45 and $.3 million for options issued with
an exercise price of $13.36.
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE OPTIONS OPTIONS AVERAGE
PRICE OUTSTANDING EXERCISABLE REMAINING LIFE
----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C>
$ 4.45 796,219 269,524 9.4
$ 13.36 336,905 -- 10.0
</TABLE>
EARNINGS PER SHARE--In March 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE. This Statement establishes
standards for computing and presenting earnings per share ("EPS") and applies to
all entities with publicly held common stock or potential common stock. This
Statement replaces the presentation of primary EPS and fully diluted EPS with a
presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes
dilution and is computed by dividing earnings available to common stockholders
by the weighted average number of common shares outstanding for the period.
Similar to fully diluted EPS, diluted EPS reflects the potential dilution of
securities that could share in the earnings.
F-14
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the income and net income
available to common stockholders.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------- ------------- -------------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Pro forma net income available to common stockholders............. $ 35,052 $ 45,978 $ 53,553
Denominator:
Denominator for basic earnings per share--weighted average
shares.......................................................... 157,671,516 157,671,516 84,142,163
Effect of dilutive securities:
Effect of shares issuable under stock option plans based on
treasury stock method......................................... -- -- 342,408
------------- ------------- -------------
Dilutive potential common shares.................................... -- -- 342,408
------------- ------------- -------------
Denominator for diluted earnings per share--weighted average
shares............................................................ 157,671,516 157,671,516 84,484,571
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
13. SUBSEQUENT EVENTS
On , the Board of Directors authorized a 1.1230165 for 1 exchange
of Boyds' common stock to be effected prior to the effectiveness of the
Offering. All share and per share amounts have been restated to give effect to
this exchange.
* * * * * *
F-15
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Condensed Financial
Statements have been derived by the application of pro forma adjustments to
Boyds' historical financial statements included elsewhere in this Prospectus.
The Unaudited Pro Forma Consolidated Condensed Statement of Income for the
periods presented give effect to the Recapitalization and related transactions
and the Offering as if such transactions were consummated as of January 1, 1998.
The Unaudited Pro Forma Consolidated Condensed Balance Sheet gives effect to the
Offering as if such transaction had occurred as of December 31, 1998. The
adjustments are described in the accompanying Notes to the Unaudited Pro Forma
Consolidated Condensed Balance Sheet and to the Unaudited Pro Forma Consolidated
Condensed Statements of Income. The Unaudited Pro Forma Consolidated Condensed
Financial Statements should not be considered indicative of actual results that
would have been achieved had the Recapitalization and related transactions and
the Offering been consummated on the dates or for the periods indicated and do
not purport to indicate balance sheet data or results of operations as of any
future date or for any future period. The Unaudited Pro Forma Consolidated
Condensed Financial Statements should be read in conjunction with Boyds'
historical financial statements and the notes thereto included elsewhere in this
Prospectus.
P-1
<PAGE>
THE BOYDS COLLECTION, LTD.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
ACTUAL ADJUSTMENTS PRO FORMA
------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................................ $ 11,606 $ 11,606
Accounts receivable...................................................... 24,355 24,355
Inventory................................................................ 8,440 8,440
Inventory in transit..................................................... 3,116 3,116
Other current assets..................................................... 527 527
------------ ----------- -----------
Total current assets................................................... 48,044 48,044
Furniture and equipment, net............................................. 1,519 1,519
Deferred debt issuance costs............................................. 12,019 (4,466)(1) 7,553
Deferred tax asset....................................................... 234,403 234,403
Other assets............................................................. 2,425 2,425
------------ ----------- -----------
$ 298,410 $ (4,466) $ 293,944
------------ ----------- -----------
------------ ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................................... $ 1,513 $ 1,513
Accrued taxes............................................................ 5,364 (3,746)(1) 1,618
Accrued expenses......................................................... 1,798 1,798
Interest payment......................................................... 5,501 5,501
------------ ----------- -----------
Total current liabilities.............................................. 14,176 (3,746) 10,430
Term Loan A.............................................................. 88,250 88,250
Term Loan B.............................................................. 189,750 (90,765)(2) 98,985
Senior Subordinated Notes................................................ 165,000 (66,000)(2) 99,000
------------ ----------- -----------
Total liabilities...................................................... 457,176 (160,511) 296,665
Capital stock and paid-in capital in excess of par....................... (193,043) 162,705(3) (30,338)
Retained earnings........................................................ 34,277 (6,660)(1) 27,617
------------ ----------- -----------
Total Stockholders' Equity (Deficit)..................................... (158,766) 156,045 (2,721)
------------ ----------- -----------
$ 298,410 $ (4,466) $ 293,944
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Condensed Balance Sheet
P-2
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
The pro forma financial data have been derived by the application of pro
forma adjustments to Boyds' historical financial statements as of December 31,
1998.
(1) The adjustments reflect an expected extraordinary loss of $6,660 on the
redemption of the principal amount of the Notes and the repayment of
indebtedness under the Credit Facility. The total loss of $10,406 includes the
$5,940 premium on the redemption of the Notes and the write off of $4,466 of
deferred debt financing costs related to the redemption of the Notes and the
repayment under the Credit Facility. The loss has been reduced by the related
income tax benefit of $3,746 at a 36% statutory income tax rate.
(2) The sources and uses of cash reflect the following:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
SOURCES OF FUNDS:
Proceeds to Boyds from the Offering............................................ $ 175,750
-------------
-------------
USES OF FUNDS:
Redemption of principal amount of the Notes.................................... $ 66,000
Premium on redemption of principal amount of the Notes at 109%................. 5,940
Repayment of indebtedness under the Credit Facility............................ 90,765
Estimated transaction fees and expenses........................................ 13,045
-------------
Total uses................................................................... $ 175,750
-------------
-------------
</TABLE>
(3) The adjustment represents the net change in capital stock and paid-in
capital in excess of par as a result of the Offering:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
Proceeds from the Offering..................................................... $ 175,750
Estimated transaction fees and expenses........................................ (13,045)
-------------
Total........................................................................ $ 162,705
-------------
-------------
</TABLE>
P-3
<PAGE>
THE BOYDS COLLECTION, LTD.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ACTUAL ADJUSTMENTS PRO FORMA
------------- -------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales......................................................... $ 197,806 $ $ 197,806
Cost of goods sold................................................ 63,852 63,852
------------- -------------- --------------
Gross profit.................................................... 133,954 133,954
General and administrative expenses............................... 14,446 124(1) 14,570
Other operating income............................................ 1,280 1,280
------------- -------------- --------------
Income from operations.......................................... 120,788 (124) 120,664
------------- -------------- --------------
Interest and dividend income.................................. 399 (399)(2) --
Other income (expense)........................................ (36) (36)
Expenses related to the Recapitalization...................... (3,248) (3,248)
------------- -------------- --------------
Net other income (expense)........................................ (2,885) (399) (3,284)
------------- -------------- --------------
Interest expense................................................ (27,764) 2,550(3) (25,214)
Amortization and write off of deferred debt issuance costs...... (1,854) 990(4) (864)
------------- -------------- --------------
Total interest expense............................................ (29,618) 3,540 (26,078)
------------- -------------- --------------
Income before provision for income taxes and extraordinary item... $ 88,285 $ 3,017(5) $ 91,302
------------- -------------- --------------
------------- -------------- --------------
Income before provision for income taxes and extraordinary item... $ 88,285 $ 3,017 $ 91,302
Pro forma provision for income taxes.............................. 34,732 1,087(6) 35,819
------------- -------------- --------------
Pro forma net income before extraordinary item.................. $ 53,553 $ 1,930(5) $ 55,483
------------- -------------- --------------
------------- -------------- --------------
Basic earnings (loss) per common share:
Pro forma net income before extraordinary item............ $ 0.64 $ 0.90
------------- --------------
------------- --------------
Diluted earnings (loss) per common share:
Pro forma net income before extraordinary item............ $ 0.63 $ 0.90
------------- --------------
------------- --------------
Weighted average basic shares outstanding......................... 84,142,163 61,375,424
------------- --------------
------------- --------------
Weighted average diluted shares outstanding....................... 84,484,571 61,717,832
------------- --------------
------------- --------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Condensed Statements of Income
P-4
<PAGE>
THE BOYDS COLLECTION, LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
The pro forma financial data have been derived by the application of pro
forma adjustments to Boyds' historical financial statements for the period ended
December 31, 1998. The historical basis of Boyds' assets and liabilities will
not be impacted by the Recapitalization.
(1) The adjustment relates to management, consulting and financial services
rendered by KKR for an annual fee of $375. The adjustment is reduced by $251
which is recorded in the historical financial statements.
(2) The adjustment eliminates historical interest and dividend income on cash
and short-term investments not expected to be received after the
Recapitalization and related transactions and the Offering.
(3) The adjustment to interest expense reflects the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Interest expense with respect to the Notes and Credit Facility giving effect to the
Recapitalization and related transactions as if they occurred as of January 1, 1998 at
an assumed weighted average interest rate of 8.06%..................................... $ 38,307
Reduction of interest expense related to the redemption of the Notes and repayment under
the Credit Facility giving effect to the Offering as if they occurred as of January 1,
1998 at an assumed weighted average interest rate of 8.35%............................. (13,093)
--------
Pro forma interest expense............................................................... 25,214
Historical interest expense.............................................................. (27,764)
--------
Total adjustment......................................................................... $ 2,550
--------
--------
</TABLE>
(4) The adjustment to amortization and write off of deferred debt issuance
costs reflects the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Amortization and write off of deferred debt issuance costs giving effect to the
Recapitalization and related transactions and the Offering as if they occurred as of
January 1, 1998........................................................................ $ 864
Historical amortization and write off of deferred debt issuance costs.................... (1,854)
--------
Total adjustment......................................................................... $ (990)
--------
--------
</TABLE>
(5) The amounts are before, and do not include, an extraordinary loss of
approximately $6,771. The total loss of $10,579 includes the $5,940 premium on
the redemption of the Notes and the write off of $4,639 of deferred financing
costs related to the redemption of the Notes and the repayment under the Credit
Facility. The loss has been reduced by the related income tax benefit.
(6) The adjustment reflects the tax effect of the pro forma adjustments at a
36% statutory income tax rate.
P-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[LOGO]
THE BOYDS COLLECTION, LTD.
16,000,000 SHARES OF COMMON STOCK
---------------------
P R O S P E C T U S
---------------------
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
- ---------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Boyds have
not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all
dealers, whether or not participating in this offering, that effect transactions
in these securities may be required to deliver a prospectus. This is in addition
to the dealer's obligation to deliver a prospectus when acting as an underwriter
in this offering and when selling previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of common stock registered hereby,
all of which expenses, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee, and the New York Stock Exchange listing application fee, are estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........................ $ 88,960
National Association of Securities Dealers, Inc. filing fee................ 30,500
New York Stock Exchange listing application fee............................ *
Printing and engraving fees and expenses................................... *
Legal fees and expenses.................................................... *
Accounting fees and expenses............................................... *
Blue Sky fees and expenses................................................. *
Transfer Agent and Registrar fees and expenses............................. *
Miscellaneous expenses..................................................... *
---------
Total.................................................................... *
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Boyds' charter provides that to the fullest extent permitted by the Maryland
General Corporation Law, directors and officers of Boyds shall not be liable to
Boyds or its stockholders for monetary damages for breach of fiduciary duty as a
director or an officer. Under Maryland law, however, these provisions do not
eliminate or limit the personal liability of a director or an officer (a) to the
extent that it is proved that the director or officer actually received an
improper benefit or profit or (b) if a judgment or other final adjudication is
entered in a proceeding based on a finding that the director's or officer's
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in such proceeding. These
provisions also do not affect the ability of Boyds or its stockholders to obtain
equitable relief, such as an injunction or rescission.
As permitted by the MGCL, Boyds' charter obligates Boyds to indemnify its
directors and officers and to pay or reimburse expenses for such individuals in
advance of the final disposition of a proceeding to the maximum extent permitted
by Maryland law. The Boyds' bylaws contain indemnification procedures which
implement those of the charter. The MGCL permits a corporation to indemnify its
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities, unless it is established that (a) the act or omission
of the director or officer was material to the matter giving rise to such
proceeding and (1) was committed in bad faith or (2) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper benefit in money, property or services, or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe
that the action or omission was unlawful.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the three years preceding the filing of this registration statement,
Boyds sold shares of its common stock in the amounts, at the times, and for the
aggregate amounts of consideration listed below without registration under the
Securities Act of 1933. Exemption from registration under the Securities Act for
each of the following sales is claimed under Section 4(2) of the Securities Act
because such transactions were by an issuer and did not involve a public
offering:
II-1
<PAGE>
On April 22, 1998, Boyds issued 843,385 shares of common stock to Bear
Acquisition for aggregate consideration of $3,755,000.
On July 21, 1998 Boyds issued 22,460 shares of common stock to Gary M.
Lowenthal for aggregate consideration of $100,000 and 157,223 shares of common
stock to Bear Acquisition for aggregate consideration of $700,000.
On October 6, 1998, Boyds issued 67,381 shares of common stock to three
individuals employed by Boyds' buying agencies. These shares were issued in
consideration for their assistance in the design and development of Boyds'
products and supervising the manufacture of such products. The value of such
services was determined by Boyds and the buying agencies to be $300,000.
On November 2, 1998 Boyds issued 9,360 shares of common stock to Stephen
Chambliss and 9,360 shares of common stock to Edward Sullivan as partial
consideration for the purchase by Boyds of H.C. Accents, a company formerly
owned by Messrs. Chambliss and Sullivan.
On November 20, 1998, Boyds issued 44,921 shares of common stock to Bear
Acquisition for aggregate consideration of $200,000.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated herein by
reference.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement among Boyds and the Underwriters named
therein**
3.1 Amended and Restated Articles of Incorporation of Boyds*
3.2 Bylaws of Boyds*
4.1 Form of Common Stock certificate**
4.2 See Exhibits 3.1 and 3.2 of this Registration Statement for provisions of
the Amended and Restated Articles of Incorporation and the Bylaws of
Boyds defining rights of security holders*
4.3 Indenture, dated as of April 21, 1998 between Boyds and The Bank of New
York, as trustee*
4.4 Form of 9% Senior Subordinated Note due 2008 (included in Exhibit 4.3)*
5.1 Opinion of Simpson Thacher & Bartlett**
5.2 Opinion of Piper & Marbury L.L.P.**
10.1 Credit Agreement, dated as of April 21, 1998 among Boyds, the several
lenders from time to time parties thereto, DLJ Capital Funding, Inc.,
The Fuji Bank, Limited, New York Branch, and Fleet National Bank*
10.2 Forms of Notes evidencing loans under the Credit Agreement**
10.3 1998 Stock Option Plan*
10.4 Lease Agreement for Boyds' McSherrystown, Pennsylvania facility**
21 List of subsidiaries*
23.1 Consent of Simpson Thacher & Bartlett (included in the opinion filed as
Exhibit 5.1 hereto)**
23.2 Consent of Piper & Marbury L.L.P. (included in the opinion filed as
Exhibit 5.2 hereto)**
23.3 Consent of Deloitte and Touche LLP**
24 Powers of Attorney*
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by the director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of McSherrystown, State of
Pennsylvania on the 8th day of February, 1999.
<TABLE>
<S> <C> <C>
THE BOYDS COLLECTION, LTD.
By: /s/ Christine L. Bell
-----------------------------------------
Christine L. Bell
Chief Operating Officer, Controller and
Secretary
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on February 8, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
i) Principal executive
officer:
*
- ------------------------------ Chief Executive Officer
Gary M. Lowenthal and Director
ii) Principal financial and
accounting officer:
/s/ CHRISTINE L. BELL
- ------------------------------ Controller
Christine L. Bell
iii) Directors:
*
- ------------------------------ President and Director
Robert T. Coccoluto
*
- ------------------------------
Henry R. Kravis
*
- ------------------------------
George R. Roberts
*
- ------------------------------
Scott M. Stuart
*
- ------------------------------
Marc S. Lipschultz
*
- ------------------------------
Timothy Brady
*By: /s/ CHRISTINE L. BELL
- ------------------------------
Christine L. Bell
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement among Boyds and the Underwriters named
therein**
3.1 Amended and Restated Articles of Incorporation of Boyds*
3.2 Bylaws of Boyds*
4.1 Form of Common Stock certificate**
4.2 See Exhibits 3.1 and 3.2 of this Registration Statement for provisions of
the Amended and Restated Articles of Incorporation and the Bylaws of
Boyds defining rights of security holders*
4.3 Indenture, dated as of April 21, 1998 between Boyds and The Bank of New
York, as trustee*
4.4 Form of 9% Senior Subordinated Note due 2008 (included in Exhibit 4.3)*
5.1 Opinion of Simpson Thacher & Bartlett**
5.2 Opinion of Piper & Marbury L.L.P.**
10.1 Credit Agreement, dated as of April 21, 1998 among Boyds, the several
lenders from time to time parties thereto, DLJ Capital Funding, Inc.,
The Fuji Bank, Limited, New York Branch, and Fleet National Bank*
10.2 Forms of Notes evidencing loans under the Credit Agreement**
10.3 1998 Stock Option Plan*
10.4 Lease Agreement for Boyds' McSherrystown, Pennsylvania facility**
21 List of subsidiaries*
23.1 Consent of Simpson Thacher & Bartlett (included in the opinion filed as
Exhibit 5.1 hereto)**
23.2 Consent of Piper & Marbury L.L.P. (included in the opinion filed as
Exhibit 5.2 hereto)**
23.3 Consent of Deloitte and Touche LLP**
24 Powers of Attorney*
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE>
Exhibit 3.1
THE BOYDS COLLECTION, LTD.
ARTICLES OF AMENDMENT AND RESTATEMENT
THE BOYDS COLLECTION, LTD., a Maryland corporation, having its principal
office in Montgomery County (changing to Baltimore City hereunder), Maryland
(which is hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended and restated in
its entirety to read as follows:
* * * * * * * *
THE BOYDS COLLECTION, LTD.
ARTICLES OF INCORPORATION
FIRST: THE UNDERSIGNED, James E. Savitz, whose address is 144 North
Frederick Avenue, Suite 200, Gaithersburg, Maryland 20877, being at least
eighteen years of age, acting as incorporator, does hereby form a corporation
under the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
The Boyds Collection, Ltd.
THIRD: (a) The purposes for which and any of which the Corporation is
formed and the business and objects to be carried on and promoted by it are:
(1) To engage in the business of wholesale decorative accessories, to
carry on an import business, and to engage in any other lawful business.
(2) To engage in any one or more businesses or transactions, or to
acquire all or any portion of any entity engaged in any one or more
businesses or transactions which the Board of Directors may from time to
time authorize or approve, whether or not related to the business described
elsewhere in this Article or to any other business at the time or
theretofore engaged in by the Corporation.
(b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other
<PAGE>
Article of the Charter of the Corporation, and each shall be regarded as
independent; and they are intended to be and shall be construed as powers as
well as purposes and objects of the Corporation and shall be in addition to and
not in limitation of the general powers of corporations under the General Laws
of the State of Maryland.
FOURTH: The present address of the principal office of the Corporation in
this State is c/o The Corporation Trust Incorporated, 300 E. Lombard Street,
Baltimore, Maryland 21202.
FIFTH: The name and address of the resident agent of the Corporation in
this State are The Corporation Trust Incorporated, 300 E. Lombard Street,
Baltimore, Maryland 21202.
SIXTH: (a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 100,000,000 shares of capital stock (par
value $.0001 per share), amounting in aggregate par value to $10,000.00. All of
such shares are initially classified as "Common Stock". The Board of Directors
may classify and reclassify any unissued shares of capital stock by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of such shares of capital stock.
(b) The following is a description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Common Stock of the
Corporation:
(1) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter classified or
reclassified, the exclusive voting power for all purposes shall be vested
in the holders of the Common Stock. Shares of Common Stock shall not have
cumulative voting rights.
(2) Subject to the provisions of law and any preferences of any class
of stock hereafter classified or reclassified, dividends, including
dividends payable in shares of another class of the Corporation's stock,
may be paid ratably on the Common Stock at such time and in such amounts as
the Board of Directors may deem advisable.
(3) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall be entitled, together with the holders of any other class of
stock hereafter classified or reclassified not having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation, to share ratably in the net assets of the Corporation
remaining, after payment or provision for payment of the debts and other
liabilities of the Corporation and the amount to which the holders of any
class
-2-
<PAGE>
of stock hereafter classified or reclassified having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation shall be entitled.
(c) Subject to the foregoing, the power of the Board of Directors to
classify and reclassify any of the shares of capital stock shall include,
without limitation, subject to the provisions of the Charter, authority to
classify or reclassify any unissued shares of such stock into a class or classes
of preferred stock, preference stock, special stock or other stock, and to
divide and classify shares of any class into one or more series of such class,
by determining, fixing, or altering one or more of the following:
(1) The distinctive designation of such class or series and the
number of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of
unissued shares and the number of shares of such class or series may be
increased by the Board of Directors in connection with any such
classification or reclassification, and any shares of any class or series
which have been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become part of
the authorized capital stock and be subject to classification and
reclassification as provided in this sub-paragraph.
(2) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of
such class or series, whether any such dividends shall rank senior or
junior to or on a parity with the dividends payable on any other class or
series of stock, and the status of any such dividends as cumulative,
cumulative to a limited extent or non-cumulative and as participating or
non-participating.
(3) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(4) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions
thereof, including provision for adjustment of the conversion or exchange
rate in such events or at such times as the Board of Directors shall
determine.
(5) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable
and the amount per share payable in case of redemption, which amount may
vary under different conditions
-3-
<PAGE>
and at different redemption dates; and whether or not there shall be any
sinking fund or purchase account in respect thereof, and if so, the terms
thereof.
(6) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on a parity with
such rights of any other class or series of stock.
(7) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any stock of the Corporation, or
upon any other action of the Corporation, including action under this
sub-paragraph, and, if so, the terms and conditions thereof.
(8) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class
or series, not inconsistent with law and the Charter of the Corporation.
(d) For the purposes hereof and of any articles supplementary to the
Charter providing for the classification or reclassification of any shares of
capital stock or of any other Charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:
(1) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable on liquidation,
dissolution or winding up, as the case may be, in preference or priority to
holders of such other class or series;
(2) on a parity with another class or series either as to dividends
or upon liquidation, whether or not the dividend rates, dividend payment
dates or redemption or liquidation price per share thereof be different
from those of such others, if the holders of such class or series of stock
shall be entitled to receipt of dividends or amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or redemption or liquidation prices,
without preference or priority over the holders of such other class or
series; and
(3) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the
-4-
<PAGE>
receipt of dividends or the amounts distributable upon liquidation,
dissolution or winding up, as the case may be.
SEVENTH: The number of directors of the Corporation is six, which number
may be increased or decreased pursuant to the By-Laws of the Corporation, but
shall never be less than the minimum number permitted by the General Laws of the
State of Maryland now or hereafter in force. The names of the directors who
will serve until the next annual meeting of stockholders and until their
successors are elected and qualify are as follows:
Gary M. Lowenthal Robert T. Coccoluto
Henry R. Kravis George R. Roberts
Scott M. Stuart Marc S. Lipscbultz
EIGHTH: (a) The following provisions are hereby adopted for the purpose
of defining, limiting, and regulating the powers of the Corporation and of the
directors and the stockholders:
(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any class, whether now
or hereafter authorized, or securities convertible into shares of its stock
of any class or classes, whether now or hereafter authorized, for such
consideration as may be deemed advisable by the Board of Directors and
without any action by the stockholders.
(2) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any preemptive
right to subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other
terms as the Board of Directors, in its sole discretion, may fix; and any
stock or other securities which the Board of Directors may determine to
offer for subscription may, as the Board of Directors in its sole
discretion shall determine, be offered to the holders of any class, series
or type of stock or other securities at the time outstanding to the
exclusion of the holders of any or all other classes, series or types of
stock or other securities at the time outstanding.
(3) The Board of Directors of the Corporation shall, consistent with
applicable law, have power in its sole discretion to determine from time to
time in accordance with sound accounting practice or other reasonable
valuation methods what constitutes annual or other net profits, earnings,
surplus or net assets in excess of capital; to fix and vary from time to
time the amount to be reserved as working capital, or determine that
retained earnings or surplus shall remain in the hands of the Corporation;
to set apart out of any funds of the Corporation such reserve or reserves
in such amount or amounts and for such proper purpose or purposes as it
-5-
<PAGE>
shall determine and to abolish any such reserve or any part thereof; to
redeem or purchase its stock or to distribute and pay distributions or
dividends in stock, cash or other securities or property, out of surplus or
any other funds or amounts legally available therefor, at such times and to
the stockholders of record on such dates as it may, from time to time,
determine; to determine the amount, purpose, time of creation, increase or
decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which
such reserves or charges shall have been created shall have been paid or
discharged); to determine the fair value and any matters relating to the
acquisition, holding and disposition of any assets by the Corporation; and
to determine whether and to what extent and at what times and places and
under what conditions and regulations the books, accounts and documents of
the Corporation, or any of them, shall be open to the inspection of
stockholders, except as otherwise provided by statute or by the By-Laws,
and, except as so provided, no stockholder shall have any right to inspect
any book, account or document of the Corporation unless authorized so to do
by resolution of the Board of Directors.
(4) Notwithstanding any provision of law requiring the authorization
of any action by a greater proportion than a majority of the total number
of shares of all classes of capital stock or of the total number of shares
of any class of capital stock, such action shall be valid and effective if
authorized by the affirmative vote of the holders of a majority of the
total number of shares of all classes outstanding and entitled to vote
thereon, except as otherwise provided in the Charter.
(5) The Corporation shall indemnify (A) its directors and officers,
whether serving the Corporation or at its request any other entity, to the
full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under
the procedures and to the full extent permitted by law and (B) other
employees and agents to such extent as shall be authorized by the Board of
Directors or the Corporation's By-Laws and be permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The Board
of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such by-laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by law. No amendment of the Charter of the Corporation or repeal
of any of its provisions shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of the
Corporation shall be
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personally liable to the Corporation or its stockholders for money damages.
No amendment of the Charter of the Corporation or repeal of any of its
provisions shall limit or eliminate the limitation on liability provided to
directors and officers hereunder with respect to any act or omission
occurring prior to such amendment or repeal.
(7) The Corporation reserves the right from time to time to make any
amendments of the Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as
expressly set forth in the Charter, of any of its outstanding stock by
classification, reclassification or otherwise.
(b) The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
NINTH: The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation,
acknowledging the same to be my act, on October 17, 1985.
Witness:
/s/ [Signature illegible] /s/ James E. Savitz,
Incorporator
* * * * * * *
SECOND: (a) As of immediately before the amendment and restatement the
total number of shares of capital stock of all classes which the Corporation has
authority to issue is 5,000 shares, all of which shares are Common Stock (par
value $1.00 per share).
(b) As amended the total number of shares of capital stock of all classes
which the Corporation has authority to issue is 100,000,000 shares, all of which
shares are currently classified as Common Stock (par value $.0001 per share).
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(c) The aggregate par value of all shares having a par value is $5,000.00
before the amendment and $10,000.00, as amended.
(d) The shares of capital stock of the Corporation are currently all of
one class (but may be divided into additional classes by the Board of
Directors), and description, as amended, of the current class, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption (and the extent to which the Board of Directors may establish such
terms for additional classes) is set forth in Article FIRST.
THIRD: Each outstanding share of Common Stock (par value $1.00 per share)
of the Corporation has been duly reclassified into one outstanding share of
Common Stock (par value $.0001 per share) of the Corporation.
FOURTH: The foregoing amendment and restatement to the Charter of the
Corporation has been advised by the Board of Directors and approved by the
stockholders of the Corporation.
IN WITNESS WHEREOF, THE BOYDS COLLECTION, LTD. has caused these presents to
be signed in its name and on its behalf by its President and witnessed by its
Secretary on April 21, 1998.
WITNESS: THE BOYDS COLLECTION, LTD.
/s/ Christine L. Bell By: /s/ Gary M. Lowenthal
- ------------------------------- ------------------------------------
Christine L. Bell, Secretary Gary M. Lowenthal, President
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THE UNDERSIGNED, President of THE BOYDS COLLECTION, LTD., who executed on
behalf of the Corporation the foregoing Articles of Amendment and Restatement of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment and Restatement
to be the corporate act of said Corporation and hereby certifies that to the
best of his knowledge, information, and belief the matters and facts set forth
therein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ Gary M. Lowenthal
-----------------------------------
Gary M. Lowenthal, President
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Exhibit 3.2
THE BOYDS COLLECTION, LTD.
BY-LAWS
ARTICLE I.
STOCKHOLDERS
SECTION 1.01. ANNUAL MEETING. The Corporation shall hold an annual
meeting of its stockholders to elect directors and transact any other business
within its powers, either at 10:00 a.m. on the third Tuesday of April in each
year if not a legal holiday, or at such other time on such other day falling on
or before the 30th day thereafter as shall be set by the Board of Directors.
Except as the Charter or statute provides otherwise, any business may be
considered at an annual meeting without the purpose of the meeting having been
specified in the notice. Failure to hold an annual meeting does not invalidate
the Corporation's existence or affect any otherwise valid corporate acts.
SECTION 1.02. SPECIAL MEETING. At any time in the interval between annual
meetings, a special meeting of the stockholders may be called by the Chairman of
the Board or the President or by a majority of the Board of Directors by vote at
a meeting or in writing (addressed to the Secretary of the Corporation) with or
without a meeting. Special meetings of the stockholders shall be called by the
Secretary at the request of stockholders only on the written request of
stockholders entitled to cast at least a majority of all the votes entitled to
be cast at the meeting. A request for a special meeting shall state the purpose
of the meeting and the matters proposed to be acted on at it. The Secretary
shall inform the stockholders who make the request of the reasonably estimated
costs of preparing and mailing a notice of the meeting and, on payment of these
costs to the Corporation, notify each stockholder entitled to notice of the
meeting.
SECTION 1.03. PLACE OF MEETINGS. Meetings of stockholders shall be held
at such place in the United States as is set from time to time by the Board of
Directors.
SECTION 1.04. NOTICE OF MEETINGS; WAIVER OF NOTICE. Not less than ten nor
more than 90 days before each stockholders' meeting, the Secretary shall give
written notice of the meeting to each stockholder entitled to vote at the
meeting and each other stockholder entitled to notice of the meeting. The
notice shall state the time and place of the meeting and, if the meeting is a
special meeting or notice of the purpose is required by statute, the purpose of
the meeting. Notice is given to a stockholder when it is personally delivered
to him or her, left at his or her residence or usual place of business, or
mailed to him or her at his or her address as it appears on the records of the
Corporation. Notwithstanding the foregoing provisions, each person who is
entitled to notice waives notice if he or she before or after the meeting signs
a waiver of the
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notice which is filed with the records of stockholders' meetings, or is present
at the meeting in person or by proxy.
SECTION 1.05. QUORUM; VOTING. Unless any statute or the Charter provides
otherwise, at a meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to be cast at
the meeting constitutes a quorum, and a majority of all the votes cast at a
meeting at which a quorum is present is sufficient to approve any matter which
properly comes before the meeting, except that a plurality of all the votes cast
at a meeting at which a quorum is present is sufficient to elect a director.
SECTION 1.06. ADJOURNMENTS. Whether or not a quorum is present, a meeting
of stockholders convened on the date for which it was called may be adjourned
from time to time without further notice by a majority vote of the stockholders
present in person or by proxy to a date not more than 120 days after the
original record date. Any business which might have been transacted at the
meeting as originally notified may be deferred and transacted at any such
adjourned meeting at which a quorum shall be present.
SECTION 1.07. GENERAL RIGHT TO VOTE; PROXIES. Unless the Charter provides
for a greater or lesser number of votes per share or limits or denies voting
rights, each outstanding share of stock, regardless of class, is entitled to one
vote on each matter submitted to a vote at a meeting of stockholders. In all
elections for directors, each share of stock may be voted for as many
individuals as there are directors to be elected and for whose election the
share is entitled to be voted. A stockholder may vote the stock the stockholder
owns of record either in person or by proxy. A stockholder may sign a writing
authorizing another person to act as proxy. Signing may be accomplished by the
stockholder or the stockholder's authorized agent signing the writing or causing
the stockholder's signature to be affixed to the writing by any reasonable
means, including facsimile signature. A stockholder may authorize another
person to act as proxy by transmitting, or authorizing the transmission of, a
telegram, cablegram, datagram, or other means of electronic transmission to the
person authorized to act as proxy or to a proxy solicitation firm, proxy support
service organization, or other person authorized by the person who will act as
proxy to receive the transmission. Unless a proxy provides otherwise, it is not
valid more than 11 months after its date. A proxy is revocable by a stockholder
at any time without condition or qualification unless the proxy states that it
is irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for so long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the stock to be voted under
the proxy or another general interest in the Corporation or its assets or
liabilities.
SECTION 1.08. LIST OF STOCKHOLDERS. At each meeting of stockholders, a
full, true and complete list of all stockholders entitled to vote at such
meeting, showing the number and class of shares held by each and certified by
the transfer agent for such class or by the Secretary, shall be furnished by the
Secretary.
SECTION 1.09. CONDUCT OF BUSINESS AND VOTING. At all meetings of
stockholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all
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questions touching the qualification of voters and the validity of proxies, the
acceptance or rejection of votes and procedures for the conduct of business not
otherwise specified by these By-Laws, the Charter or law, shall be decided or
determined by the chairman of the meeting. If demanded by stockholders, present
in person or by proxy, entitled to cast 10% in number of votes entitled to be
cast, or if ordered by the chairman, the vote upon any election or question
shall be taken by ballot and, upon like demand or order, the voting shall be
conducted by two inspectors, in which event the proxies and ballots shall be
received, and all questions touching the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided,
by such inspectors. Unless so demanded or ordered, no vote need be by ballot
and voting need not be conducted by inspectors. The stockholders at any meeting
may choose an inspector or inspectors to act at such meeting, and in default of
such election the chairman of the meeting may appoint an inspector or
inspectors. No candidate for election as a director at a meeting shall serve as
an inspector thereat.
SECTION 1.10. INFORMAL ACTION BY STOCKHOLDERS. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if there is filed with the records of stockholders meetings an unanimous
written consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter and a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled to
vote at it.
SECTION 1.11. MEETING BY CONFERENCE TELEPHONE. Stockholders may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. FUNCTION OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred on or reserved to the stockholders by statute or
by the Charter or By-Laws.
SECTION 2.02. NUMBER OF DIRECTORS. The Corporation shall have at least
three directors; provided that, if there is no stock outstanding, the number of
Directors may be less than three but not less than one, and, if there is stock
outstanding and so long as there are less than three stockholders, the number of
Directors may be less than three but not less than the number of stockholders.
The Corporation shall have the number of directors provided in the Charter until
changed as herein provided. A majority of the entire Board of Directors may
alter the number of directors set by the Charter to not exceeding 25 nor less
than the minimum number then permitted herein, but the action may not affect the
tenure of office of any director.
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SECTION 2.03. ELECTION AND TENURE OF DIRECTORS. Subject to the rights of
the holders of any class of stock separately entitled to elect one or more
directors, at each annual meeting, the stockholders shall elect directors to
hold office until the next annual meeting and until their successors are elected
and qualify.
SECTION 2.04. REMOVAL OF DIRECTOR. Unless statute or the Charter provides
otherwise, the stockholders may remove any director, with or without cause, by
the affirmative vote of a majority of all the votes entitled to be cast for the
election of directors.
SECTION 2.05. VACANCY ON BOARD OF DIRECTORS. Subject to the rights of the
holders of any class of stock separately entitled to elect one or more
directors, the stockholders may elect a successor to fill a vacancy on the Board
of Directors which results from the removal of a director. A director elected
by the stockholders to fill a vacancy which results from the removal of a
director serves for the balance of the term of the removed director. Subject to
the rights of the holders of any class of stock separately entitled to elect one
or more directors, a majority of the remaining directors, whether or not
sufficient to constitute a quorum, may fill a vacancy on the Board of Directors
which results from any cause except an increase in the number of directors, and
a majority of the entire Board of Directors may fill a vacancy which results
from an increase in the number of directors. A director elected by the Board of
Directors to fill a vacancy serves until the next annual meeting of stockholders
and until his or her successor is elected and qualifies.
SECTION 2.06. REGULAR MEETINGS. After each meeting of stockholders at
which directors shall have been elected, the Board of Directors shall meet as
soon thereafter as practicable for the purpose of organization and the
transaction of other business. In the event that no other time and place are
specified by resolution of the Board of Directors or announced by the President
or the Chairman at such stockholders meeting, the Board of Directors shall meet
immediately following the close of, and at the place of, such stockholders
meeting. Any other regular meeting of the Board of Directors shall be held on
such date and time and at such place as may be designated from time to time by
the Board of Directors. No notice of such meeting following a stockholders
meeting or any other regular meeting shall be necessary if held as hereinabove
provided.
SECTION 2.07. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or the
President or by a majority of the Board of Directors by vote at a meeting, or in
writing with or without a meeting. A special meeting of the Board of Directors
shall be held on such date and at any place as may be designated from time to
time by the Board of Directors. In the absence of designation such meeting
shall be held at such place as may be designated in the call.
SECTION 2.08. NOTICE OF MEETING. Except as provided in Section 2.06, the
Secretary shall give notice to each director of each regular and special meeting
of the Board of Directors. The notice shall state the time and place of the
meeting. Notice is given to a director when it is delivered personally to him
or her, left at his or her residence or usual place of business, or sent
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by telegraph, facsimile transmission or telephone, at least 24 hours before the
time of the meeting or, in the alternative by mail to his or her address as it
shall appear on the records of the Corporation, at least 72 hours before the
time of the meeting. Unless these By-Laws or a resolution of the Board of
Directors provides otherwise, the notice need not state the business to be
transacted at or the purposes of any regular or special meeting of the Board of
Directors. No notice of any meeting of the Board of Directors need be given to
any director who attends except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened, or to any director who, in writing
executed and filed with the records of the meeting either before or after the
holding thereof, waives such notice. Any meeting of the Board of Directors,
regular or special, may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement.
SECTION 2.09. QUORUM; ACTION BY DIRECTORS. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business. In the
absence of a quorum, the directors present by majority vote and without notice
other than by announcement may adjourn the meeting from time to time until a
quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally notified. Unless statute or the Charter or By-Laws
requires a greater proportion, the action of a majority of the directors present
at a meeting at which a quorum is present is action of the Board of Directors.
Any action required or permitted to be taken at a meeting of the Board of
Directors may be taken without a meeting, if an unanimous written consent which
sets forth the action is signed by each member of the Board of Directors and
filed with the minutes of proceedings of the Board of Directors.
SECTION 2.10. MEETING BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
SECTION 2.11. COMPENSATION. By resolution of the Board of Directors a
fixed sum and expenses, if any, for attendance at each regular or special
meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. Directors who are full-time employees of
the Corporation need not be paid for attendance at meetings of the Board of
Directors or committees thereof for which fees are paid to other directors. A
director who serves the Corporation in any other capacity also may receive
compensation for such other services, pursuant to a resolution of the directors.
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ARTICLE III.
COMMITTEES
SECTION 3.01. COMMITTEES. The Board of Directors may appoint from among
its members an Executive Committee, an Audit Committee, a Compensation
Committee, and other committees composed of one or more directors and delegate
to these committees any of the powers of the Board of Directors, except the
power to authorize dividends on stock, elect directors, issue stock other than
as provided in the next sentence, recommend to the stockholders any action which
requires stockholder approval, amend these By-Laws, or approve any merger or
share exchange which does not require stockholder approval. If the Board of
Directors has given general authorization for the issuance of stock providing
for or establishing a method or procedure for determining the maximum number of
shares to be issued, a committee of the Board of Directors, in accordance with
that general authorization or any stock option or other plan or program adopted
by the Board of Directors, may authorize or fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
SECTION 3.02. COMMITTEE PROCEDURE. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of the
committee. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if an unanimous written consent which
sets forth the action is signed by each member of the committee and filed with
the minutes of the committee. The members of a committee may conduct any
meeting thereof by conference telephone in accordance with the provisions of
Section 2.10.
SECTION 3.03. EMERGENCY. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors and officers as contemplated by the
Charter and these By-Laws, any two or more available members of the then
incumbent Executive Committee shall constitute a quorum of that Committee for
the full conduct and management of the affairs and business of the Corporation
in accordance with the provisions of Section 3.01. In the event of the
unavailability, at such time, of a minimum of two members of the then incumbent
Executive Committee, the available directors shall elect an Executive Committee
consisting of any two members of the Board of Directors, whether or not they be
officers of the Corporation, which two members shall constitute the Executive
Committee for the full conduct and management of the affairs of the Corporation
in accordance with the foregoing provisions of this Section. This Section shall
be subject to implementation by resolution of the Board of Directors passed from
time to time for that purpose, and any provisions of these By-Laws (other than
this Section) and any resolutions which are contrary to the provisions of this
Section or to the provisions of any such
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implementary resolutions shall be suspended until it shall be determined by any
interim Executive Committee acting under this Section that it shall be to the
advantage of the Corporation to resume the conduct and management of its affairs
and business under all the other provisions of these By-Laws.
ARTICLE IV.
OFFICERS
SECTION 4.01. EXECUTIVE AND OTHER OFFICERS. The Corporation shall have a
President, a Secretary, and a Treasurer. It may also have a Chairman of the
Board. The Board of Directors shall designate who shall serve as chief
executive officer, who shall have general supervision of the business and
affairs of the Corporation, and may designate a chief operating officer, who
shall have supervision of the operations of the Corporation. In the absence of
any designation the Chairman of the Board, if there be one, shall serve as chief
executive officer and the President shall serve as chief operating officer. In
the absence of the Chairman of the Board, or if there be none, the President
shall be the chief executive officer. The same person may hold both offices.
The Corporation may also have one or more Vice-Presidents, assistant officers,
and subordinate officers as may be established by the Board of Directors. A
person may hold more than one office in the Corporation except that no person
may serve concurrently as both President and Vice-President of the Corporation.
The Chairman of the Board shall be a director, and the other officers may be
directors.
SECTION 4.02. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one be
elected, shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present. Unless otherwise specified by
the Board of Directors, he or she shall be the chief executive officer of the
Corporation. In general, he or she shall perform such duties as are customarily
performed by the chief executive officer of a corporation and may perform any
duties of the President and shall perform such other duties and have such other
powers as are from time to time assigned to him or her by the Board of
Directors.
SECTION 4.03. PRESIDENT. Unless otherwise provided by resolution of the
Board of Directors, the President, in the absence of the Chairman of the Board,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he or she shall be present. Unless otherwise specified by the Board of
Directors, the President shall be the chief operating officer of the Corporation
and perform the duties customarily performed by chief operating officers. He or
she may execute, in the name of the Corporation, all authorized deeds,
mortgages, bonds, contracts or other instruments, except in cases in which the
signing and execution thereof shall have been expressly delegated to some other
officer or agent of the Corporation. In general, he or she shall perform such
other duties customarily performed by a president of a corporation and shall
perform such other duties and have such other powers as are from time to time
assigned to him or her by the Board of Directors or the chief executive officer
of the Corporation.
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SECTION 4.04. VICE-PRESIDENTS. The Vice-President or Vice-Presidents, at
the request of the chief executive officer or the President, or in the
President's absence or during his or her inability to act, shall perform the
duties and exercise the functions of the President, and when so acting shall
have the powers of the President. If there be more than one Vice-President, the
Board of Directors may determine which one or more of the Vice-Presidents shall
perform any of such duties or exercise any of such functions, or if such
determination is not made by the Board of Directors, the chief executive
officer, or the President may make such determination; otherwise any of the
Vice-Presidents may perform any of such duties or exercise any of such
functions. Each Vice-President shall perform such other duties and have such
other powers, and have such additional descriptive designations in their titles
(if any), as are from time to time assigned to them by the Board of Directors,
the chief executive officer, or the President.
SECTION 4.05. SECRETARY. The Secretary shall keep the minutes of the
meetings of the stockholders, of the Board of Directors and of any committees,
in books provided for the purpose; he or she shall see that all notices are duly
given in accordance with the provisions of these By-Laws or as required by law;
he or she shall be custodian of the records of the Corporation; he or she may
witness any document on behalf of the Corporation, the execution of which is
duly authorized, see that the corporate seal is affixed where such document is
required or desired to be under its seal, and, when so affixed, may attest the
same. In general, he or she shall perform such other duties customarily
performed by a secretary of a corporation, and shall perform such other duties
and have such other powers as are from time to time assigned to him or her by
the Board of Directors, the chief executive officer, or the President.
SECTION 4.06. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the Board of
Directors; he or she shall render to the President and to the Board of
Directors, whenever requested, an account of the financial condition of the
Corporation. In general, he or she shall perform such other duties customarily
performed by a treasurer of a corporation, and shall perform such other duties
and have such other powers as are from time to time assigned to him or her by
the Board of Directors, the chief executive officer, or the President.
SECTION 4.07. ASSISTANT AND SUBORDINATE OFFICERS. The assistant and
subordinate officers of the Corporation are all officers below the office of
Vice-President, Secretary, or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board of
Directors, the chief executive officer, or the President.
SECTION 4.08. ELECTION, TENURE AND REMOVAL OF OFFICERS. The Board of
Directors shall elect the officers of the Corporation. The Board of Directors
may from time to time authorize any committee or officer to appoint assistant
and subordinate officers. Election or appointment of an officer, employee or
agent shall not of itself create contract rights. All officers shall be
appointed to hold their offices, respectively, during the pleasure of the Board
of Directors. The Board of Directors (or, as to any assistant or subordinate
officer, any committee
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or officer authorized by the Board of Directors) may remove an officer at any
time. The removal of an officer does not prejudice any of his or her contract
rights. The Board of Directors (or, as to any assistant or subordinate officer,
any committee or officer authorized by the Board of Directors) may fill a
vacancy which occurs in any office for the unexpired portion of the term.
SECTION 4.09. COMPENSATION. The Board of Directors shall have power to
fix the salaries and other compensation and remuneration, of whatever kind, of
all officers of the Corporation. No officer shall be prevented from receiving
such salary by reason of the fact that he or she is also a director of the
Corporation. The Board of Directors may authorize any committee or officer,
upon whom the power of appointing assistant and subordinate officers may have
been conferred, to fix the salaries, compensation and remuneration of such
assistant and subordinate officer.
ARTICLE V.
STOCK
SECTION 5.01. CERTIFICATES FOR STOCK. Each stockholder is entitled to
certificates which represent and certify the shares of stock he or she holds in
the Corporation. Each stock certificate shall include on its face the name of
the Corporation, the name of the stockholder or other person to whom it is
issued, and the class of stock and number of shares it represents. It shall
also include on its face or back (a) a statement of any restrictions on
transferability and (b) a statement which provides in substance that the
Corporation will furnish to any stockholder on request and without charge a full
statement of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue, of the differences in the relative rights
and preferences between the shares of each series of a preferred or special
class in series which the Corporation is authorized to issue, to the extent they
have been set, and of the authority of the Board of Directors to set the
relative rights and preferences of subsequent series of a preferred or special
class of stock and any restrictions on transferability. Such request may be
made to the Secretary or to its transfer agent. It shall be in such form, not
inconsistent with law or with the Charter, as shall be approved by the Board of
Directors or any officer or officers designated for such purpose by resolution
of the Board of Directors. Each stock certificate shall be signed by the
Chairman of the Board, the President, or a Vice-President, and countersigned by
the Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer.
Each certificate may be sealed with the actual corporate seal or a facsimile of
it or in any other form and the signatures may be either manual or facsimile
signatures. A certificate is valid and may be issued whether or not an officer
who signed it is still an officer when it is issued. A certificate may not be
issued until the stock represented by it is fully paid.
SECTION 5.02. TRANSFERS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and
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registration of certificates of stock; and may appoint transfer agents and
registrars thereof. The duties of transfer agent and registrar may be combined.
SECTION 5.03. RECORD DATES OR CLOSING OF TRANSFER BOOKS. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be prior to the close of business on the day
the record date is fixed nor, subject to Section 1.06, more than 90 days before
the date on which the action requiring the determination will be taken; the
transfer books may not be closed for a period longer than 20 days; and, in the
case of a meeting of stockholders, the record date or the closing of the
transfer books shall be at least ten days before the date of the meeting.
SECTION 5.04. STOCK LEDGER. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of
the stock ledger shall be kept at the offices of a transfer agent for the
particular class of stock, or, if none, at the principal office in the State of
Maryland or the principal executive offices of the Corporation.
SECTION 5.05. CERTIFICATION OF BENEFICIAL OWNERS. The Board of Directors
may adopt by resolution a procedure by which a stockholder of the Corporation
may certify in writing to the Corporation that any shares of stock registered in
the name of the stockholder are held for the account of a specified person other
than the stockholder. The resolution shall set forth the class of stockholders
who may certify; the purpose for which the certification may be made; the form
of certification and the information to be contained in it; if the certification
is with respect to a record date or closing of the stock transfer books, the
time after the record date or closing of the stock transfer books within which
the certification must be received by the Corporation; and any other provisions
with respect to the procedure which the Board of Directors considers necessary
or desirable. On receipt of a certification which complies with the procedure
adopted by the Board of Directors in accordance with this Section, the person
specified in the certification is, for the purpose set forth in the
certification, the holder of record of the specified stock in place of the
stockholder who makes the certification.
SECTION 5.06. LOST STOCK CERTIFICATES. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen, or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may require the owner of the certificate to give bond, with sufficient
surety, to indemnify the Corporation against any loss or claim arising as a
result of the issuance of a new certificate. In their discretion, the Board of
Directors or such officer or officers may refuse to issue such new certificate
save upon the order of some court having jurisdiction in the premises.
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<PAGE>
SECTION 5.07. EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE. The
provisions of Sections 3-701 to 3-709 of the Corporations and Associations
Article of the Annotated Code of Maryland shall not apply to any share of the
capital stock of the Corporation. Such shares of capital stock are exempted
from such Sections of the Annotated Code of Maryland to the fullest extent
permitted by Maryland law.
ARTICLE VI.
FINANCE
SECTION 6.01. CHECKS, DRAFTS, ETC. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the name
of the Corporation, shall, unless otherwise provided by resolution of the Board
of Directors, be signed by the Chairman of the Board, the President, a
Vice-President, an Assistant Vice-President, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary.
SECTION 6.02. ANNUAL STATEMENT OF AFFAIRS. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Corporation, to include a balance sheet and a financial statement
of operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of the stockholders and, within 20 days after
the meeting, placed on file at the Corporation's principal office.
SECTION 6.03. FISCAL YEAR. The fiscal year of the Corporation shall be
the 12 calendar months period ending December 31 in each year, unless otherwise
provided by the Board of Directors.
SECTION 6.04. DIVIDENDS. If declared by the Board of Directors at any
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Charter.
ARTICLE VII.
INDEMNIFICATION
SECTION 7.01. PROCEDURE. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made promptly, and
in any event within 60 days, upon the written request of the director or officer
entitled to seek indemnification (the "Indemnified Party"). The right to
indemnification and advances hereunder shall be enforceable by the Indemnified
Party in any court of competent jurisdiction, if (i) the Corporation denies such
request, in whole or in part, or (ii) no disposition thereof is made within 60
days. The Indemnified Party's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be reimbursed by
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<PAGE>
the Corporation. It shall be a defense to any action for advance for expenses
that (a) a determination has been made that the facts then known to those making
the determination would preclude indemnification or (b) the Corporation has not
received both (i) an undertaking as required by law to repay such advances in
the event it shall ultimately be determined that the standard of conduct has not
been met and (ii) a written affirmation by the Indemnified Party of such
Indemnified Party's good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met.
SECTION 7.02. EXCLUSIVITY, ETC. The indemnification and advance of
expenses provided by the Charter and these By-Laws shall not be deemed exclusive
of any other rights to which a person seeking indemnification or advance of
expenses may be entitled under any law (common or statutory), or any agreement,
vote of stockholders or disinterested directors or other provision that is
consistent with law, both as to action in his or her official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, shall continue in respect of all events occurring
while a person was a director or officer after such person has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such person. The Corporation shall not be
liable for any payment under this By-Law in connection with a claim made by a
director or officer to the extent such director or officer has otherwise
actually received payment under insurance policy, agreement, vote or otherwise,
of the amounts otherwise indemnifiable hereunder. All rights to indemnification
and advance of expenses under the Charter of the Corporation and hereunder shall
be deemed to be a contract between the Corporation and each director or officer
of the Corporation who serves or served in such capacity at any time while this
By-Law is in effect. Nothing herein shall prevent the amendment of this By-Law,
provided that no such amendment shall diminish the rights of any person
hereunder with respect to events occurring or claims made before its adoption or
as to claims made after its adoption in respect of events occurring before its
adoption. Any repeal or modification of this By-Law shall not in any way
diminish any rights to indemnification or advance of expenses of such director
or officer or the obligations of the Corporation arising hereunder with respect
to events occurring, or claims made, while this By-Law or any provision hereof
is in force.
SECTION 7.03. SEVERABILITY; DEFINITIONS. The invalidity or
unenforceability of any provision of this Article VII shall not affect the
validity or enforceability of any other provision hereof. The phrase "this
By-Law" in this Article VII means this Article VII in its entirety.
ARTICLE VIII.
SUNDRY PROVISIONS
SECTION 8.01. BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors.
The books and records of the Corporation may be
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<PAGE>
in written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. Minutes shall be recorded in
written form but may be maintained in the form of a reproduction. The original
or a certified copy of these By-Laws shall be kept at the principal office of
the Corporation.
SECTION 8.02. CORPORATE SEAL. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the charge
of the Secretary. The Board of Directors may authorize one or more duplicate
seals and provide for the custody thereof. If the Corporation is required to
place its corporate seal to a document, it is sufficient to meet the requirement
of any law, rule, or regulation relating to a corporate seal to place the word
"(seal)" adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
SECTION 8.03. BONDS. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his or her duties, with one or more
sureties and in such amount as may be satisfactory to the Board of Directors.
SECTION 8.04. VOTING STOCK IN OTHER CORPORATIONS. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice-President, or a proxy appointed by either of
them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
SECTION 8.05. MAIL. Any notice or other document which is required by
these By-Laws to be mailed shall be deposited in the United States mails,
postage prepaid.
SECTION 8.06. EXECUTION OF DOCUMENTS. A person who holds more than one
office in the Corporation may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer.
SECTION 8.07. AMENDMENTS. Subject to the special provisions of Section
2.02, (a) any and all provisions of these By-Laws may be altered or repealed and
new by-laws may be adopted at any annual meeting of the stockholders, or at any
special meeting called for that purpose, and (b) the Board of Directors shall
have the power, at any regular or special meeting thereof, to make and adopt new
by-laws, or to amend, alter or repeal any of these By-Laws of the Corporation.
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<PAGE>
Exhibit 4.3
THE BOYDS COLLECTION, LTD.
as Issuer
and
THE BANK OF NEW YORK
as Trustee
---------------------
INDENTURE
Dated as of April 21, 1998
---------------------
$165,000,000
9% Senior Subordinated Notes due 2008
9% Series B Senior Subordinated Notes due 2008
<PAGE>
THE BOYDS COLLECTION, LTD.*
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF APRIL 21, 1998
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
Section 310(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 608
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . 608
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
Section 311. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 702
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
Section 314(a)(4). . . . . . . . . . . . . . . . . . . . . . . . 1010(a)
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . 102
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . .601(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . .601(b)
(d) . . . . . . . . . . . . . . . . . . . . . . . 601(c), 603
Section 316(a)
(last sentence). . . . . . . . . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . .502, 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . 513
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . .104(d)
Section 317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . .1003
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
- ------------------------
* Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS *
PAGE
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION . . . . . . . . . . . 2
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . 27
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . 28
SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . . 28
SECTION 105. Notices, Etc., to Trustee, the Company and any Guarantor. 30
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . 30
SECTION 107. Effect of Headings and Table of Contents. . . . . . . . . 31
SECTION 108. Successors and Assigns. . . . . . . . . . . . . . . . . . 31
SECTION 109. Separability Clause . . . . . . . . . . . . . . . . . . . 31
SECTION 110. Benefits of Indenture . . . . . . . . . . . . . . . . . . 31
SECTION 111. Governing Law . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 112. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . 32
SECTION 113. No Personal Liability of Directors, Officers,
Employees, Stockholders or Incorporators. . . . . . . . . .32
SECTION 114. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE TWO
NOTE FORMS . . . . . . . . . . . . . . 32
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . 32
SECTION 202. Restrictive Legends . . . . . . . . . . . . . . . . . . . 34
SECTION 203. Form of Certificate to Be Delivered upon Termination of
Restricted Period . . . . . . . . . . . . . . . . . . . . 37
SECTION 204. Form of Face of Note. . . . . . . . . . . . . . . . . . . 38
SECTION 205. Form of Reverse of Note . . . . . . . . . . . . . . . . . 42
SECTION 206. Form of Trustee's Certificate of Authentication . . . . . 51
- ------------------------
* Note: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.
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<PAGE>
ARTICLE THREE
THE NOTES. . . . . . . . . . . . . . . 51
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . 51
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 303. Execution, Authentication, Delivery and Dating. . . . . . 53
SECTION 304. Temporary Notes . . . . . . . . . . . . . . . . . . . . . 54
SECTION 305. Registration, Registration of Transfer and Exchange . . . 55
SECTION 306. Book-Entry Provisions for the Global Note . . . . . . . . 56
SECTION 307. Special Transfer Provisions . . . . . . . . . . . . . . . 57
SECTION 308. Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors . 60
SECTION 309. Form of Certificate to Be Delivered in Connection with
Transfers of an Offshore Global Note. . . . . . . . . . . 63
SECTION 310. Mutilated, Destroyed, Lost and Stolen Notes . . . . . . . 64
SECTION 311. Payment of Interest; Interest Rights Preserved. . . . . . 65
SECTION 312. Persons Deemed Owners . . . . . . . . . . . . . . . . . . 66
SECTION 313. Cancellation. . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 314. Computation of Interest . . . . . . . . . . . . . . . . . 67
SECTION 315. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE FOUR
SATISFACTION AND DISCHARGE . . . . . . . . . . 67
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . 67
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . 69
ARTICLE FIVE
REMEDIES. . . . . . . . . . . . . . . 70
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . 70
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . 71
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee. . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . 74
SECTION 505. Trustee May Enforce Claims Without Possession of Notes. . 74
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . 75
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . 75
SECTION 508. Unconditional Right of Holders to Receive Principal,
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<PAGE>
Premium and Interest. . . . . . . . . . . . . . . . . . . 76
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . 76
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . 77
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . 77
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . 77
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . 78
SECTION 514. Waiver of Stay or Extension Laws. . . . . . . . . . . . . 78
SECTION 515. Undertaking for Costs . . . . . . . . . . . . . . . . . . 79
ARTICLE SIX
THE TRUSTEE . . . . . . . . . . . . . . 79
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . 79
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . . . . . . 80
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . 81
SECTION 604. Trustee Not Responsible for Recitals or Issuance of Notes 82
SECTION 605. May Hold Notes. . . . . . . . . . . . . . . . . . . . . . 83
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . 83
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . 83
SECTION 608. Corporate Trustee Required; Eligibility . . . . . . . . . 84
SECTION 609. Resignation and Removal; Appointment of Successor . . . . 85
SECTION 610. Acceptance of Appointment by Successor. . . . . . . . . . 86
SECTION 611. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 612. Trustee's Application for Instructions from the Company . 87
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY. . . . . 87
SECTION 701. Company to Furnish Trustee Names and Addresses. . . . . . 87
SECTION 702. Disclosure of Names and Addresses of Holders. . . . . . . 88
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . 88
ARTICLE EIGHT
MERGER, CONSOLIDATION, OR SALE OF ASSETS. . . . . . . 88
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. . . 88
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . 90
ARTICLE NINE
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SUPPLEMENTS AND AMENDMENTS TO INDENTURE . . . . . . . 90
SECTION 901. Supplemental Indentures Without Consent of Holders. . . . 90
SECTION 902. Supplemental Indentures with Consent of Holders . . . . . 91
SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . 92
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . 93
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . 93
SECTION 906. Reference in Notes to Supplemental Indentures . . . . . . 93
SECTION 907. Notice of Supplemental Indentures . . . . . . . . . . . . 93
SECTION 908. Effect on Senior Indebtedness . . . . . . . . . . . . . . 93
ARTICLE TEN
COVENANTS. . . . . . . . . . . . . . . 94
SECTION 1001. Payment of Principal, Premium, if Any, and Interest. . . 94
SECTION 1002. Maintenance of Office or Agency. . . . . . . . . . . . . 94
SECTION 1003. Money for Note Payments to Be Held in Trust. . . . . . . 95
SECTION 1004. Corporate Existence. . . . . . . . . . . . . . . . . . . 96
SECTION 1005. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 1006. Maintenance of Properties. . . . . . . . . . . . . . . . 97
SECTION 1007. Insurance. . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 1008. Compliance with Laws.. . . . . . . . . . . . . . . . . . 97
SECTION 1009. Limitation on Restricted Payments. . . . . . . . . . . . 97
SECTION 1010. Limitation on Incurrence of Indebtedness and Issuance
of Disqualified Stock. . . . . . . . . . . . . . . . . . 102
SECTION 1011. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 1012. Transactions with Affiliates.. . . . . . . . . . . . . . 107
SECTION 1013. Dividend and Other Payment Restrictions Affecting
Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . 108
SECTION 1014. Limitation on Guarantees of Indebtedness by
Restricted Subsidiaries. . . . . . . . . . . . . . . . . 110
SECTION 1015. Limitation on Other Senior Subordinated Indebtedness . . 112
SECTION 1016. Purchase of Notes upon a Change of Control . . . . . . . 112
SECTION 1017. Asset Sales. . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 1018. Compliance Certificate . . . . . . . . . . . . . . . . . 116
SECTION 1019. Reports. . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 1020. Further Assurances . . . . . . . . . . . . . . . . . . . 117
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<PAGE>
ARTICLE ELEVEN
REDEMPTION OF NOTES . . . . . . . . . . . . 117
SECTION 1101. Redemption . . . . . . . . . . . . . . . . . . . . . . . 117
SECTION 1102. Applicability of Article . . . . . . . . . . . . . . . . 117
SECTION 1103. Election to Redeem; Notice to Trustee. . . . . . . . . . 118
SECTION 1104. Selection by Trustee of Notes to Be Redeemed . . . . . . 118
SECTION 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . 118
SECTION 1106. Deposit of Redemption Price. . . . . . . . . . . . . . . 120
SECTION 1107. Notes Payable on Redemption Date . . . . . . . . . . . . 120
SECTION 1108. Notes Redeemed in Part . . . . . . . . . . . . . . . . . 120
ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . 121
SECTION 1201. Company's Option to Effect Legal Defeasance or
Covenant Defeasance. . . . . . . . . . . . . . . . . . . 121
SECTION 1202. Legal Defeasance and Discharge . . . . . . . . . . . . . 121
SECTION 1203. Covenant Defeasance. . . . . . . . . . . . . . . . . . . 122
SECTION 1204. Conditions to Legal Defeasance or Covenant Defeasance. . 122
SECTION 1205. Deposited Money and U.S. Government Securities to Be
Held in Trust; Other Miscellaneous Provisions. . . . . . 124
SECTION 1206. Reinstatement. . . . . . . . . . . . . . . . . . . . . . 124
ARTICLE THIRTEEN
SUBORDINATION OF NOTES . . . . . . . . . . . 125
SECTION 1301. Notes Subordinate to Senior Indebtedness . . . . . . . . 125
SECTION 1302. Payment over of Proceeds upon Dissolution, Etc.. . . . . 125
SECTION 1303. Suspension of Payment When Senior Indebtedness in Default126
SECTION 1304. Acceleration of Notes. . . . . . . . . . . . . . . . . . 127
SECTION 1305. When Distribution Must Be Paid Over. . . . . . . . . . . 127
SECTION 1306. Notice by Company. . . . . . . . . . . . . . . . . . . . 128
SECTION 1307. Payment Permitted If No Default. . . . . . . . . . . . . 128
SECTION 1308. Subrogation to Rights of Holders of Senior Indebtedness. 128
SECTION 1309. Provisions Solely to Define Relative Rights. . . . . . . 129
SECTION 1310. Trustee to Effectuate Subordination. . . . . . . . . . . 129
SECTION 1311. Subordination May Not Be Impaired by Company . . . . . . 129
SECTION 1312. Distribution or Notice to Representative . . . . . . . . 129
SECTION 1313. Notice to Trustee. . . . . . . . . . . . . . . . . . . . 130
SECTION 1314. Reliance on Judicial Order or Certificate of
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Liquidating Agent. . . . . . . . . . . . . . . . . . . . 131
SECTION 1315. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustees' Rights . . . . . . . . . . . . 131
SECTION 1316. Article Applicable to Paying Agents. . . . . . . . . . . 131
SECTION 1317. No Suspension of Remedies. . . . . . . . . . . . . . . . 132
SECTION 1318. Modification of Terms of Senior Indebtedness . . . . . . 132
SECTION 1319. Certain Terms. . . . . . . . . . . . . . . . . . . . . . 132
SECTION 1320. Trust Moneys Not Subordinated. . . . . . . . . . . . . . 132
vi
<PAGE>
INDENTURE, dated as of April 21, 1998, between The Boyds Collection,
Ltd., a corporation duly organized and existing under the laws of the State of
Maryland (the "COMPANY"), having its principal office at 350 South Street,
McSherrystown, Pennsylvania 17334, and The Bank of New York, a New York banking
corporation, as trustee (the "TRUSTEE").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issuance of its 9%
Senior Subordinated Notes due 2008 (the "INITIAL NOTES"), and 9% Series B Senior
Subordinated Notes due 2008 (the "EXCHANGE NOTES" and, together with the Initial
Notes, the "NOTES") of substantially the tenor and amount hereinafter set forth,
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
Upon issuance of the Exchange Notes, if any, or the effectiveness of
the Shelf Registration Statement (as defined herein), this Indenture will be
subject to, and shall be governed by, the provisions of the Trust Indenture Act
of 1939, as amended, that are required or deemed to be part of and to govern
indentures qualified thereunder.
All things necessary have been done to make the Notes, when executed
and duly issued by the Company and authenticated and delivered hereunder by the
Trustee or the Authenticating Agent, the valid obligations of the Company and to
make this Indenture a valid agreement of the Company in accordance with their
and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
<PAGE>
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and words in the singular include the plural as well
as the singular, and words in the plural include the singular as well as
the plural;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, or defined by
Commission rule and not otherwise defined herein have the meanings assigned
to them therein, and the terms "cash transaction" and "self-liquidating
paper", as used in TIA Section 311, shall have the meanings assigned to
them in the rules of the Commission adopted under the Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(e) the word "or" is not exclusive; and
(f) provisions of this Indenture apply to successive events and
transactions.
Certain terms, used principally in Articles Two, Ten, Twelve and
Thirteen, are defined in those Articles.
"ACQUIRED INDEBTEDNESS" 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 Restricted 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
<PAGE>
3
becoming a Restricted Subsidiary of such specified Person, and (ii) Indebtedness
secured by a Lien encumbering any asset acquired by such specified Person.
"ACT," when used with respect to any Holder, has the meaning set forth
in Section 104.
"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, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"AGENT" means any Paying Agent, Authenticating Agent and Note
Registrar under this Indenture.
"APPLICABLE PREMIUM" means, with respect to any Note on any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at such Redemption Date of (1) the redemption
price of such Note at May 15, 2003 (such redemption price being set forth as
described in the Notes) plus (2) all required interest payments due on such Note
through May 15, 2003 (excluding accrued but unpaid interest and Liquidated
Damages, if any), computed using a discount rate equal to the Treasury Rate on
such Redemption Date plus 75 basis points over (B) the principal amount of such
Note.
"ASSET SALE" means (i) the sale, conveyance, transfer or other
disposition (whether in a single transaction or a series of related
transactions) of property or assets (including by way of a sale and leaseback)
of the Company or any Restricted Subsidiary (each referred to in this definition
as a "DISPOSITION"), other than the Asset Transfer or (ii) the issuance or sale
of Equity Interests of any Restricted Subsidiary (whether in a single
transaction or a series of related transactions), in each case, other than: (a)
a disposition of Cash Equivalents or Investment Grade Securities or obsolete
equipment in the ordinary course of business; (b) the disposition of all or
substantially all of the assets of the Company in a manner permitted pursuant to
the provisions of Section 801 hereof or any disposition that constitutes a
Change of Control pursuant to this Indenture; (c) any Restricted Payment that is
permitted to be made, and is made, under the first paragraph of Section 1009
hereof; (d) any disposition of assets with an aggregate fair market value of
less than $1.0 million; (e) any disposition of property or assets by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Restricted Subsidiary; (f) any exchange of like
property
<PAGE>
4
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, for
use in a Similar Business; (g) any financing transaction with respect to
property built or acquired by the Company or any Restricted Subsidiary after the
Issuance Date including, without limitation, sale-leasebacks and asset
securitizations; (h) foreclosures on assets; (i) sales of accounts receivable,
or participations therein, in connection with any Receivables Facility; and (j)
any sale of Equity Interests in, or Indebtedness or other securities of, an
Unrestricted Subsidiary.
"ASSET TRANSFER" means the transfer of all of the assets of the
Company to a newly-formed Wholly Owned Subsidiary.
"AUTHENTICATING AGENT" means the Person appointed, if any, by the
Trustee as an authenticating agent pursuant to the last paragraph of Section
303.
"BANK AGENT" means Fleet National Bank, in its capacity as
administrative agent under the Credit Facility, and any successor administrative
agent thereunder.
"BANKRUPTCY LAW" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States federal or state or foreign law
relating to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or change
in any such law.
"BOARD OF DIRECTORS" means, with respect to any Person, either the
board of directors of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
are authorized or obligated by law or executive order to close.
"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 or limited
liability company, partnership or membership interests (whether general or
limited) 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.
<PAGE>
5
"CAPITALIZED 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 and reflected as a
liability on a balance sheet (excluding the footnotes thereto) in accordance
with GAAP.
"CASH EQUIVALENTS" means (i) U.S. dollars, (ii) securities issued or
directly and fully guaranteed or insured by the U.S. Government or any agency or
instrumentality thereof, (iii) certificates of deposit, time deposits and
eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any commercial bank having capital
and surplus in excess of $500.0 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date of
acquisition, (vi) investment funds investing 95% of their assets in securities
of the types described in clauses (i)-(v) above, (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's or S&P and (viii) Indebtedness or preferred stock issued by
Persons with a rating of "A" or higher from S&P or "A2" or higher from Moody's.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, 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; or
(ii) the Company becomes aware of (by way of a report or any
other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote,
written notice or otherwise) the acquisition by any Person or group (within
the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or
any successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than the Permitted Holders and
their Related Parties, in a single transaction or in a related series of
transactions, by way of merger, consolidation or other business combination
or purchase of beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision) of 50% or more of the total
voting power of the Voting Stock of the Company.
Notwithstanding the foregoing provisions, the Asset Transfer shall not
be deemed to constitute a Change of Control.
<PAGE>
6
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issuance Date or issued after the Issuance Date and includes, without
limitation, all series and classes of such common stock.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company (i) by its Chairman, a Vice-Chairman, its
President or any Vice President and (ii) by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee;
PROVIDED, HOWEVER, that such written request or order may be signed by any two
of the officers or directors listed in clause (i) above in lieu of being signed
by one of such officers or directors listed in such clause (i) and one of the
officers listed in clause (ii) above.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means with
respect to any Person for any period, the total amount of depreciation and
amortization expense of such Person and its Restricted Subsidiaries for such
period on a consolidated basis and otherwise determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any period, the
sum, without duplication, of: (i) consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, to the extent such expense was
deducted in computing Consolidated Net Income (including amortization of
original issue discount, non-cash interest payments, the interest component of
Capitalized Lease Obligations, and net payments and receipts (if any) pursuant
to Hedging Obligations to the extent included in Consolidated Interest Expense,
excluding amortization of deferred financing fees) and (ii) consolidated
capitalized interest of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued; PROVIDED, HOWEVER, that Receivables Fees shall
be deemed not to constitute Consolidated Interest Expense.
"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, and otherwise determined
in accordance with GAAP; PROVIDED, HOWEVER, that
<PAGE>
7
(i) any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto) shall be excluded, (ii) the Net Income for such period shall
not include the cumulative effect of a change in accounting principles during
such period, (iii) any net after-tax income (loss) from discontinued operations
and any net after-tax gains or losses on disposal of discontinued operations
shall be excluded, (iv) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to asset dispositions other than in the
ordinary course of business (as determined in good faith by the Board of
Directors of the Company) shall be excluded, (v) the Net Income for such period
of any Person that is not a Subsidiary, or is an Unrestricted 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 or other payments paid
in cash (or to the extent converted into cash) to the referent Person or a
Wholly Owned Restricted Subsidiary thereof in respect of such period, (vi) the
Net Income of any Person acquired in a pooling of interests transaction shall
not be included for any period prior to the date of such acquisition and (vii)
the Net Income for such period 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 its Net Income is not at the date of
determination permitted without any prior governmental approval (which has not
been obtained) or, directly or indirectly, by the 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, unless such restriction with respect to the payment of dividends
or in similar distributions has been legally waived.
"CONTINGENT OBLIGATIONS" means, with respect to any Person, any
obligation of such Person guaranteeing any leases, dividends or other
obligations that do not constitute Indebtedness "PRIMARY OBLIGATIONS") of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (A) for the purchase or payment of any such primary obligation or
(B) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, or (iii)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation against loss in respect
thereof.
"CORPORATE TRUST OFFICE" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 101 Barclay Street, Floor 21 West, New York, NY 10286, Att:
Corporate Trust Administration.
<PAGE>
8
"CREDIT FACILITY" means that certain CREDIT AGREEMENT, DATED AS OF
APRIL 21, 1998, BY AND AMONG THE COMPANY, DLJ CAPITAL FUNDING, INC., AS
SYNDICATION AGENT, THE FUJI BANK, LIMITED, NEW YORK BRANCH, AS DOCUMENTATION
AGENT, FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, and the lenders from time
to time party thereto, including any collateral documents, instruments and
agreements executed in connection therewith, and the term Credit Facility shall
also include any amendments, supplements, modifications, extensions, renewals,
restatements or refundings thereof and any credit facilities that replace,
refund or refinance any part of the loans, other credit facilities or
commitments thereunder, including any such replacement, refunding or refinancing
facility that increases the amount borrowable thereunder or alters the maturity
thereof, PROVIDED, HOWEVER, that there shall not be more than one facility at
any one time that constitutes the Credit Facility and, if at any time there is
more than one facility which would constitute the Credit Facility, the Company
will designate to the Trustee which one of such facilities will be the Credit
Facility for purposes of this Indenture.
"CREDIT FACILITIES" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator 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.
"DEFAULTED INTEREST" has the meaning set forth in Section 311.
"DEPOSITARY" means The Depository Trust Company, its nominees and
successors.
"DESIGNATED NONCASH CONSIDERATION" means the fair market value of
noncash consideration received by the Company or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, executed by the principal executive officer
and the principal financial officer of the Company, less the amount of cash or
Cash Equivalents received in connection with a sale of such Designated Noncash
Consideration.
<PAGE>
9
"DESIGNATED PREFERRED STOCK" means preferred stock of the Company
(other than Disqualified Stock) that is issued for cash (other than to a
Restricted Subsidiary) and is so designated as Designated Preferred Stock,
pursuant to an Officers' Certificate executed by the principal executive officer
and the principal financial officer of the Company, on the issuance date
thereof, the cash proceeds of which are excluded from the calculation set forth
in clause (C) of paragraph (a) of Section 1009.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Senior Indebtedness under
the Credit Facility and (ii) any other Senior Indebtedness permitted under this
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the Company as Designated Senior Indebtedness.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital
Stock of such Person which, by its terms (or by the terms of any security into
which it is convertible or for which it is putable or 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, in each case prior to the date 91 days after the
maturity date of the Notes; PROVIDED, HOWEVER, that if such Capital Stock is
issued to any employee or to any plan for the benefit of employees of the
Company or its Subsidiaries or by any such plan to such employees, such Capital
Stock shall not constitute Disqualified Stock solely because it may be required
to be repurchased by the Company in order to satisfy applicable statutory or
regulatory obligations, PROVIDED, FURTHER, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof (or of any
security into which it is convertible or for which it is exchangeable) have the
right to require the issuer to repurchase such Capital Stock (or such security
into which it is convertible or for which it is exchangeable) upon the
occurrence of any of the events constituting an Asset Sale or a Change of
Control shall not constitute Disqualified Stock if such Capital Stock (and all
such securities into which it is convertible or for which it is exchangeable)
provides that the issuer thereof will not repurchase or redeem any such Capital
Stock (or any such security into which it is convertible or for which it is
exchangeable) pursuant to such provisions prior to compliance by the Company
with the provisions of Sections 1016 and 1017 as the case may be.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus (a) provision for
taxes based on income or profits of such Person for such period deducted in
computing Consolidated Net Income, plus (b) Consolidated Interest Expense of
such Person for such period and any Receivables Fees paid by such Person or any
of its Restricted Subsidiaries during such period, in each case to the extent
the same was deducted in calculating such Consolidated Net Income, plus (c)
Consolidated Depreciation and Amortization Expense of such Person for such
period to the extent such depreciation and amortization were deducted in
computing Consolidated Net Income, plus (d) any expenses or
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10
charges related to any Equity Offering, Permitted Investment or Indebtedness
permitted to be incurred by this Indenture (including such expenses or charges
related to the Recapitalization) or any costs incurred in the cancellation of
stock options and, in each case, deducted in such period in computing
Consolidated Net Income, plus (e) the amount of any restructuring charge
deducted in such period in computing Consolidated Net Income, plus (f) without
duplication, any other non-cash charges reducing Consolidated Net Income for
such period (excluding any such charge which requires an accrual of a cash
reserve for anticipated cash charges for any future period), plus (g) the amount
of any minority interest expense deducted in calculating Consolidated Net
Income, less, without duplication (h) non-cash items increasing Consolidated Net
Income of such Person for such period (excluding any items which represent the
reversal of any accrual of, or cash reserve for, anticipated cash charges in any
prior period).
"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).
"EQUITY OFFERING" means any public or private sale of common stock or
preferred stock of the Company (excluding Disqualified Stock), other than (i)
public offerings with respect to the Company's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"EVENT OF DEFAULT" has the meaning set forth in Section 501.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"EXCHANGE NOTES" has the meaning stated in the first recital of this
Indenture and refers to any Exchange Notes containing terms substantially
identical to the Initial Notes (except that (i) such Exchange Notes shall not
contain terms with respect to transfer restrictions and shall be registered
under the Securities Act, and (ii) certain provisions relating to the payment of
Liquidated Damages thereon shall be eliminated) that are issued and exchanged
for the Initial Notes in accordance with the Exchange Offer, as provided for in
the Registration Rights Agreement and this Indenture.
"EXCHANGE OFFER" means the offer by the Company to the Holders of the
Initial Notes to exchange all of the Initial Notes for Exchange Notes, as
provided for in the Registration Rights Agreement.
<PAGE>
11
"EXCHANGE OFFER REGISTRATION STATEMENT" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"EXCLUDED CONTRIBUTIONS" means the net cash proceeds received by the
Company after the closing of the Recapitalization from (i) contributions to its
equity capital other than contributions from the issuance of Disqualified Stock
and (ii) the sale (other than to a Subsidiary or to any Company or Subsidiary
management equity plan or stock option plan or any other management or employee
benefit plan or agreement) of Capital Stock (other than Disqualified Stock) of
the Company, in each case designated as Excluded Contributions pursuant to an
Officers' Certificate executed by the principal executive officer and the
principal financial officer of the Company on the date such capital
contributions are made or the date such Equity Interests are sold, as the case
may be, the cash proceeds of which are excluded from the calculation set forth
in clause (C) of paragraph (a) of Section 1009.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company or its
Restricted Subsidiaries in existence on the Issuance Date, plus interest
accruing thereon, after application of the net proceeds of the sale of the Notes
as described in the Offering Memorandum.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for
any period, the ratio of EBITDA of such Person for such period to the Fixed
Charges of such Person for such period. In the event that the Company or any of
its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than in the case of revolving credit borrowings, in which
case interest expense shall be computed based upon the average daily balance of
such Indebtedness during the applicable period) or issues or redeems preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to 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 period. For purposes of making the
computation referred to above, Investments, acquisitions, dispositions, mergers,
consolidations and discontinued operations (as determined in accordance with
GAAP) that have been made by the Company or any of its Restricted Subsidiaries
during the four-quarter reference period or subsequent to such reference period
and on or prior to or simultaneously with the Calculation Date shall be
calculated on a pro forma basis assuming that all such Investments,
acquisitions, dispositions, discontinued operations, mergers and consolidations
(and the reduction of any associated fixed charge obligations and the change in
EBITDA resulting therefrom) had occurred on the first day of the four-quarter
reference period. If since the beginning
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12
of such period any Person (that subsequently became a Restricted Subsidiary or
was merged with or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any Investment, acquisition,
disposition, discontinued operation, merger or consolidation that would have
required adjustment pursuant to this definition, then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect thereto for such period as if
such Investment, acquisition, disposition, discontinued operation, merger or
consolidation had occurred at the beginning of the applicable four-quarter
period. For purposes of this definition, whenever pro forma effect is to be
given to a transaction, the pro forma calculations shall be made in good faith
by a responsible financial or accounting officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the Calculation Date had been the applicable rate for the entire
period (taking into account any Hedging Obligations applicable to such
Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined by a responsible financial or
accounting officer of the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP. For purposes of making the
computation referred to above, interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period.
Interest on Indebtedness that may optionally be determined at an interest rate
based upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rate, shall be deemed to have been based upon the rate actually
chosen, or, if none, then based upon such optional rate chosen as the Company
may designate.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of (i) Consolidated Interest Expense of such Person for such period and (ii)
all cash dividend payments (excluding items eliminated in consolidation) on any
series of preferred stock of such Person.
"FOREIGN SUBSIDIARY" means a Restricted Subsidiary not organized or
existing under the laws of the United States, any State thereof, the District of
Columbia or any territory thereof.
"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 on the Issuance Date. For the purposes of this
Indenture, the term "CONSOLIDATED" with respect to any Person shall mean such
Person consolidated with its Restricted Subsidiaries, and shall not include any
Unrestricted Subsidiary.
"GOVERNMENT SECURITIES" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or
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13
(ii) obligations of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the timely payment of which
is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as
custodian with respect to any such Government Securities or a specific payment
of principal of or interest on any such Government Securities held by such
custodian for the account of the holder of such depository receipt; PROVIDED
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Securities or
the specific payment of principal of or interest on the Government Securities
evidenced by such depository receipt.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"GUARANTEE" means any guarantee of the obligations of the Company
under this Indenture and the Notes by any Person in accordance with the
provisions of this Indenture. When used as a verb, "GUARANTEE" shall have a
corresponding meaning. No Guarantees will be issued in connection with the
initial offering and sale of the Notes.
"GUARANTOR" means any Person that incurs a Guarantee; PROVIDED that
upon the release and discharge of such Person from its Guarantee in accordance
with this Indenture, such Person shall cease to be a Guarantor. No Guarantees
will be issued in connection with the initial offering and sale of the Notes.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange or interest rates.
"HOLDER" means the Person in whose name a Note is registered in the
Note Register.
"INDEBTEDNESS" means, with respect to any Person, (a) any indebtedness
of such Person, whether or not contingent (i) in respect of borrowed money, (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or bankers' acceptances (or, without double counting, reimbursement
agreements in respect thereof), (iii) representing the balance deferred and
<PAGE>
14
unpaid of the purchase price of any property (including Capitalized Lease
Obligations), except any such balance that constitutes a trade payable or
similar obligation to a trade creditor, in each case accrued in the ordinary
course of business or (iv) representing any Hedging Obligations, if and to the
extent of any of the foregoing Indebtedness (other than letters of credit and
Hedging Obligations) that would appear as a liability upon a balance sheet
(excluding the footnotes thereto) of such Person prepared in accordance with
GAAP, (b) to the extent not otherwise included, any obligation by such Person to
be liable for, or to pay, as obligor, guarantor or otherwise, on the
Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (c) to the
extent not otherwise included, Indebtedness of another Person secured by a Lien
on any asset owned by such Person (whether or not such Indebtedness is assumed
by such Person); PROVIDED, HOWEVER, that Contingent Obligations incurred in the
ordinary course of business shall be deemed not to constitute Indebtedness and
obligations under or in respect of Receivables Facilities shall not be deemed to
constitute Indebtedness of a Person.
"INDENTURE" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal,
investment banking firm or consultant to Persons engaged in Similar Businesses
of nationally recognized standing that is, in the judgment of the Company's
Board of Directors, as evidenced by a Board Resolution, qualified to perform the
task for which it has been engaged.
"INITIAL NOTES" has the meaning specified in the recitals to this
Indenture.
"INITIAL PURCHASER" means Donaldson, Lufkin & Jenrette Securities
Corporation, as initial purchaser of the Notes.
"INTEREST PAYMENT DATE" means the Stated Maturity of an installment of
interest on the Notes.
"INVESTMENT GRADE SECURITIES" means (i) securities issued or directly
and fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB-or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among the Company and
its Subsidiaries, and (iii) investments in any fund that
<PAGE>
15
invests exclusively in investments of the type described in clauses (i) and (ii)
which fund may also hold immaterial amounts of cash pending investment and/or
distribution.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of loans
(including guarantees), advances or capital contributions (excluding advances to
customers, 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 issued by
any other Person and investments that are required by GAAP to be classified on
the balance sheet (excluding the footnotes thereto) of the Company in the same
manner as the other investments included in this definition to the extent such
transactions involve the transfer of cash or other property. For purposes of the
definition of "UNRESTRICTED SUBSIDIARY" and Section 1009 hereof, (i)
"INVESTMENTS" shall include the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of a
Subsidiary of the Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"ISSUANCE DATE" means the closing date for the sale and original
issuance of the Notes hereunder.
"KKR" means Kohlberg Kravis Roberts & Co. L.P.
"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);
PROVIDED that in no event shall an operating lease be deemed to constitute a
Lien.
"LIQUIDATED DAMAGES" means all Liquidated Damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
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16
"MANAGEMENT GROUP" means the group consisting of the Officers of the
Company.
"MATURITY" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity by declaration of acceleration, call for
redemption or purchase or otherwise.
"MOODY'S" means Moody's Investors Service, Inc., and its successors.
"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.
"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 Designated Noncash Consideration received in any Asset Sale),
net of the direct costs relating to such Asset Sale and the sale or disposition
of such Designated Noncash Consideration (including, without limitation, legal,
accounting and investment banking fees, and brokerage 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 related thereto), amounts required
to be applied to the repayment of principal, premium (if any) and interest on
Indebtedness required (other than required by clause (i) of paragraph (b) of
Section 1017) to be paid as a result of such transaction and any deduction of
appropriate amounts to be provided by the Company as a reserve in accordance
with GAAP against any liabilities associated with the asset disposed of in such
transaction and retained by the Company after such sale or other disposition
thereof, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or against
any indemnification obligations associated with such transaction.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in Section 305.
"NOTES" has the meaning stated in the first recital of this Indenture
and more particularly means any Notes authenticated and delivered under this
Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities payable under the documentation governing any
Indebtedness.
<PAGE>
17
"OFFER PERIOD" means the period from the date of a Change of Control
until and including the Change of Control Payment Date.
"OFFERING MEMORANDUM" MEANS THE OFFERING MEMORANDUM DATED APRIL 16,
1998, RELATING TO THE NOTES.
"OFFICER" means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in Section 102.
"OPINION OF COUNSEL" means a written opinion of counsel complying with
the requirements of Section 102. Unless otherwise required by the TIA, such
legal counsel may be an employee of or counsel to the Company or the Trustee.
"OUTSTANDING," when used with respect to Notes, means, as of the date
of determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Notes; PROVIDED that, if such Notes
are to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the Trustee has
been made;
(iii) Notes, except to the extent provided in Sections 1202 and
1203, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Twelve; and
(iv) Notes in exchange for or in lieu of which other Notes (including
pursuant to Section 310) have been authenticated and delivered pursuant to
this Indenture, other than any such Notes in respect of which there shall
have been presented to the Trustee proof
<PAGE>
18
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands the Notes are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of Outstanding Notes have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the Company
or such other obligor shall be disregarded and deemed not to be Outstanding
(provided, that in connection with any offer by the Company or any obligor to
purchase the Notes, Notes tendered for purchase will be deemed to be Outstanding
and held by the tendering Holder until the date of purchase), except that, in
determining whether the Trustee shall be protected in making such calculation or
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes which a REASONABLE Officer of the Trustee
actually knows to be so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Company or any other
obligor upon the Notes or any Affiliate of the Company or such other obligor.
"PARI PASSU INDEBTEDNESS" means (i) with respect to the Notes,
Indebtedness which ranks PARI PASSU in right of payment to the Notes and (ii)
with respect to any Guarantee, Indebtedness which ranks PARI PASSU in right of
payment to such Guarantee.
"PAYING AGENT" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any) or interest on any Notes on behalf of the Company.
"PERMITTED HOLDERS" means KKR and any of its Affiliates and the
Management Group.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or any
Restricted Subsidiary; (b) any Investment in cash and Cash Equivalents or
Investment Grade Securities; (c) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person that is a Similar Business if as a result
of such Investment (i) such Person becomes a Restricted Subsidiary or (ii) such
Person, in one transaction or a series of related transactions, 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 Restricted
Subsidiary; (d) any Investment in securities or other assets not constituting
cash or Cash Equivalents and received in connection with an Asset Sale made
pursuant to the provisions of Section 1017 hereof or any other disposition of
assets not constituting an Asset Sale; (e) any Investment existing on the
Issuance Date; (f) advances to employees not in excess of
<PAGE>
19
$10.0 million outstanding at any one time, in the aggregate; (g) any Investment
acquired by the Company or any of its Restricted Subsidiaries (i) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (ii) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default; (h) Hedging Obligations permitted under clause (x) of paragraph (b) of
Section 1010; (i) loans and advances to officers, directors and employees for
business- related travel expenses, moving expenses and other similar expenses,
in each case incurred in the ordinary course of business; (j) any Investment in
a Similar Business (other than an Investment in an Unrestricted Subsidiary)
having an aggregate fair market value, taken together with all other Investments
made pursuant to this clause (j) that are at that time outstanding, not to
exceed the greater of (x) $50.0 million or (y) 15% of Total Assets at the time
of such Investment (with the fair market value of each Investment being measured
at the time made and without giving effect to subsequent changes in value); (k)
Investments the payment for which consists of Equity Interests of the Company
(exclusive of Disqualified Stock); PROVIDED, HOWEVER, that such Equity Interests
will not increase the amount available for Restricted Payments under clause (C)
of Section 1009(a) hereof; (l) additional Investments having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (l) that are at that time outstanding, not to exceed the greater of (x)
$30.0 million or (y) 10% of Total Assets at the time of such Investment (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value); (m) any transaction to
the extent it constitutes an investment that is permitted by and made in
accordance with the provisions of Section 1012(b) hereof (except transactions
described in clauses (ii) and (vi) of such paragraph); (n) any Investment by
Restricted Subsidiaries in other Restricted Subsidiaries and Investments by
Subsidiaries that are not Restricted Subsidiaries in other Subsidiaries that are
not Restricted Subsidiaries; and (o) Investments relating to any special purpose
Wholly Owned Subsidiary of the Company organized in connection with a
Receivables Facility that, in the good faith determination of the Board of
Directors of the Company, are necessary or advisable to effect such Receivables
Facility.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PHYSICAL NOTES" means Notes issued in definitive, certificated form.
"PREDECESSOR NOTE" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 310 in exchange for a mutilated
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20
security or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"PREFERRED STOCK" means any Equity Interest with preferential right of
payment of dividends or upon liquidation, dissolution, or winding up.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"RECAPITALIZATION" means the consummation on the Issuance Date of the
series of transactions contemplated by the Recapitalization and Stock Purchase
Agreement dated as of March 6, 1998, among the Company, Bear Acquisition, Inc.
and the existing stockholders of the Company.
"RECEIVABLES FACILITY" means one or more receivables financing
facilities, as amended from time to time, pursuant to which the Company and/or
any of its Restricted Subsidiaries sells its accounts receivable to a Person
that is not a Restricted Subsidiary.
"RECEIVABLES FEES" means distributions or payments made directly or by
means of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"REDEMPTION DATE," when used with respect to any Note to be redeemed,
in whole or in part, means the date fixed for such redemption by or pursuant to
this Indenture.
"REDEMPTION PRICE," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"REGISTRATION DEFAULT" has the meaning specified in the second
paragraph of Section 204.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of April 21, 1998, among the Company and the holders of
Initial Notes.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date means the May 1 or November 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"REGULATION S" means Regulation S under the Securities Act.
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21
"RELATED PARTIES" means any Person controlled by a Permitted Holder,
including any partnership of which a Permitted Holder or its Affiliates is the
general partner.
"REPRESENTATIVE" means (i) with respect to the Credit Facility, the
Bank Agent and (ii) with respect to any other Senior Indebtedness, the indenture
trustee or other trustee, agent or representative for the holders of such Senior
Indebtedness.
"REPURCHASE OFFER" means an offer made by the Company to purchase all
or any portion of a Holder's Notes pursuant to Section 1016 and 1017 herein.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any trust officer or assistant trust officer,
the controller or any assistant controller 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" means, at any time, any direct or indirect
Subsidiary of the Company that is not then an Unrestricted Subsidiary; PROVIDED,
HOWEVER, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an
Unrestricted Subsidiary, such Subsidiary shall be included in the definition of
"Restricted Subsidiary."
"RULE 144A" means Rule 144A under the Securities Act.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"SENIOR INDEBTEDNESS" means (i) the Obligations under the Credit
Facility and (ii) any other Indebtedness permitted to be incurred by the Company
under the terms of this Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes, including, with respect to (i)
and (ii), interest accruing subsequent to the filing of, or which would have
accrued but for the filing of, a petition for bankruptcy, whether or not such
interest is an allowable claim in such bankruptcy
<PAGE>
22
proceeding. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (1) any liability for federal, state, local or
other taxes owed or owing by the Company, (2) any obligation of the Company to
any of its Subsidiaries, (3) any accounts payable or trade liabilities arising
in the ordinary course of business (including instruments evidencing such
liabilities) other than obligations in respect of bankers' acceptances and
letters of credit under the Credit Facility, (4) any Indebtedness that is
incurred in violation of this Indenture, (5) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to the Company, (6) any Indebtedness, guarantee
or obligation of the Company which is subordinate or junior to any other
Indebtedness, guarantee or obligation of the Company, (7) Indebtedness evidenced
by the Notes and (8) Capital Stock of the Company.
"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 Securities Act, as such Regulation is in effect on
the date hereof.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"SIMILAR BUSINESS" means a business, the majority of whose revenues
are derived from the design, manufacture, import and/or distribution of
collectibles and/or other specialty giftware products or whose revenues are
derived from the licensing of the Boyds name, or any business or activity that
is reasonably similar thereto or a reasonable extension, development or
expansion thereof or ancillary thereto.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 311.
"STATED MATURITY" when used with respect to any Note or any
installment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable, and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"SUBORDINATED INDEBTEDNESS" means (a) with respect to the Notes, any
Indebtedness of the Company which is by its terms subordinated in right of
payment to the Notes and (b) with respect to any Guarantee, any Indebtedness of
the applicable Guarantor which is by its terms subordinated in right of payment
to such Guarantee.
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23
"SUBORDINATED NOTE OBLIGATIONS" means any principal of, premium, if
any, and interest on the Notes payable pursuant to the terms of the Notes or
upon acceleration, together with and including any amounts received upon the
exercise of rights of rescission or other rights of action (including claims for
damages) or otherwise, to the extent relating to the purchase price of the Notes
or amounts corresponding to such principal, premium, if any, or interest on the
Notes.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership) 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 of determination 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,
joint venture, limited liability company or similar entity of which (x) more
than 50% of the capital accounts, distribution rights, total equity and voting
interests or general or limited partnership interests, as applicable, are owned
or controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person or a combination thereof whether in the form
of membership, general, special or limited partnership or otherwise and (y) such
Person or any Wholly Owned Restricted Subsidiary of such Person is a controlling
general partner or otherwise controls such entity.
"TOTAL ASSETS" means the total consolidated assets of the Company and
its Restricted Subsidiaries, as shown on the most recent balance sheet
(excluding the footnotes thereto) of the Company.
"TREASURY RATE" means, as of any Redemption Date, the yield to
maturity as of such Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to May 15, 2003; PROVIDED,
HOWEVER, that if the period from the Redemption Date to May 15, 2003 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939
as in force on the date as of which this Indenture was executed, except as
provided in Section 905.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
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24
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company
which at the time of determination is an Unrestricted Subsidiary (as designated
by the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any existing Subsidiary
and any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests of, or owns, or holds any Lien on, any property of, the Company or any
Subsidiary of the Company (other than any Subsidiary of the Subsidiary to be so
designated), PROVIDED that (a) any Unrestricted Subsidiary must be an entity of
which shares of the capital stock or other equity interests (including
partnership interests) entitled to cast at least a majority of the votes that
may be cast by all shares or equity interests having ordinary voting power for
the election of directors or other governing body are owned, directly or
indirectly, by the Company, (b) the Company certifies that such designation
complies with Section 1009 hereof and (c) each of (I) the Subsidiary to be so
designated and (II) its Subsidiaries has not at the time of designation, and
does not thereafter, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that, immediately after
giving effect to such designation, (i) the Company could incur at least $1.00 of
additional Indebtedness under paragraph (a) of Section 1010 or (ii) the Fixed
Charge Coverage Ratio for the Company and its Restricted Subsidiaries would be
greater than such ratio for the Company and its Restricted Subsidiaries
immediately prior to such designation, in each case on a pro forma basis taking
into account such designation. Any such designation by the Board of Directors
shall be notified by the Company to the Trustee by promptly filing with the
Trustee a copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"VICE PRESIDENT," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
"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 or Disqualified Stock, as the case may be, at any date, the
quotient obtained by dividing (i) the sum of the products of the number of years
from the date of determination to the date of each successive scheduled
principal payment of such Indebtedness or redemption or similar payment with
respect to such Disqualified Stock multiplied by the amount of such payment, by
(ii) the sum of all such payments.
<PAGE>
25
"WHOLLY OWNED RESTRICTED SUBSIDIARY" is any Wholly Owned Subsidiary
that is a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person 100% 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 or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company and any Guarantor
(if applicable) and any other obligor on the Notes (if applicable) shall furnish
to the Trustee an Officers' Certificate in form and substance reasonably
acceptable to the Trustee stating that all conditions precedent, if any,
provided for in this Indenture (including any covenant compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of an Officers' Certificate and an Opinion of Counsel is specifically required
by any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including certificates
provided pursuant to Section 1018(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) 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;
(3) a statement that, in the opinion of each such individual or such
firm, he or it has made such examination or investigation as is necessary
to enable him or it to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
<PAGE>
26
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company, any Guarantor
or other obligor on the Notes may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer or
officers of the Company, any Guarantor or other obligor on the Notes stating
that the information with respect to such factual matters is in the possession
of the Company, any Guarantor or other obligor on the Notes unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are received
by a RESPONSIBLE Officer of the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"ACT" of the Holders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this
<PAGE>
27
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section 104.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by any
Person, and the date of holding the same, shall be proved by the Note Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; PROVIDED that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than six months after the
record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof (including in
accordance with Section 310) in respect of anything done, omitted or suffered to
be done by the Trustee, any Paying Agent or the Company or any Guarantor in
reliance thereon, whether or not notation of such action is made upon such Note.
<PAGE>
28
SECTION 105. NOTICES, ETC., TO TRUSTEE, THE COMPANY AND ANY
GUARANTOR.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or any Guarantor or
any other obligor on the Notes shall be sufficient for every purpose
hereunder if made, given, furnished or delivered in writing and mailed,
first-class postage prepaid, or delivered by recognized overnight courier,
to or with the Trustee and received at its Corporate Trust Office,
Attention: Corporate Trust ADMINISTRATION - The Boyds Collection, Ltd.,
or
(2) the Company or any Guarantor by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or delivered, in writing, or
mailed, first-class postage prepaid, or delivered by recognized overnight
courier, to the Company or such Guarantor addressed to it at the address of
its principal office specified in the first paragraph of this Indenture, or
at any other address previously furnished in writing to the Trustee by the
Company or such Guarantor.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any notice
mailed to a Holder in the manner herein prescribed shall be conclusively deemed
to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving
<PAGE>
29
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice for every purpose hereunder.
SECTION 107. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 108. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 109. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the 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 110. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, (other than the parties hereto, any Agent and their
successors hereunder and each of the Holders and, with respect to any provisions
hereof relating to the subordination of the Notes or the rights of holders of
Senior Indebtedness, the holders of Senior Indebtedness) any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 111. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY THE LAW OF THE STATE
OF NEW YORK EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY LAW) ANY RULE OF
LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN
THE STATE OF NEW YORK. UPON THE ISSUANCE OF THE EXCHANGE NOTES OR THE
EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, THIS INDENTURE SHALL BE
SUBJECT TO THE PROVISIONS OF THE TRUST INDENTURE ACT THAT ARE REQUIRED TO BE
PART OF THIS INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH
PROVISIONS.
<PAGE>
30
SECTION 112. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, any date established for
payment of Defaulted Interest pursuant to Section 311 or Redemption Date or
Stated Maturity or Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of principal (or premium, if any) or interest need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date or date established for payment of
Defaulted Interest pursuant to Section 311, Redemption Date, or at the Stated
Maturity or Maturity; PROVIDED that no interest shall accrue for the period from
and after such Interest Payment Date, Redemption Date or date established for
payment of Defaulted Interest pursuant to Section 311, Stated Maturity or
Maturity, as the case may be, to the next succeeding Business Day.
SECTION 113. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
STOCKHOLDERS OR INCORPORATORS.
No director, officer, employee, incorporator or stockholder, as such,
of the Company or any Guarantor shall have any liability for any obligations of
the Company or such Guarantor under the Notes, this Indenture or any Guarantee
or for any claim based on, in respect of, or by reason of, such obligations or
their creations. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
SECTION 114. COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each of
which shall be original; but such counterparts shall together constitute but one
and the same instrument.
ARTICLE TWO
NOTE FORMS
SECTION 201. FORMS GENERALLY.
The Initial Notes shall be known as the "9% Senior Subordinated Notes
due 2008" and the Exchange Notes shall be known as the "9% Series B Senior
Subordinated Notes due 2008," in each case, of the Company. The Notes and the
Trustee's certificate of authentication shall be in substantially the forms set
forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such
<PAGE>
31
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
Any portion of the text of any Note may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Note. Each Note shall
be dated the date of its authentication.
The definitive Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as determined
by the officers of the Company executing such Notes, as evidenced by their
execution of such Notes.
Initial Notes offered and resold in reliance on Rule 144A to QIBs
will be issued on the Issuance Date in the form of A permanent global NOTE
substantially in the form set forth in Sections 204 and 205 (THE "U.S. Global
Note") deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. THE U.S. Global Note (which may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate) will represent
Initial Notes sold to QIB's.
Initial Notes offered and resold in reliance on Regulation S, if any,
will initially be issued in the form of a temporary global Note (the "Temporary
Offshore Global Note"). Beneficial interests in the Temporary Offshore Global
Note will be exchanged for beneficial interests in a corresponding permanent
global Note (the "Permanent Offshore Global Note" and, together with the
Temporary Offshore Global Note, each an "Offshore Global Note" and, together
with the Temporary Offshore Global Note and the U.S. Global Notes, each a
"Global Note") within a reasonable period after the expiration of the Restricted
Period (as defined below) upon delivery of the certification contemplated by
Section 203. Each Offshore Global Note will be deposited upon issuance with, or
on behalf of, the Trustee as custodian for the Depositary in the manner
described in the preceding paragraph for credit to the respective accounts of
the purchasers (or to such other accounts as they may direct) at Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear"), or Cedel Bank, societe anonyme ("CEDEL"). Prior to the 40th day
after the later of the commencement of the offering of the Initial Notes and the
Closing Date (such period through and including such 40th day, the "Restricted
Period"), interests in the Temporary Offshore Global Note may only be held
through Euroclear or CEDEL unless exchanged for interests in a U.S. Global Note
in accordance with the transfer and certification requirements described herein.
Investors may hold their interests in the applicable Offshore Global
Note directly through Euroclear or CEDEL, if they are participants in such
systems, or indirectly through organizations which are participants in such
systems. After the expiration of the Restricted Period
<PAGE>
32
(but not earlier), investors may also hold such interests through organizations
other than Euroclear or CEDEL that are participants in the Depositary's system.
Euroclear and CEDEL will hold such interests in the applicable Offshore Global
Note on behalf of their participants through customers' securities accounts in
their respective names on the books of their respective depositories. Such
depositories, in turn, will hold such interests in the applicable Offshore
Global Note in customers' securities accounts in the depositories' names on the
books of the Depositary.
The aggregate principal amount of each Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided. Transfers among Global Notes by the beneficial owners of the
interests therein will be represented by appropriate increases and decreases to
the respective amounts of the appropriate Global Notes, as more fully provided
in Section 307.
Certificated Notes in registered form in substantially the form set
forth in Sections 204 and 205 (the "Physical Notes") shall be transferred in
certain circumstances to all beneficial owners in exchange for their beneficial
interests in the Global Notes as set forth in Section 306.
SECTION 202. RESTRICTIVE LEGENDS.
Unless and until (i) an Initial Note is sold under an effective
Registration Statement or (ii) an Initial Note is exchanged for an Exchange Note
in connection with an effective Registration Statement, in each case pursuant to
the Registration Rights Agreement, each such Global Note and Physical Note shall
bear the following legend (the "Private Placement Legend") on the face thereof
unless otherwise agreed by the Company and the Holder thereof:
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
<PAGE>
33
PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144 (D) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES
ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) 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, (C) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
AND AN OPTION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) 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 (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM
BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
Each Global Note, whether or not an Initial Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER,
<PAGE>
34
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS 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 SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
<PAGE>
35
SECTION 203. FORM OF CERTIFICATE TO BE DELIVERED UPON TERMINATION OF
RESTRICTED PERIOD.
On or after MAY 31, 1998
The Bank of New York
101 Barclay Street
FLOOR 21 WEST
New York, New York 10286
Attention: Corporate Trust ADMINISTRATION - The Boyds Collection, Ltd.
Re: THE BOYDS COLLECTION, LTD. (the "Company")
9% Senior Subordinated Notes Due 2008 (the "Notes")
---------------------------------------------------
Ladies and Gentlemen:
This letter relates to Notes represented by a temporary global note
(the "Temporary Offshore Global Note"). Pursuant to Section 201 of the
Indenture dated as of April 21, 1998 relating to the Notes (the "Indenture"), we
hereby certify that the persons who are the beneficial owners of $[
] principal amount of Notes represented by the Temporary Offshore Global Note
are persons outside the United States to whom beneficial interests in such Notes
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the Securities Act of 1933, as amended. Accordingly, you are hereby
requested to issue a Permanent Offshore Global Note representing the
undersigned's interest in the principal amount of Notes represented by the
Temporary Offshore Global Note, all in the manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or
<PAGE>
36
legal proceedings or official inquiry with respect to the matters covered
hereby. Terms used in this certificate have the meanings set forth in
Regulation S.
Very truly yours,
[Name of Holder]
By:
------------------------------------
Authorized Signature
<PAGE>
37
SECTION 204. FORM OF FACE OF NOTE.
THE BOYDS COLLECTION, LTD.
9% Senior Subordinated Note due 2008
CUSIP No. [ ]
Common Code No. [ ]
ISIN No. [ ]*
NO. ____________ $
THE BOYDS COLLECTION, LTD., a Maryland corporation (herein called the
"COMPANY", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of $_____________ U.S. dollars on
May 15, 2008, at the office or agency of the Company referred to below, and to
pay interest thereon on November 15, 1998, and semi-annually thereafter, on May
15 and November 15 in each year, from April 21, 1998, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, at
the rate of 9% per annum, until the principal hereof is paid or duly provided
for, and (to the extent lawful) to pay on demand interest on any overdue
interest at the rate borne by the Notes from the date on which such overdue
interest becomes payable to the date payment of such interest has been made or
duly provided for. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Note (or one or more Predecessor Notes)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the May 1 or November 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for shall forthwith cease to be
payable to the Holder on such Regular Record Date, and such defaulted interest,
and (to the extent lawful) interest on such defaulted interest at the rate borne
by the Notes, may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Notes not less than 10 days prior to
such Special Record Date, or may be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
- -----------------------
* Include only for Temporary Offsjore Global Note and Permanent Offshore
Global Note.
<PAGE>
38
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated as of April 21, 1998 (the "Registration
Rights Agreement"), between the Company and the Initial PURCHASER NAMED
THEREIN. THE REGISTRATION RIGHTS AGREEMENT WILL PROVIDE THAT (i) THE COMPANY
WILL FILE an Exchange Offer Registration Statement (as defined in the
Registration Rights Agreement) with the Commission on or prior to 540 DAYS
AFTER the date of original issue of the Notes, (ii) THE COMPANY WILL USE ITS
BEST EFFORTS TO HAVE THE Exchange Offer Registration Statement DECLARED
EFFECTIVE BY THE COMMISSION ON OR PRIOR TO 75 DAYS AFTER SUCH FILING, (iii)
UNLESS the Exchange Offer (as defined in the Registration Rights Agreement)
WOULD NOT BE PERMITTED BY APPLICABLE LAW OR COMMISSION POLICY, THE COMPANY WILL
COMMENCE THE EXCHANGE OFFER AND USE ITS BEST EFFORTS TO ISSUE ON OR PRIOR TO 30
BUSINESS DAYS AFTER THE DATE ON WHICH THE EXCHANGE OFFER REGISTRATION STATEMENT
WAS DECLARED EFFECTIVE BY THE COMMISSION, EXCHANGE NOTES (AS defined in the
Registration Rights Agreement) IN EXCHANGE FOR ALL NOTES TENDERED PRIOR THERETO
IN THE EXCHANGE OFFER AND (iv) IF OBLIGATED TO FILE THE SHELF REGISTRATION
STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) THE COMPANY WILL USE
ITS BEST REASONABLE EFFORTS TO FILE THE SHELF REGISTRATION STATEMENT WITH THE
COMMISSION ON OR PRIOR TO 30 DAYS AFTER SUCH FILING OBLIGATION ARISES AND TO
CAUSE THE SHELF REGISTRATION STATEMENT TO BE DECLARED EFFECTIVE BY THE
COMMISSION ON OR PRIOR TO 75 DAYS AFTER SUCH FILING. IF (a) THE COMPANY FAILS
TO FILE ANY OF THE REGISTRATION STATEMENTS REQUIRED BY THE REGISTRATION RIGHTS
AGREEMENT ON OR BEFORE THE DATE SPECIFIED FOR SUCH FILING, (b) ANY OF SUCH
REGISTRATION STATEMENTS is not declared effective BY THE COMMISSION ON OR PRIOR
TO THE DATE SPECIFIED FOR SUCH EFFECTIVENESS (THE "EFFECTIVENESS TARGET DATE"),
(c) THE COMPANY FAILS TO CONSUMMATE THE EXCHANGE OFFER WITHIN 30 BUSINESS DAYS
OF THE EFFECTIVENESS TARGET DATE WITH RESPECT TO the Exchange Offer Registration
Statement OR (d) THE SHELF REGISTRATION STATEMENT OR the Exchange Offer
Registration Statement IS DECLARED EFFECTIVE BUT THEREAFTER CEASES TO BE
EFFECTIVE OR USABLE IN CONNECTION WITH RESALES OF TRANSFER RESTRICTED SECURITIES
(AS DEFINED IN the Registration Rights Agreement) DURING THE PERIODS SPECIFIED
IN THE REGISTRATION RIGHTS AGREEMENT (EACH SUCH EVENT REFERRED TO IN CLAUSES (a)
THROUGH (d) ABOVE a "Registration Default"), then the COMPANY WILL PAY
LIQUIDATED DAMAGES TO EACH HOLDER OF NOTES. LIQUIDATED DAMAGES WILL ACCRUE, AT
AN ANNUAL RATE OF 0.25% OF THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES, ON THE
DATE OF SUCH REGISTRATION DEFAULT, PAYABLE IN CASH SEMI-ANNUALLY IN ARREARS ON
EACH INTEREST PAYMENT DATE, COMMENCING ON THE DATE OF SUCH REGISTRATION DEFAULT.
FOLLOWING THE CURE OF ALL REGISTRATION DEFAULTS, THE ACCRUAL OF LIQUIDATED
DAMAGES WILL CEASE.]*
Principal of, premium, if any, interest and Liquidated Damages, if
any, on the Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or at such
other office or agency of the Company as may be maintained for such purpose, or
at the option of the Company, payment of interest may be made by check mailed
- -----------------------
* Include only for Initial Notes.
<PAGE>
39
to the Holders of the Notes at their respective addresses set forth in the
register of Holders of Notes or by wire transfer to an account maintained by the
payee located in the United States; PROVIDED that all payments of principal,
premium, interest and Liquidated Damages, if any, with respect to Notes
represented by one or more permanent global Notes registered in the name of or
held by The Depository Trust Company or its nominee will be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Company, the Company's office or
agency in New York will be the office of the Trustee maintained for such
purpose.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee or the Authenticating Agent referred to on the reverse hereof by
manual signature, this Note shall not be entitled to any benefit under the
Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
THE BOYDS COLLECTION, LTD.
By
-----------------------------------
Name:
Title:
<PAGE>
40
SECTION 205. FORM OF REVERSE OF NOTE.
This Note is one of a duly authorized issue of securities of the
Company designated as its 9% Senior Subordinated Notes due 2008 (the "NOTES"),
limited (except as otherwise provided in the Indenture referred to below) in
aggregate principal amount of $165,000,000, which may be issued under an
indenture (the "INDENTURE") dated as of April 21, 1998 between the Company and
The Bank of New York, as trustee (the "TRUSTEE", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Trustee and the Holders of the Notes, and of the terms upon
which the Notes are, and are to be, authenticated and delivered.
The indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness as defined in the
Indenture, and this Note is issued subject to such provisions. Each Holder of
this Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose.
On or before each payment date, the Company shall deliver or cause to
be delivered to the Trustee or the Paying Agent an amount in dollars sufficient
to pay the amount due on such payment date.
Except as described below, the Notes will not be redeemable at the
Company's option prior to May 15, 2003. From and after May 15, 2003, the Notes
will be subject to redemption at any time at the option of the Company, 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 and Liquidated Damages, if any, thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on May 15 of each of the years indicated below:
YEAR REDEMPTION PRICE
---- ----------------
2003 104.5%
2004 103.0%
2005 101.5%
2006 and thereafter 100.0%
======
<PAGE>
41
In addition, at any time or from time to time, on or prior to May 15,
2001, the Company may, at its option, redeem up to 40% of the aggregate
principal amount of Notes originally issued under the Indenture on the Issuance
Date at a Redemption Price equal to 109% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date, with the net proceeds of one or more Equity
Offerings; PROVIDED that at least 60% of the aggregate principal amount of Notes
originally issued under the Indenture on the Issuance Date remains outstanding
immediately after the occurrence of each such redemption; PROVIDED FURTHER that
such redemption shall occur within 60 days of the date of the closing of any
such Equity Offering.
If less than all the Notes are to be redeemed pursuant to the
preceding two paragraphs, the Trustee shall select the Notes or portions thereof
to be redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes being redeemed are listed, or if
the Notes are not so listed, on a pro rata basis, by lot or by such other method
the Trustee shall deem fair and appropriate (and in such manner as complies with
applicable legal requirements); PROVIDED that no such Notes of less than $1,000
shall be redeemed in part.
At any time ON OR prior to May 15, 2003, the Notes may also be
redeemed, in whole but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control or transfer event) mailed by first-class mail to each Holder's
registered address, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium as of, and accrued and unpaid interest and
Liquidated Damages, if any, to, the Redemption Date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date).
In the event of redemption or repurchase of this Note in part only, a
new Note or Notes for the unredeemed portion hereof shall be issued in the name
of the Holder hereof upon the cancellation hereof.
Upon the occurrence of a Change of Control, unless the Company has
elected to redeem the Notes in connection with such Change of Control, the
Company will be required to make an offer to purchase all or any part (equal to
$1,000 in principal amount or an integral multiple thereof) of Notes at a price
in cash equal to 101% of the aggregate principal amount of the Notes thereof,
plus accrued and unpaid interest thereon, and Liquidated Damages, if any,
thereon, if any, to the date of purchase, in accordance with the Indenture.
Holders of Notes that are subject to an
<PAGE>
42
offer to purchase will receive a Change of Control Offer from the Company prior
to any related Change of Control Payment Date.
Under certain circumstances, in the event the Net Proceeds received by
the Company from an Asset Sale, which proceeds are not used (i) to permanently
reduce Obligations under the Credit Facility (and to correspondingly reduce
commitments with respect thereto) or other Senior Indebtedness or Pari Passu
Indebtedness (PROVIDED that if the Company shall so reduce Obligations under
Pari Passu Indebtedness, it will equally and ratably reduce Obligations under
the Notes if the Notes are then prepayable or, if the Notes may not be then
prepaid, the Company shall make an offer (in accordance with the procedures set
forth below for an Asset Sale Offer) to all Holders to purchase at 100% of the
principal amount thereof the amount of Notes that would otherwise be prepaid),
(ii) to make an investment in any one or more businesses, capital expenditures
or acquisitions of other assets in each case, used or useful in a Similar
Business and/or (iii) to make an investment in properties or assets that replace
the properties and assets that are the subject of such Asset Sale, equal or
exceed a specified amount, the Company will be required to make an offer to all
Holders to purchase the maximum principal amount of Notes, in an integral
multiple of $1,000, that may be purchased out of such amount at a purchase price
in cash equal to 100% of the principal amount thereof, plus accrued and unpaid
interest AND LIQUIDATED DAMAGES, if any, to the date of purchase, in accordance
with the Indenture. Holders of Notes that are subject to any offer to purchase
will receive an Asset Sale Offer from the Company prior to any related Asset
Sale Purchase Date.
In the case of any redemption or repurchase of Notes, interest
installments whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Notes, or one or more Predecessor Notes, of
record at the close of business on the relevant Regular Record Date or Special
Record Date, as the case may be, referred to on the face hereof. Notes (or
portions thereof) for whose redemption and payment provision is made in
accordance with the Indenture shall cease to bear interest from and after the
Redemption Date.
If an Event of Default shall occur and be continuing, the principal of
all the Notes may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a)
the entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related Defaults and Events of Default, upon compliance by the
Company with certain conditions set forth therein, which provisions apply to
this Note.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture and the Notes and the
Guarantees, if any, at any time by the Company
<PAGE>
43
and the Trustee with the consent of the Holders of a specified percentage in
aggregate principal amount of the Notes at the time Outstanding. Additionally,
the Indenture permits that, without notice to or consent of any Holder, the
Company, any Guarantor and the Trustee together may amend or supplement the
Indenture, any Guarantee or this Note (i) to cure any ambiguity, defect or
inconsistency, (ii) to provide for uncertificated Notes in addition to or in
place of certificated Notes, (iii) to comply with Article Eight of the
Indenture, (iv) to provide for the assumption of the Company's or any
Guarantor's obligations to Holders of such Notes, (v) to make any change that
would provide any additional rights or benefits to the Holders of the Notes or
that does not adversely affect the legal rights under the Indenture of any such
Holder, (vi) to add covenants for the benefit of the Holders or to surrender any
right or power conferred upon the Company, (vii) to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act, (viii) to evidence and provide for the acceptance
of appointment under this Indenture by a successor Trustee pursuant to the
requirements of Section 610, or (ix) to add a Guarantor under the Indenture.
The Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all the Notes, to waive compliance by the Company
with certain provisions of the Indenture the Notes and the Guarantees, if any,
and certain past Defaults under the Indenture and the Notes and the Guarantees,
if any, and their consequences. Any such consent or waiver by or on behalf of
the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, any
Guarantor or any other obligor on the Notes (in the event such Guarantor or
other obligor is obligated to make payments in respect of the Notes), which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Note at the times, place, and rate, and in the coin or
currency, herein prescribed, subject to the subordination provisions of the
Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registerable on the Note
Register of the Company, upon surrender of this Note for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Note Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
<PAGE>
44
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to pay all documentary, stamp or similar issue or transfer taxes or
other governmental charges payable in connection therewith.
Prior to the time of due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.
<PAGE>
45
THIS NOTE AND THE INDENTURE SHALL BE GOVERNED BY THE LAW OF THE STATE
OF NEW YORK EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY LAW) ANY RULE OF
LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN
THE STATE OF NEW YORK.
Interest on this Note shall be computed on the basis of a 360-day year
of twelve 30-day months.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
- ----------------------------------
please print or typewrite name and address including zip code of assignee
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
<PAGE>
46
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT
OFFSHORE GLOBAL NOTES]
In connection with any transfer of this Note occurring prior to the
date that is the earlier of the date of an effective Registration Statement, as
defined in the Registration Rights Agreement dated as of April 21, 1998, or
April 21, 2000, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[CHECK ONE]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
OR
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished that comply with the conditions of
transfer set forth in this Note and the Indenture.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Note in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date: ____________________ __________________________________________
NOTICE: The signature must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the
<PAGE>
47
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ________________________ NOTICE: To be executed by an executive
officer.
<PAGE>
48
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 1016 or 1017 of the Indenture, check the applicable Box below:
[ ] Section 1016 [ ] Section 1017
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 1016 or 1017 of the Indenture, state the amount (in original
principal amount) below:
$_____________________.
Date:
Your Signature:
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
<PAGE>
49
SECTION 206. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in substantially
the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Notes referred to in the within-mentioned
Indenture.
The Bank of New York
as Trustee
By
----------------------------
Authorized Signatory
Dated: ____________________
ARTICLE THREE
THE NOTES
SECTION 301. TITLE AND TERMS.
The aggregate principal amount of Notes which may be authenticated and
delivered under this Indenture is limited to $165,000,000, except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Section 304, 305, 306, 307, 310,
906, 1016, 1017 or 1108 or pursuant to an Exchange Offer.
The Initial Notes shall be known and designated as the "9% Senior
Subordinated Notes due 2008" and the Exchange Notes shall be known and
designated as the "9% Series B Senior Subordinated Notes due 2008," in each
case, of the Company. The Stated Maturity of the
<PAGE>
50
Notes shall be May 15, 2008, and they shall bear interest at the rate of 9% per
annum, which rate may be increased in the event of a Registration Default
pursuant to Section 5 of the Registration Rights Agreement dated April 21, 1998
by and among the Company and the parties named on the signature pages thereof,
from April 21, 1998, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable on November 15, 1998 and
semi-annually thereafter on May 15 and November 15 in each year, until the
principal thereof is paid in full and to the Person in whose name the Note (or
any predecessor Note) is registered at the close of business on the May 1 or
November 1 IMMEDIATELY preceding such interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months, until
the principal thereof is paid or duly provided for. Interest on any overdue
principal, interest (to the extent lawful) or premium, if any, shall be payable
on demand.
Principal of, premium, if any, interest and Liquidated Damages, if
any, on the Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or at such
other office or agency of the Company as may be maintained for such purposes, or
at the option of the Company, payment of LIQUIDATED DAMAGES, IF ANY, OR interest
may be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes or by wire transfer to
an account maintained by the payee located in the United States; PROVIDED that
all payments of principal, premium, IF ANY, interest AND LIQUIDATED DAMAGES, IF
ANY, with respect to Notes represented by one or more permanent global Notes
registered in the name of or held by the Depositary or its nominee will be made
by wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Trustee maintained for
such purpose.
Holders shall have the right to require the Company to purchase their
Notes, in whole or in part, in the event of a Change of Control pursuant to
Section 1016.
The Notes shall be subject to repurchase by the Company pursuant to an
Asset Sale Offer as provided in Section 1017.
The Notes shall be redeemable as provided in Article Eleven and in the
Notes.
The Indebtedness evidenced by the Notes shall be subordinated in right
of payment to Senior Indebtedness as provided in Article Thirteen.
SECTION 302. DENOMINATIONS.
<PAGE>
51
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Notes shall be executed on behalf of the Company by its Chief
Executive Officer or any Vice President. The signature of any of these officers
on the Notes may be manual or facsimile signatures of the present or any future
such authorized officer and may be imprinted or otherwise reproduced on the
Notes.
Notes bearing the manual or facsimile signature of an individual who
was at any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual has ceased to hold such office prior to the
authentication and delivery of such Notes or did not hold such office at the
date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Initial Notes executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Notes, and the Trustee in accordance with
such Company Order shall authenticate and deliver the Initial Notes directing
the Trustee to authenticate the Notes and certifying that all conditions
precedent to the issuance of Notes contained herein have been fully complied
with, and the Trustee in accordance with such Company Order shall authenticate
and deliver such Initial Notes. On Company Order, the Trustee shall
authenticate for original issue Exchange Notes in an aggregate principal amount
not to exceed $165,000,000; provided that such Exchange Notes shall be issuable
only upon the valid surrender for cancellation of Initial Notes of a like
aggregate principal amount in accordance with an Exchange Offer pursuant to the
Registration Rights Agreement. In each case, the Trustee shall be entitled to
receive an Officers' Certificate and an Opinion of Counsel of the Company that
it may reasonably request in connection with such authentication of Notes. Such
Company Order shall specify the amount of Notes to be authenticated and the date
on which the original issue of Initial Notes or Exchange Notes is to be
authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Note shall be conclusive evidence, and the
<PAGE>
52
only evidence, that such Note has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
In case the Company or any Guarantor, pursuant to Article Eight, shall
be consolidated or merged with or into any other Person or shall convey,
transfer, lease or otherwise dispose of its properties and assets substantially
as an entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company or such
Guarantor shall have been merged, or the Person which shall have received a
conveyance, transfer, lease or other disposition as aforesaid, shall have
executed an indenture supplemental hereto with the Trustee pursuant to Article
Eight, any of the Notes authenticated or delivered prior to such consolidation,
merger, conveyance, transfer, lease or other disposition may, from time to time,
at the request of the successor Person, be exchanged for other Notes executed in
the name of the successor Person with such changes in phraseology and form as
may be appropriate, but otherwise in substance of like tenor as the Notes
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Notes as specified in such request for the purpose of such exchange. If Notes
shall at any time be authenticated and delivered in any new name of a successor
Person pursuant to this Section 303 in exchange or substitution for or upon
registration of transfer of any Notes, such successor Person, at the option of
the Holders but without expense to them, shall provide for the exchange of all
Notes at the time Outstanding for Notes authenticated and delivered in such new
name.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes on behalf of the Trustee. Unless limited by the
terms of such appointment, an authenticating agent may authenticate 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 any Note Registrar or Paying Agent
to deal with the Company and its Affiliates.
SECTION 304. TEMPORARY NOTES.
Pending the preparation of definitive Notes, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Notes which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Notes in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as conclusively evidenced by their execution
of such Notes.
<PAGE>
53
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "NOTE REGISTER") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Note Register shall be in written form
or any other form capable of being converted into written form within a
reasonable time. At all reasonable times, the Note Register shall be open to
inspection by the Trustee. The Trustee is hereby initially appointed as
security registrar (the Trustee in such capacity, together with any successor of
the Trustee in such capacity, the "NOTE REGISTRAR") for the purpose of
registering Notes and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at the office
or agency of the Company designated pursuant to Section 1002, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Notes of any authorized
denomination or denominations of a like aggregate principal amount.
Furthermore, any Holder of a Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interest in such Global Note may
be effected only through a book-entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denomination and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange (including an exchange of Initial Notes
for Exchange Notes), the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
<PAGE>
54
entitled to receive; provided that no exchange of Initial Notes for Exchange
Notes shall occur until an Exchange Offer Registration Statement shall have been
declared effective by the Commission, the Trustee shall have received an
Officers' Certificate confirming that the Exchange Offer Registration Statement
has been declared effective by the Commission and the Initial Notes to be
exchanged for the Exchange Notes shall be cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Note Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Note Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 304, 906, 1016, 1017 or 1108, not involving any
transfer.
SECTION 306. BOOK-ENTRY PROVISIONS FOR THE GLOBAL NOTE .
(a) Each Global Note initially shall (i) be registered in the name of
the Depositary for such Global Note or the nominee of such Depositary, (ii) be
delivered to the Trustee as custodian for such Depositary and (iii) bear legends
as set forth in Section 202.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees.
<PAGE>
55
Interests of beneficial owners in a Global Note may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
307. If required to do so pursuant to any applicable law or regulation,
beneficial owners may obtain Physical Notes in exchange for their beneficial
interests in the Global Note upon written request in accordance with the
Depositary's and the Registrar's procedures. In addition, Physical Notes shall
be transferred to all beneficial owners in exchange for their beneficial
interests in a Global Note if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for such Global Note or the
Depositary ceases to be a clearing agency registered under the Exchange Act, at
a time when the Depositary is required to be so registered in order to act as
Depositary, and in each case a successor depositary is not appointed by the
Company within 90 days of such notice or (ii) the Company executes and delivers
to the Trustee and Note Registrar an Officers' Certificate stating that such
Global Note shall be so exchangeable or (iii) an Event of Default has occurred
and is continuing and the Note Registrar has received a request from the
Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in the Global Note pursuant to subsection (b) of this Section to
beneficial owners who are required to hold Physical Notes, the Note Registrar
shall reflect on its books and records the date and a decrease in the principal
amount of such Global Note in an amount equal to the principal amount of the
beneficial interest in the Global Note to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Physical
Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to subsection (b) of this Section, such Global Note
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in such Global Note, an equal aggregate principal amount of Physical
Notes of authorized denominations.
(e) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 307. SPECIAL TRANSFER PROVISIONS.
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56
Unless and until (i) an Initial Note is sold under an effective
Registration Statement, or (ii) an Initial Note is exchanged for an Exchange
Note in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, the following provisions shall
apply:
(a) The following provisions shall apply with respect to any
proposed transfer of a Rule 144A Global Note or an IAI Global Note prior to the
two-year anniversary of the Issuance Date:
(i) a transfer of a Rule 144A Global Note or an IAI Global
Note or a beneficial interest therein to a QIB shall be made upon the
representation of the transferee that it is purchasing the Note for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as the transferee has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the transferee's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A;
(ii) a transfer of a Rule 144A Global Note or an IAI Global
Note or a beneficial interest therein to an IAI shall be made upon receipt
by the Trustee or its agent of a certificate substantially in the form set
forth in Section 308 hereof from the proposed transferee and, if requested
by the Company or the Trustee, the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them; and
(iii) a transfer of a Rule 144A Global Note or an IAI Global
Note or a beneficial interest therein to a Non-U.S. Person shall be made
upon receipt by the Trustee or its agent of a certificate substantially in
the form set forth in Section 309 hereof from the transferor and, if
requested by the Company or the Trustee, the delivery of an opinion of
counsel, certification and/or other information satisfactory to each of
them.
(b) The following provisions shall apply with respect to any
proposed transfer of an Offshore Global Note prior to the expiration of the
Restricted Period:
(i) a transfer of an Offshore Global Note or a beneficial
interest therein to a QIB shall be made upon the representation of the
transferee that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a "qualified institutional buyer" within the
<PAGE>
57
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the transferee has requested pursuant
to Rule 144A or has determined not to request such information and that it
is aware that the transferor is relying upon its foregoing representations
in order to claim the exemption from registration provided by Rule 144A;
(ii) a transfer of an Offshore Global Note or a beneficial
interest therein to an IAI shall be made upon receipt by the Trustee or its
agent of a certificate substantially in the form set forth in Section 308
hereof from the proposed transferee and, if requested by the Company or the
Trustee, the delivery of an opinion of counsel, certification and/or other
information satisfactory to each of them; and
(iii) a transfer of an Offshore Global Note or a beneficial
interest therein to a Non-U.S. Person shall be made upon, if requested by
the Company or the Trustee, receipt by the Trustee or its agent of an
opinion of counsel, certification and/or other information satisfactory to
each of them.
After the expiration of the Restricted Period, interests in an
Offshore Global Note may be transferred without requiring certification set
forth in Section 309 or any additional certification.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Note Registrar shall deliver only Notes that bear the
Private Placement Legend unless there is delivered to the Note Registrar an
Opinion of Counsel to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Note Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 306 or this Section
307. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Note Registrar.
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58
SECTION 308. FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS.
[date]
THE BOYDS COLLECTION, LTD.
c/o The Bank of New York
101 BARCLAY STREET
FLOOR 21 WEST
NEW YORK, NEW YORK 10286
Attention: Corporate Trust ADMINISTRATION - The Boyds Collection, Ltd.
Dear Sirs:
In connection with our proposed purchase of $ principal amount
of the 9% Senior Subordinated Notes due 2008 (the "Notes") of The Boyds
Collection, Ltd., a Maryland corporation (the "Company"), we confirm that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act") purchasing for our own account or for the account
of such an institutional "accredited investor," and we are acquiring the Notes
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act or other
applicable securities law and we have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment.
2. We understand and acknowledge that the Notes have not been
registered under the Securities Act, or any other applicable securities law and
may not be offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act or any other applicable
securities law, or pursuant to an exemption therefrom, and in each case in
compliance with the conditions for transfer set forth below. We agree on our own
behalf and on behalf of any investor account for which we are purchasing Notes
to offer, sell or otherwise transfer such Notes prior to the date which is two
years after the later of the date of original issue and the last date on which
the Company or any affiliate of the Company was the owner of such Notes (or any
predecessor thereto) (the "Resale Restriction Termination Date")
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59
only (a) to the Company, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) for so long as the Notes are
eligible for resale pursuant to Rule 144A under the Securities Act, to a person
we reasonably believe is a "Qualified Institutional Buyer" within the meaning of
Rule 144A (a "QIB") that purchases for its own account, or for the account of a
QIB, and to whom notice is given that the transfer is being made in reliance on
Rule 144A, (d) pursuant to offers and sales to non-U.S. persons that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" that is acquiring
the Notes for its own account or for the account of such an institutional
"accredited investor" for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution in violation of the
Securities Act or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver to the trustee (the "Trustee")
under the Indenture pursuant to which the Notes are issued a letter from the
transferee substantially in the form of this letter, which shall provide, among
other things, that the transferee is a person or entity as deemed in paragraph 1
of this letter and that it is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. We acknowledge that
the Company and the Trustee reserve the right prior to any offer, sale or other
transfer of the Notes pursuant to clauses (d), (e) and (f) above prior to the
Resale Restriction Termination Date to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to the Company and
the Trustee.
3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By: (Name of Purchaser)
Date:
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60
Upon transfer the Notes would be registered in the name of the new beneficial
owner as follows:
Taxpayer ID
Name Address Number
---- ------- -----------
<PAGE>
61
SECTION 309. FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS OF AN OFFSHORE GLOBAL NOTE.
[date]
The Bank of New York
Attention: Corporate Trust Department - The Boyds Collection, Ltd.
Re: THE BOYDS COLLECTION, LTD.
(the "Company") 9% Senior Subordinated
Notes due 2008 (the "Notes")
--------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the United States Securities Act of 1933,
as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the facilities
of a designated off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been pre-arranged with
a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
<PAGE>
62
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_______________________
Authorized Signature
SECTION 310. MUTILATED, DESTROYED, LOST AND STOLEN NOTES.
If (i) any mutilated Note is surrendered to the Trustee, or (ii) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, and there is delivered to the Company,
any Guarantor and the Trustee such security or indemnity, in each case, as may
be required by them to save each of them harmless, then, in the absence of
notice to the Company any Guarantor or the Trustee that such Note has been
acquired by a bona fide purchaser, the Company shall execute and upon Company
Order the Trustee shall authenticate and deliver, in exchange for any such
mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note
of like tenor and principal amount, bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) in connection therewith.
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63
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, any Guarantor and any other
obligor upon the Notes, whether or not the mutilated, destroyed, lost or stolen
Note shall be at any time enforceable by anyone, and shall be entitled to all
benefits of this Indenture equally and proportionately with any and all other
Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 311. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest and Liquidated Damages, if any, on any Note which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name such Note (or one or more Predecessor Notes)
is registered at the close of business on the Regular Record Date for such
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose pursuant to Section 1002; PROVIDED, HOWEVER, that
each installment of interest and Liquidated Damages, if any, may at the
Company's option be paid by mailing a check for such interest and Liquidated
Damages, if any, payable to or upon the written order of the Person entitled
thereto pursuant to Section 312, to the address of such Person as it appears in
the Note Register ; PROVIDED THAT ALL PAYMENTS OF PRINCIPAL, PREMIUM, IF ANY,
INTEREST AND LIQUIDATED DAMAGES, IF ANY, WITH RESPECT TO NOTES REPRESENTED BY
ONE OR MORE PERMANENT GLOBAL NOTES REGISTERED IN THE NAME OF OR HELD BY THE
DEPOSITARY OR ITS NOMINEE WILL BE MADE BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS TO THE ACCOUNTS SPECIFIED BY THE HOLDERS THEREOF. UNTIL OTHERWISE
DESIGNATED BY THE COMPANY, THE COMPANY'S OFFICE OR AGENCY IN NEW YORK WILL BE
THE OFFICE OF THE TRUSTEE MAINTAINED FOR SUCH PURPOSE.
Any interest and Liquidated Damages, if any, on any Note which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date shall forthwith cease to be payable to the Holder on the Regular
Record Date by virtue of having been such Holder, and such defaulted interest
and Liquidated Damages, if any, and (to the extent lawful) interest on such
defaulted interest and Liquidate Damages, if any, at the rate borne by the Notes
(such defaulted interest and Liquidated Damages, if any, and interest thereon
herein collectively called "DEFAULTED INTEREST") shall be paid by the Company,
at its election in each case, as provided in clause (1) or (2) below:
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64
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective Predecessor
Notes) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Note and the date
(not less than 30 days after such notice) of the proposed payment (the
"SPECIAL RECORD DATE"), and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the Special Record Date and not less
than 10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date, and in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be given in the manner provided for in Section 106,
not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so given, such Defaulted Interest shall be paid to the
Persons in whose names the Notes (or their respective Predecessor Notes)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Company
to the Trustee of the proposed payment pursuant to this clause, such manner
of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 312. PERSONS DEEMED OWNERS.
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65
Prior to the due presentment of a Note for registration of transfer,
the Company, the Trustee and any agent of the Company, any Guarantor or the
Trustee may treat the Person in whose name such Note is registered as the owner
of such Note for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 305 and 311) interest on such Note and for all
other purposes whatsoever, whether or not such Note be overdue, and none of the
Company, any Guarantor, the Trustee nor any agent of the Company, any Guarantor
or the Trustee shall be affected by notice to the contrary.
SECTION 313. CANCELLATION.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. If the
Company shall acquire any of the Notes other than as set forth in the preceding
sentence, the acquisition shall not operate as a redemption or satisfaction of
the Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 313. No
Notes shall be authenticated in lieu of or in exchange for any Notes cancelled
as provided in this Section, except as expressly permitted by this Indenture.
All cancelled Notes held by the Trustee shall be returned to the Company.
SECTION 314. COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a 360-day year
of twelve 30-day months.
SECTION 315. CUSIP NUMBERS.
The Company in issuing Notes may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers; if so, the Trustee shall use
such CUSIP numbers in addition to serial numbers in notices of redemption and
repurchase as a convenience to Holders; PROVIDED that any such notice may state
that no representation is made as to the correctness of such CUSIP numbers
either as printed on the Notes or as contained in any notice of a redemption or
repurchase and that reliance may be placed only on the serial or other
identification numbers printed on the Notes, and any such redemption or
repurchase shall not be affected by any defect in or omission of such CUSIP
numbers. The Company shall promptly notify the Trustee of any change of the
CUSIP numbers.
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66
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Notes expressly provided for herein or pursuant hereto) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture when
(1) either
(a) all such Notes theretofore authenticated and delivered
(except (i) lost, stolen or destroyed Notes which have been replaced or paid as
provided in Section 310 and (ii) Notes for whose payment money has theretofore
been deposited in trust and thereafter repaid to the Company) have been
delivered to the Trustee for cancellation; or
(b) all such Notes not theretofore delivered to such Trustee for
cancellation
(i) have become due and payable by reason of the making of
a notice of redemption or otherwise;
(ii) will become due and payable at their Stated Maturity
within one year; or
(iii) are called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company or any Guarantor, in the case of (i), (ii) or (iii)
above, has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust solely for the benefit of the Holders,
cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient without
consideration of any reinvestment of interest, to pay and discharge
the entire indebtedness on such Notes not theretofore delivered to the
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68
Trustee for cancellation, for principal, premium, if any, accrued
interest and Liquidated Damages, if any, to the date of the Stated
Maturity or Redemption Date, as the case may be;
(2) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under, any other
instrument to which the Company or any Guarantor is a party or by which the
Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or caused to be paid all
sums payable hereunder by the Company or any Guarantor;
(4) the Company has delivered irrevocable instructions to the Trustee
to apply the deposited money toward the payment of such Notes at maturity
or the Redemption Date, as the case may be; and
(5) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been satisfied.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the provisions of Section 402 and the last paragraph of Section
1003 shall survive such satisfaction and discharge.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 401 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise
<PAGE>
68
prohibiting such application, the Company's and any Guarantor's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 401; PROVIDED that if the Company has
made any payment of principal of, premium, if any, or interest on any Notes
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money or Government Securities held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"EVENT OF DEFAULT," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Thirteen or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) default in payment when due and payable, upon redemption,
acceleration or otherwise, of principal or premium, if any, on the Notes
whether or not such payment shall be prohibited by Article Thirteen;
(ii) default for 30 days or more in the payment when due of interest
on or Liquidated Damages, if any, with respect to the Notes whether or not
such payment shall be prohibited by Article Thirteen;
(iii) failure by the Company or any Guarantor for 30 days after
receipt of written notice given by the Trustee or the holders of at least
30% in principal amount of the Notes then Outstanding to comply with any of
its other agreements in this Indenture or the Notes;
(iv) default under any mortgage, indenture or instrument under which
there is issued or by which there is secured or evidenced any Indebtedness
for money borrowed by the Company or any of its Restricted Subsidiaries or
the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries (other than Indebtedness owed to the Company or a Restricted
Subsidiary), whether such Indebtedness or guarantee now exists or is
created after the Issuance Date, if both (A) such default either
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69
(1) results from the failure to pay any such Indebtedness at its stated
final maturity (after giving effect to any applicable grace periods) or (2)
relates to an obligation other than the obligation to pay principal of any
such Indebtedness at its stated final maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior
to its stated maturity and (B) the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at stated final maturity (after giving
effect to any applicable grace periods), or the maturity of which has been
so accelerated, aggregate $20.0 million or more at any one time
outstanding;
(v) failure by the Company or any of its Significant Subsidiaries to
pay final judgments aggregating in excess of $20.0 million, which final
judgments remain unpaid, undischarged and unstayed for a period of more
than 60 days after such judgment becomes final, and in the event such
judgment is covered by insurance, an enforcement proceeding has been
commenced by any creditor upon such judgment or decree which is not
promptly stayed;
(vi) the Company or any of its Significant Subsidiaries pursuant to or
within the meaning of Federal Bankruptcy Code: (A) commences a voluntary
case; (B) consents to the entry of an order for relief against it in an
involuntary case; (C) consents to the appointment of a Custodian of it or
for all or substantially all of its property; (D) makes a general
assignment for the benefit of its creditors, or (E) admits in writing that
it is generally not paying its debts (other than debts which are the
subject of a bona fide dispute) as they become due;
(vii) a court of competent jurisdiction enters an order or decree
under any Federal Bankruptcy Code that remains unstayed and in effect for
60 days and: (A) is for relief against the Company or any of its
Significant Subsidiaries in an involuntary case; (B) appoints a Custodian
of the Company or any of its Significant Subsidiaries or for all or
substantially all of the property of the Company or any of its Significant
Subsidiaries; or (C) orders the liquidation of the Company or any of its
Significant Subsidiaries; PROVIDED that clauses (A), (B) and (C) shall not
apply to an Unrestricted Subsidiary, unless such action or proceeding has a
material adverse effect on the interests of the Company or any Restricted
Subsidiary; or
(viii) any Guarantee shall for any reason cease to be in full force
and effect or is declared null and void or any Responsible Officer of the
Company or any Guarantor denies that it has any further liability under any
Guarantee or gives notice to such effect
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(other than by reason of the termination of this Indenture or the release
of any such Guarantee in accordance with this Indenture).
The Trustee shall not be charged with knowledge of any Event of
Default unless written notice thereof shall have been received by a Responsible
Officer of the Trustee at the Corporate Trust Office.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If any Event of Default (other than of a type specified in Section
501(vi) or 501(vii)) occurs and is continuing, the Trustee or the Holders of at
least 30% in principal amount of the Outstanding Notes may declare the
principal, premium, if any, interest and any other monetary obligations on all
the then Outstanding Notes to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders); PROVIDED,
HOWEVER, that, so long as any Indebtedness permitted to be incurred pursuant to
the Credit Facility shall be outstanding, such acceleration shall not be
effective until the earlier of (i) acceleration of any such Indebtedness under
the Credit Facility or (ii) five Business Days after the giving of written
notice to the Company and the Bank Agent of such acceleration. Upon the
effectiveness of such declaration, such principal and interest shall be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default specified in Section 501(vi) or 501(vii) occurs and is continuing, then
the principal amount of all the Notes shall IPSO FACTO become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in aggregate principal amount of the Notes Outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all overdue interest and Liquidated Damages, if any, on all
Outstanding Notes,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Notes which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal and
premium at the rate borne by the Notes
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(for purposes of this clause (B) without duplication to amounts to be
paid or deposited under clause (A) above);
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Notes;
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(2) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on Notes which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513;
(3) if the rescission would not conflict with any judgment or decree;
and
(4) in the event of the cure or waiver of an Event of Default
specified in clause (iv) of Section 501, the Trustee shall have received an
Officers' Certificate and, if appropriate, an Opinion of Counsel that such
Event of Default has been cured or waived.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon a determination by the Company that the Credit Facility is no
longer in effect, the Company shall promptly give to the Trustee written notice
thereof executed by an Officer of the Company, which notice shall be
countersigned by the Bank Agent. Unless and until the Trustee shall have
received such written notice with respect to the Credit Facility, the Trustee,
subject to the TIA Sections 315(a) through 315(d), shall be entitled in all
respects to assume that the Credit Facility is in effect (unless a Responsible
Officer of the Trustee shall have knowledge to the contrary).
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
If an Event of Default specified in Section 501(i) or 501(ii) occurs
and is continuing, the Trustee, in its own name as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any Guarantor (in accordance with the
applicable Guarantee) or any other obligor upon the Notes and collect the moneys
adjudged or decreed to be payable in the manner provided by law out of the
property of the Company, any Guarantor or any other obligor upon the Notes,
wherever situated.
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If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture or any Guarantee by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, including, seeking recourse against any Guarantor pursuant to the
terms of any Guarantee, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy including, without limitation,
seeking recourse against any Guarantor pursuant to the terms of a Guarantee, or
to enforce any other proper remedy, subject however to Section 513. No recovery
of any such judgment upon any property of the Company or any Guarantor shall
affect or impair any rights, powers or remedies of the Trustee or the Holders.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including any
Guarantor, upon the Notes or the property of the Company or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal, premium, if any,
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Notes, to
take such other actions (including participating as a member, voting or
otherwise, of any official committee of creditors appointed in such matter)
and to file such 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 of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
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 the
Trustee any amount due 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 607.
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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 Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding; PROVIDED, HOWEVER, that the
Trustee may, on behalf of such Holders, vote for the election of a trustee in
bankruptcy or other similar official.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF NOTES.
All rights of action and claims under this Indenture, the Notes or the
Guarantees may be prosecuted and enforced by the Trustee without the possession
of any of the Notes or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Subject to Article Thirteen, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Notes and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607 or otherwise pursuant to this Indenture;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Notes in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Notes for principal (and premium, if any) and interest,
respectively; and
THIRD: The balance, if any, to the Company, PROVIDED that all sums
due and owing to the Holders and the Trustee have been paid in full as
required by this Indenture.
SECTION 507. LIMITATION ON SUITS.
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No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 30% in principal amount of the
Outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 30-day period by the Holders of a majority
or more in principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture, any Note or any Guarantee to affect, disturb or prejudice the
rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
any Note or any Guarantee, except in the manner herein provided and for the
equal and ratable benefit of all the Holders.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment, as provided herein (including, if applicable, Article Eleven) and in
such Note of the principal of (and premium, if any) and (subject to Section 311)
interest and Liquidated Damages, if any, on such Note on the respective Stated
Maturities expressed in such Note (or, in the case of redemption or repurchase,
on the Redemption Date or repurchase) and to institute suit for the enforcement
of any such payment, and such rights shall not be impaired without the consent
of such Holder.
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SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Guarantee and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, any Guarantor, any other
obligor on the Notes, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 310, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of not less than a majority in principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture or any Guarantee,
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(2) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting; and
(3) subject to the provisions of Section 315 of the Trust Indenture
Act, the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
Subject to Sections 508 and 902, the Holders of a majority in
aggregate principal amount of the Outstanding Notes (including consents obtained
in connection tender offer or exchange offer for the Notes) may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under this Indenture or any Guarantee except a continuing
Default or Event of Default in the payment of interest on, premium, if any, or
the principal of, any such Note held by a non-consenting Holder, or in respect
of a covenant or a provision which cannot be amended or modified without the
consent of all Holders.
In the event that any Event of Default specified in Section 501(iv)
shall have occurred and be continuing, such Event of Default and all
consequences thereof (including without limitation any acceleration or resulting
payment default) shall be annulled, waived and rescinded, automatically and
without any action by the Trustee or the Holders of the Notes, if within 20 days
after such Event of Default arose (x) the Indebtedness or guarantee that is the
basis for such Event of Default has been discharged, or (y) the holders thereof
have rescinded or waived the acceleration, notice or action (as the case may be)
giving rise to such Event of Default, or (z) if the default that is the basis
for such Event of Default has been cured.
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 Event of Default or impair any right consequent thereon.
SECTION 514. WAIVER OF STAY OR EXTENSION LAWS.
The Company, the Guarantors and any other obligors upon the Notes,
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which would prohibit or forgive the Company, any
Guarantor or any such obligor from paying all or any portion of the principal
of, premium, if any, or interest on the Notes contemplated herein or in the
Notes or which may
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affect the covenants or the performance of this Indenture; and each of the
Company, any Guarantor and any such obligor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 515. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, 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,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Note on or after the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of a Default or an Event of
Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith or willful misconduct 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; but in the case of any such certificates or opinions
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required to be delivered hereunder, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein).
(b) In case a Default or an Event of Default has occurred and is
continuing of which a Responsible Officer of the Trustee has actual knowledge or
of which written notice of such Default or Event of Default shall have been
given to the Trustee by the Company, any other obligor of the Notes or by any
Holder, 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 their exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, EXCEPT that
(1) this paragraph (c) shall not be construed to limit the effect of
paragraph (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of the Outstanding Notes received by the Trustee pursuant to
Sections 502, 512 and 513 hereof or in exercising any trust or power
conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
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SECTION 602. NOTICE OF DEFAULTS.
Within 90 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such Default hereunder actually known to a Responsible Officer
of the Trustee, unless such Default shall have been cured or waived; PROVIDED,
HOWEVER, that, except in the case of a Default in the payment of the principal
of (or premium, if any) or interest on any Note, the Trustee shall be protected
in withholding such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders; and PROVIDED FURTHER that in the case
of any Default of the character specified in clause (iii) of Section 501 no such
notice to Holders shall be given until at least 30 days after the occurrence
thereof.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
(a) Subject to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document (whether in its original or facsimile form)
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee may, in the
absence of bad faith on its part, request and rely upon an Officers'
Certificate or an Opinion of Counsel or both;
(4) the Trustee may consult with counsel of its selection and any
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;
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(5) 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 pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney at the sole cost of the Company
and shall incur no liability or additional liability of any kind by reason
of such inquiry or investigation;
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.
SECTION 604. TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
NOTES.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes and shall not be responsible for any statement of any
Person in this Indenture, the Notes or any statement made in connection with
the sale of the Notes, PROVIDED that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Notes and
perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility on Form T-1 supplied to the Company are true and
accurate, subject to the qualifications set forth therein. The Trustee shall
not be accountable for the use or application by the Company of Notes or the
proceeds thereof.
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SECTION 605. MAY HOLD NOTES.
The Trustee, any Paying Agent, any Note Registrar, any Authenticating
Agent or any other agent of the Company or of the Trustee, in its individual or
any other capacity, may become the owner or pledgee of Notes and, subject to TIA
Sections 310(b) and 311, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Note Registrar,
Authenticating Agent or such other agent.
SECTION 606. MONEY HELD IN TRUST.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust hereunder for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed in writing with the
Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as
shall be agreed to in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel and costs and expenses of
collection), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee (and
their respective directors, officers, employees and agents) for, and to
hold it harmless against, any and all loss, damage, claim, liability or
expense, including taxes (other than taxes based on the income of the
Trustee) incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
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The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the Holders
of the Notes upon all property and funds held or collected by the Trustee as
such, except funds held in trust for the payment of principal of (and premium,
if any) or interest on particular Notes.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(vi) or (vii), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section shall also apply to the Trustee in its
capacity as Note Registrar and for so long as the Trustee shall remain Note
Registrar.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1), and which shall have an
office in The City of New York and shall have a combined capital and surplus of
at least $50,000,000. If the Trustee does not have an office in The City of New
York, the Trustee may appoint an agent in The City of New York reasonably
acceptable to the Company to conduct any activities which the Trustee may be
required under this Indenture to conduct in The City of New York. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section 608,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 608, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
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SECTION 609. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of this Section.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. Upon receiving such notice of resignation, the Company
shall promptly appoint a successor trustee by written instrument executed by
authority of the Board of Directors, a copy of which shall be delivered to the
resigning Trustee and a copy to the successor trustee. If an instrument of
acceptance required by this Section shall not have been delivered to the Trustee
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition at the expense of the Company any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Notes, delivered
to the Trustee and to the Company. If an instrument of acceptance required by
this Section shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition at
the expense of the Company any court of competent jurisdiction for the
appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Note for at least six months,
or
(2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Note for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a Custodian of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
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then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Notes delivered to
the Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Notes in the manner provided for in Section 106. Each notice shall
include the name of the successor Trustee and the address of its Corporate Trust
Office.
SECTION 610. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
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SECTION 611. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes. In case at
that time any of the Notes shall not have been authenticated, any successor
Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee. In all such cases such
certificates shall have the full force and effect which this Indenture provides
for the certificate of authentication of the Trustee shall have; PROVIDED,
HOWEVER, that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Notes in the name of any predecessor
Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.
SECTION 612. TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE COMPANY.
Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such OMISSION shall be
effective. The Trustee shall not be liable for any action taken by, or
OMISSION of, the Trustee in accordance with a proposal included in such
application (which date shall not be less than three Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to any earlier date) unless prior
to taking any such action (or the effective date in the case of an OMISSION),
the Trustee shall have received written instructions in response to such
application specifying the action to be taken or OMITTED.
ARTICLE SEVEN
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES.
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The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such request, a list
of similar form and content to that in Subsection (a) hereof as of a date not
more than 15 days prior to the time such list is furnished; PROVIDED, HOWEVER
that if and so long as the Trustee shall be the Note Registrar, no such list
need be furnished.
SECTION 702. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Every Holder of Notes, by receiving and holding the same, agrees with
the Company and the Trustee that none of the Company or the Trustee or any agent
of either of them shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Holders in accordance with
TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 703. REPORTS BY TRUSTEE.
Within 60 days after May 15 of each year commencing with May 15, 1999,
the Trustee shall transmit to the Holders, in the manner and to the extent
provided in TIA Section 313(c), a brief report dated as of such May 15 if
required by TIA Section 313(a).
ARTICLE EIGHT
MERGER, CONSOLIDATION, OR SALE OF ASSETS
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
(1) The Company shall not consolidate or merge with or into or wind
up 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 any Person
unless (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which
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such sale, assignment, transfer, lease, conveyance or other disposition will
have been made is a corporation organized or existing under the laws of the
United States, any state thereof, the District of Columbia, or any territory
thereof (the Company or such Person, as the case may be, being herein called the
"SUCCESSOR COMPANY"); (ii) the Successor Company (if other than the Company)
expressly assumes all the obligations of the Company under this Indenture and
the Notes pursuant to a supplemental indenture or other documents or instruments
in form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving pro forma effect to such transaction,
as if such transaction had occurred at the beginning of the applicable
four-quarter period, (A) the Successor Company would be permitted to incur at
least $1.00 of additional Indebtedness under the provisions of paragraph (a) of
Section 1010 or (B) the Fixed Charge Coverage Ratio for the Successor Company
and its Restricted Subsidiaries would be greater than such Ratio for the Company
and its Restricted Subsidiaries immediately prior to such transaction; (v) each
Guarantor, if any, unless it is the other party to the transactions described
above, shall have by supplemental indenture confirmed that its Guarantee shall
apply to such Person's obligations under this Indenture and the Notes; and (vi)
the Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture. The Successor
Company shall succeed to, and be substituted for, the Company under this
Indenture and the Notes. Notwithstanding the foregoing clause (iv), (a) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company and (b) the Company may merge with
an Affiliate incorporated solely for the purpose of reincorporating the Company
in another State of the United States so long as the amount of Indebtedness of
the Company and its Restricted Subsidiaries is not increased thereby. In
addition, notwithstanding the foregoing provisions, the Company may effect the
Asset Transfer.
(2) Each Guarantor, if any, shall not, and the Company shall not
permit a Guarantor to, consolidate or merge with or into or wind up into
(whether or not such Guarantor 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 any Person unless
(i) such Guarantor is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than such Guarantor) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made is a corporation organized or existing under the laws of the
United States, any state thereof, the District of Columbia, or any territory
thereof (such Guarantor or such Person, as the case may be, being herein called
the "SUCCESSOR GUARANTOR"); (ii) the Successor Guarantor (if other than such
Guarantor) expressly assumes all the obligations of such Guarantor under this
Indenture and such Guarantor's Guarantee pursuant to a supplemental indenture or
other documents or instruments in form
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reasonably satisfactory to the Trustee; (iii) immediately after such transaction
no Default or Event of Default shall have occurred and be continuing; and (iv)
the Guarantor shall have delivered or caused to be delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture. The Successor Guarantor shall succeed to, and be
substituted for, such Guarantor under this Indenture and such Guarantor's
Guarantee.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with or merger of the Company
with or into or wind up into any other corporation or any sale, assignment,
conveyance, transfer, lease or other disposition of the properties and assets of
the Company substantially as an entirety to any Person in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or wound up or to which such sale, assignment, conveyance,
transfer, lease or other disposition is made will succeed to, and be substituted
for, 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
therein, and thereafter (except in the case of a sale, assignment, transfer,
lease, conveyance or other disposition) the predecessor corporation will be
relieved of all further obligations and covenants under this Indenture and the
Notes; provided that, solely with respect to calculating amounts described in
clauses (A), (B) and (C) of paragraph (a) of Section 1009, any such surviving
entity to the Company shall only be deemed to have succeeded to and be
substituted for the Company with respect to periods subsequent to the effective
time of such merger, consolidation, combination or transfer of assets.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders of Notes, the Company, any
Guarantor (with respect to a Guarantee to which it is a party), when authorized
by a Board Resolution, and the Trustee may amend or supplement this Indenture,
any Guarantee or the Notes:
(1) to cure any ambiguity, defect or inconsistency; or
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes; or
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(3) to comply with Article Eight hereof; or
(4) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of such Notes; or
(5) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any such Holder; or
(6) to add covenants for the benefit of the Holders or to surrender
any right or power conferred upon the Company; or
(7) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture
Act; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
610; or
(9) to add a Guarantor hereunder.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of at least a majority in principal
amount of the Outstanding Notes (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, the Notes), by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture; PROVIDED, HOWEVER, that no such supplemental
indenture shall, without the consent of each Holder affected thereby (with
respect to any Notes held by a nonconsenting Holder of the Notes):
(1) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver; or
(2) reduce the principal of or change or have the effect of changing
the Stated Maturity of any such Note or alter or waive the provisions with
respect to the redemption of the Notes (other than Sections 1016 and 1017
and the defined terms used therein); or
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(3) reduce the rate of or change the time for payment of interest on
any Note; or
(4) waive a Default or Event of Default in the payment of principal
of, or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of such Notes Outstanding and a waiver of the
payment default that resulted from such acceleration), or in respect of a
covenant or provision contained in this Indenture or any Guarantee which
cannot be amended or modified without the consent of all Holders; or
(5) make any Note payable in money other than that stated in such
Notes; or
(6) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of the Notes to receive
payments of principal of or premium, if any, or interest on the Notes; or
(7) make any change in the foregoing amendment and waiver provisions;
or
(8) impair the right of any Holder of the Notes to receive payment of
principal of, or interest on such Holder's Notes on or after the due dates
relating thereto or to institute suit for the enforcement of any payment on
or with respect to such Holder's Notes; or
(9) make any change in the subordination provisions of this Indenture
that would adversely affect the Holders of the Notes.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel and an
Officers' Certificate stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustees own rights, duties or immunities under this Indenture or otherwise.
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SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes theretofore or thereafter authenticated and delivered hereunder shall
be bound thereby (except as provided in Section 902).
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Note affected, in
the manner provided for in Section 106, setting forth in general terms the
substance of such supplemental indenture.
SECTION 908. EFFECT ON SENIOR INDEBTEDNESS.
No supplemental indenture shall adversely affect the rights of any
holders of Senior Indebtedness under Article Thirteen unless the requisite
holders of each issue of Senior Indebtedness affected thereby shall have
consented to such supplemental indenture.
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ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST.
The Company shall pay or cause to be paid the principal of, premium,
if any, interest, and Liquidated Damages, if any, on the Notes on the dates and
in the manner provided in the Notes. Principal, premium, if any, interest, and
Liquidated Damages, if any, 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. Eastern 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, interest and Liquidated Damages, if any, then due.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in 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 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 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 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 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
305.
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SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (or premium, if any) or interest
on any of the Notes, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal of (or premium, if any)
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure to so act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, on or before each due date of the principal of (or premium, if
any) or interest on any Notes, deposit with a Paying Agent a sum in same day
funds (or New York Clearing House funds if such deposit is made prior to the
date on which such deposit is required to be made) sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure to so act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Notes) in the making of any payment of principal
(and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were
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held by the Company or such Paying Agent; and, upon such payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such sums.
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 (or premium, if
any) or interest on any Note and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Note shall thereafter, as an unsecured
general 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 to the Company, may at the expense of the Company
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in the
City of New York, 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 publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. CORPORATE EXISTENCE.
Subject to Article Eight 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 Restricted 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 Notes.
SECTION 1005. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
charges 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 Notes.
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SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will cause all material properties owned by the Company or
any Restricted Subsidiary or used or held for use in the conduct of its business
or the business of any Restricted Subsidiary to be maintained and kept in normal
condition, repair and working order and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly conducted at all times; PROVIDED, HOWEVER,
that nothing in this Section shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the maintenance of any of such properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business or the business of any Restricted Subsidiary and not adverse in
any material respect to the Holders.
SECTION 1007. INSURANCE.
To the extent available at commercially reasonable rates, the Company
will maintain, and will cause its Subsidiaries to maintain, insurance with
responsible carriers against such risks and in such amounts, and with such
deductibles, retentions, self-insured amounts and co-insurance provisions, as
are customarily carried by similar businesses, of similar size, including
professional and general liability, property and casualty loss, workers'
compensation and interruption of business insurance.
SECTION 1008. COMPLIANCE WITH LAWS.
The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental regulatory authority, in respect of the conduct
of their respective businesses and the ownership of their respective properties,
except for such noncompliances as would not in the aggregate have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.
SECTION 1009. LIMITATION ON RESTRICTED PAYMENTS.
(a) 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 distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests, including any dividend or
distribution payable in connection with any merger or consolidation (other than
(A) dividends or distributions by the Company payable in Equity Interests (other
than
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Disqualified Stock) of the Company or (B) dividends or distributions by a
Restricted Subsidiary so long as, in the case of any dividend or distribution
payable on or in respect of any class or series of securities issued by a
Subsidiary other than a Wholly Owned Subsidiary, the Company or a Restricted
Subsidiary receives at least its PRO RATA share of such dividend or distribution
in accordance with its Equity Interests in such class or series of securities);
(ii) purchase, redeem, defease or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent of the Company;
(iii) make any principal payment on, or redeem, repurchase, defease or otherwise
acquire or retire for value in each case, prior to any scheduled repayment, or
maturity, any Subordinated Indebtedness (other than Indebtedness permitted under
clauses (vii) and (ix) of Section 1010(b) hereof); 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 such Restricted Payment:
(A) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(B) immediately before and immediately after giving effect to such
transaction on a pro forma basis, the Company could incur $1.00 of
additional Indebtedness under the provisions of paragraph (a) of Section
1010; 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 Issuance Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of dividends on
Refunding Capital Stock pursuant to clause (b) thereof), (v) (only to the
extent that amounts paid pursuant to such clause are greater than amounts
that would have been paid pursuant to such clause if $3.75 million and
$7.50 million were substituted in such clause for $7.50 million and $15.0
million, respectively), (vi), (ix) and (x) of paragraph (b) of this Section
1009, but excluding all other Restricted Payments permitted by paragraph
(b) of this Section 1009), 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 fiscal quarter that first begins after the
Issuance Date 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, in the case such Consolidated Net Income
for such period is a deficit, minus 100% of such deficit), PLUS (ii) 100%
of the aggregate net cash proceeds and the fair market value, as determined
in good faith by the Board of Directors, of marketable securities received
by the Company since immediately after the closing of the Recapitalization
from the issue or sale of Equity Interests of the Company (including
Refunding Capital Stock (as defined below), but excluding cash proceeds and
marketable securities received from the sale of Equity
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Interests to members of management, directors or consultants of the Company
and its Subsidiaries after the Issuance Date to the extent such amounts
have been applied to Restricted Payments in accordance with clause (v) of
paragraph (b) of this Section 1009 and excluding Excluded Contributions) or
debt securities of the Company that have been converted into such Equity
Interests of the Company (other than Refunding Capital Stock (as defined
below) or Equity Interests or convertible debt securities of the Company
sold to a Restricted Subsidiary of the Company and other than Disqualified
Stock or debt securities that have been converted into Disqualified Stock),
PLUS (iii) 100% of the aggregate amount of cash and marketable securities
contributed to the capital of the Company following the Issuance Date
(excluding Excluded Contributions), PLUS (iv) 100% of the aggregate amount
received in cash and the fair market value of marketable securities (other
than Restricted Investments) received from (A) the sale or other
disposition (other than to the Company or a Restricted Subsidiary) of
Restricted Investments made by the Company and its Restricted Subsidiaries
or (B) a dividend from, or the sale (other than to the Company or a
Restricted Subsidiary) of the stock of, an Unrestricted Subsidiary (other
than an Unrestricted Subsidiary the Investment in which was made by the
Company or a Restricted Subsidiary pursuant to clauses (vii) or (xi) of
paragraph (b) of this Section 1009).
(b) The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) (A) the redemption, repurchase, retirement or other
acquisition of any Equity Interests (the "RETIRED CAPITAL STOCK") or
Subordinated Indebtedness of the Company in exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary) of, Equity Interests of the Company (other than any
Disqualified Stock) (the "REFUNDING CAPITAL STOCK"), and (B) if immediately
prior to the retirement of Retired Capital Stock, the declaration and
payment of dividends thereon was permitted under clause (vi) of this
paragraph (b), the declaration and payment of dividends on the Refunding
Capital Stock in an aggregate amount per year no greater than the aggregate
amount of dividends per annum that was declarable and payable on such
Retired Capital Stock immediately prior to such retirement; PROVIDED,
HOWEVER, that at the time of the declaration of any such dividends, no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof;
(iii) distributions or payments of Receivables Fees;
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(iv) the redemption, repurchase or other acquisition or retirement
of Subordinated Indebtedness of the Company made by exchange for, or out of
the proceeds of the substantially concurrent sale of, new Indebtedness of
the Company so long as (A) the principal amount of such new Indebtedness
does not exceed the principal amount of the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired for value (plus the amount of
any premium required to be paid under the terms of the instrument governing
the Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired), (B) such Indebtedness is subordinated to the Senior Indebtedness
and the Notes at least to the same extent as such Subordinated Indebtedness
so purchased, exchanged, redeemed, repurchased, acquired or retired for
value, (C) such Indebtedness has a final scheduled maturity date equal to
or later than the final scheduled maturity date of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or retired and (D)
such Indebtedness has a Weighted Average Life to Maturity equal to or
greater than the remaining Weighted Average Life to Maturity of the
Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired;
(v) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of the
Company held by any future, present or former employee, director or
consultant of the Company or any Subsidiary pursuant to any management
equity plan or stock option plan or any other management or employee
benefit plan or agreement; PROVIDED, HOWEVER, that the aggregate Restricted
Payments made under this clause (v) does not exceed in any calendar year
$7.5 million (with unused amounts in any calendar year being carried over
to succeeding calendar years subject to a maximum (without giving effect to
the following proviso) of $15.0 million in any calendar year); PROVIDED
FURTHER that such amount in any calendar year may be increased by an amount
not to exceed (i) the cash proceeds from the sale of Equity Interests of
the Company to members of management, directors or consultants of the
Company and its Subsidiaries that occurs after the Issuance Date (to the
extent the cash proceeds from the sale of such Equity Interest have not
otherwise been applied to the payment of Restricted Payments by virtue of
clause (C) of paragraph (a) of this Section 1009) plus (ii) the cash
proceeds of key man life insurance policies received by the Company and its
Restricted Subsidiaries after the Issuance Date less (iii) the amount of
any Restricted Payments previously made pursuant to clauses (i) and (ii) of
this subparagraph (v); and PROVIDED FURTHER that cancellation of
Indebtedness owing to the Company from members of management of the Company
or any of its Restricted Subsidiaries in connection with a repurchase of
Equity Interests of the Company will not be deemed to constitute a
Restricted Payment for purposes of this Section 1009 or any other provision
of this Indenture;
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99
(vi) the declaration and payment of dividends to holders of any
class or series of Designated Preferred Stock (other than Disqualified
Stock) issued after the Issuance Date (including, without limitation, the
declaration and payment of dividends on Refunding Capital Stock in excess
of the dividends declarable and payable thereon pursuant to clause (ii));
PROVIDED, HOWEVER, that for the most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date of issuance of such Designated Preferred Stock, after
giving effect to such issuance on a pro forma basis, the Company and its
Restricted Subsidiaries would have had a Fixed Charge Coverage Ratio of at
least 1.75 to 1.00;
(vii) Investments in Unrestricted Subsidiaries having an aggregate
fair market value, taken together with all other Investments made pursuant
to this clause (vii) that are at that time outstanding, not to exceed $25.0
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value);
(viii) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the
exercise price of such options;
(ix) the payment of dividends on the Company's Common Stock,
following the first public offering of the Company's Common Stock after the
Issuance Date, of up to 6% per annum of the net proceeds received by the
Company in such public offering, other than public offerings with respect
to the Company's Common Stock registered on Form S-8;
(x) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of Equity Interests of the
Company which are not held by KKR or any of its affiliates (including any
Equity Interests issued in respect of such Equity Interests as a result of
a stock split, recapitalization, merger, combination, consolidation or
otherwise, but excluding any management equity plan or stock option plan or
similar agreement), provided that the aggregate Restricted Payments made
under this clause (x) shall not exceed $25 million, PROVIDED FURTHER that
prior to the first anniversary of the consummation of the Recapitalization,
no Restricted Payments may be made under this clause (x) PROVIDED FURTHER
that notwithstanding the foregoing proviso, the Company shall be permitted
to make Restricted Payments under this clause (x) only if after giving
effect thereto, the Company would be permitted to incur at least $1.00 of
additional Indebtedness under the provisions of Section 1010(a) hereof;
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(xi) Investments in Unrestricted Subsidiaries that are made with
Excluded Contributions;
(xii) the payment of dividends on Disqualified Stock which is issued
in accordance with Section 1010 hereof;
(xiii) other Restricted Payments in an aggregate amount not to
exceed $20.0 million; PROVIDED, HOWEVER, that at the time of, and after
giving effect to, any Restricted Payment permitted under clauses (iv), (v),
(vi), (vii), (viii), (ix), (x), (xi), (xii) and (xiii), no Default or Event
of Default shall have occurred and be continuing or would occur as a
consequence thereof; and PROVIDED FURTHER that for purposes of determining
the aggregate amount expended for Restricted Payments in accordance with
clause (C) of paragraph (a) of this Section 1009, only the amounts expended
under clauses (i), (ii) (with respect to the payment of dividends on
Refunding Capital Stock pursuant to clause (b) thereof), (v) (only to the
extent that amounts paid pursuant to such clause are greater than amounts
that would have been paid pursuant to such clause if $3.75 million and
$7.50 million were substituted in such clause for $7.50 million and $15.0
million, respectively), (vi), (ix) and (x) shall be included; and
(xiv) the Asset Transfer.
(c) In the future, the Company will not permit any Unrestricted
Subsidiary to become a Restricted Subsidiary except pursuant to the second to
last sentence of the definition of "Unrestricted Subsidiary." For purposes of
designating any Restricted Subsidiary as an Unrestricted Subsidiary, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid) in the Subsidiary so designated will be deemed to be
Restricted Payments in an amount determined as set forth in the last sentence of
the definition of "Investments." Such designation will only be permitted if a
Restricted Payment in such amount would be permitted at such time (whether
pursuant to paragraph (a) of this Section 1009 or under clause (vii) or (xi) of
paragraph (b) of this Section 1009) and if such Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be
subject to any of the restrictive covenants set forth in this Indenture.
SECTION 1010. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE
OF DISQUALIFIED STOCK.
(a) The Company shall not, and will not permit any of its
Restricted 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" and
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collectively, an "INCURRENCE") any Indebtedness (including Acquired
Indebtedness) and that the Company will not issue any shares of Disqualified
Stock and will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness
(including Acquired Indebtedness) or issue shares of Disqualified Stock if the
Fixed Charge Coverage Ratio for the Company's and the Restricted Subsidiaries'
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 1.75 to 1.00, 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, and the application of proceeds therefrom had occurred at the beginning of
such four-quarter period.
(b) Section 1010(a) shall not apply to:
(i) the incurrence by the Company or its Restricted Subsidiaries
of Indebtedness under Credit Facilities and the issuance and creation of
letters of credit and banker's acceptances thereunder (with letters of
credit and banker's acceptances being deemed to have a principal amount
equal to the face amount thereof) up to an aggregate principal amount of
$415.0 million outstanding at any one time; PROVIDED, HOWEVER that
Indebtedness incurred by Restricted Subsidiaries pursuant to this clause
(i) does not exceed $50.0 million (or the equivalent thereof in any other
currency) at any one time outstanding;
(ii) the incurrence by the Company of Indebtedness represented by
the Notes;
(iii) the Existing Indebtedness (other than Indebtedness described
in clauses (i) and (ii));
(iv) Indebtedness (including Capitalized Lease Obligations) incurred
by the Company or any of its Restricted Subsidiaries, to finance the
purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of any
Person owning such assets) in an aggregate principal amount which, when
aggregated with the principal amount of all other Indebtedness then
outstanding and incurred pursuant to this clause (iv) and including all
Refinancing Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (iv), does not exceed the
greater of (x) $30.0 million or (y) 10% of Total Assets;
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(v) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including without
limitation letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims; PROVIDED, HOWEVER,
that upon the drawing of such letters of credit or the incurrence of such
Indebtedness, such obligations are reimbursed within 30 days following such
drawing or incurrence;
(vi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary,
other than guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; PROVIDED, HOWEVER, that (A) such Indebtedness
is not reflected on the balance sheet of the Company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this clause
(A)) and (B) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured at
the time received and without giving effect to any subsequent changes in
value) actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(vii) Indebtedness of the Company to a Restricted Subsidiary;
PROVIDED that any such Indebtedness is made pursuant to an intercompany
note and is subordinated in right of payment to the Notes; PROVIDED FURTHER
that any subsequent issuance or transfer of any Capital Stock or any other
event which will result in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any other subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary) shall
be deemed, in each case to be an incurrence of such Indebtedness;
(viii) shares of preferred stock of a Restricted Subsidiary issued
to the Company or another Restricted Subsidiary; PROVIDED that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any other subsequent transfer of any such shares of preferred
stock (except to the Company or another Restricted Subsidiary) shall be
deemed, in each case to be an issuance of shares of preferred stock;
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(ix) Indebtedness of a Restricted Subsidiary to the Company or
another Restricted Subsidiary; PROVIDED that (A) any such Indebtedness is
made pursuant to an intercompany note and (B) if a Guarantor incurs such
Indebtedness from a Restricted Subsidiary that is not a Guarantor such
Indebtedness is subordinated in right of payment to the Guarantee of such
Guarantor; PROVIDED FURTHER that any subsequent transfer of any such
Indebtedness (except to the Company or another Restricted Subsidiary) shall
be deemed, in each case to be an incurrence of such Indebtedness;
(x) Hedging Obligations that are incurred in the ordinary course of
business (A) for the purpose of fixing or hedging interest rate risk with
respect to any Indebtedness that is permitted by the terms of this
Indenture to be outstanding or (B) for the purpose of fixing or hedging
currency exchange rate risk with respect to any currency exchanges;
(xi) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
in the ordinary course of business;
(xii) Indebtedness of any Guarantor in respect of such Guarantor's
Guarantee;
(xiii) Indebtedness of the Company and any of its Restricted
Subsidiaries not otherwise permitted hereunder in an aggregate principal
amount, which when aggregated with the principal amount of all other
Indebtedness then outstanding and incurred pursuant to this clause (xiii),
does not exceed $75.0 million at any one time outstanding; PROVIDED,
HOWEVER, that (A) Indebtedness of Foreign Subsidiaries, which when
aggregated with the principal amount of all other Indebtedness of Foreign
Subsidiaries then outstanding and incurred pursuant to this clause (xiii),
does not exceed $50.0 million (or the equivalent thereof in any other
currency) at any one time outstanding and (B) Indebtedness of a Restricted
Subsidiary organized under the laws of the United States, any state
thereof, the District of Columbia or any territory thereof, which when
aggregated with the principal amount of all other Indebtedness of such
Restricted Subsidiaries then outstanding and incurred pursuant to this
clause (xiii), does not exceed $50.0 million at any one time outstanding;
(xiv) (A) any guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the incurrence
of such Indebtedness incurred by such Restricted Subsidiary is permitted
under the terms of this Indenture and (B) any Excluded Guarantee (as
defined in Section 1014 hereof) of a Restricted Subsidiary;
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(xv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness which serves to refund, refinance or
restructure any Indebtedness incurred as permitted under paragraph (a) of
this Section 1010 and clauses (ii) and (iii) of this paragraph (b), or any
Indebtedness issued to so refund, refinance or restructure such
Indebtedness including additional Indebtedness incurred to pay premiums and
fees in connection therewith (the "REFINANCING INDEBTEDNESS") prior to its
respective maturity; PROVIDED, HOWEVER, that such Refinancing Indebtedness
(A) has a Weighted Average Life to Maturity at the time such Refinancing
Indebtedness is incurred which is not less than the remaining Weighted
Average Life to Maturity of Indebtedness being refunded or refinanced, (B)
to the extent such Refinancing Indebtedness refinances Indebtedness
subordinated or pari passu to the Notes, such Refinancing Indebtedness is
subordinated or pari passu to the Notes at least to the same extent as the
Indebtedness being refinanced or refunded and (C) shall not include (x)
Indebtedness of a Subsidiary that refinances Indebtedness of the Company or
(y) Indebtedness of the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary; and PROVIDED FURTHER that
subclauses (A) and (B) of this clause (xv) will not apply to any refunding
or refinancing of any Senior Indebtedness;
(xvi) Indebtedness or Disqualified Stock of Persons that are
acquired by the Company or any of its Restricted Subsidiaries or merged
into a Restricted Subsidiary in accordance with the terms of this
Indenture; provided that such Indebtedness or Disqualified Stock is not
incurred in contemplation of such acquisition or merger; and provided
further that after giving effect to such acquisition, either (A) the
Company would be permitted to incur at least $1.00 of additional
Indebtedness under the provisions of Section 1010(a) or (B) the Fixed
Charge Coverage Ratio is greater than immediately prior to such
acquisition; and
(xvii) The incurrence by the Company of Indebtedness represented by
the Subordinated Notes.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (i) through (xvii)
above or is entitled to be incurred pursuant to paragraph (a) of this Section
1010, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to paragraph (a) of this Section 1010. Accrual of
interest, the accretion of ACCREDITED value and the payment of interest in the
form of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness for purposes of this Section 1010.
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SECTION 1011. LIENS.
(a) 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 that secures obligations under any Pari Passu Indebtedness or
Subordinated Indebtedness on any asset or property of the Company or such
Restricted Subsidiary, or any income or profits therefrom, or assign or convey
any right to receive income therefrom, unless the Notes are equally and ratably
secured with the obligations so secured or until such time as such obligations
are no longer secured by a Lien.
(b) No Guarantor shall directly or indirectly create, incur, assume
or suffer to exist any Lien that secures obligations under any Pari Passu
Indebtedness or Subordinated Indebtedness of such Guarantor on any asset or
property of such Guarantor or any income or profits therefrom, or assign or
convey any right to receive income therefrom, unless the Guarantee of such
Guarantor is equally and ratably secured with the obligations so secured or
until such time as such obligations are no longer secured by a Lien.
(c) Any Lien created, incurred or existing in respect of unfunded
pension obligations or any similar obligations of the Company or any of its
Restricted Subsidiaries or any Guarantor shall not be deemed to give rise to any
obligations under this Section 1011.
SECTION 1012. TRANSACTIONS WITH AFFILIATES.
(a) 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") involving
aggregate consideration in excess of $5.0 million, unless (i) such Affiliate
Transaction is on terms that are not materially less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee with respect to
any Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution adopted by the
majority of the Board of Directors of the Company approving such Affiliate
Transaction and set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above.
(b) Notwithstanding Section 1012(a), this Section 1012 shall not
apply to the following: (i) transactions between or among the Company and/or any
of its Restricted
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Subsidiaries; (ii) Restricted Payments permitted by Section 1009 hereof; (iii)
the payment of customary annual management, consulting and advisory fees and
related expenses to KKR and its Affiliates; (iv) the payment of reasonable and
customary fees paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company or any Restricted Subsidiary;
(v) payments by the Company or any of its Restricted Subsidiaries to KKR and its
Affiliates made for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities, including,
without limitation, in connection with acquisitions or divestitures which
payments are approved by a majority of the Board of Directors of the Company in
good faith; (vi) transactions in which the Company or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view or meets
the requirements of clause (i) of paragraph (a) of this Section 1012; (vii)
payments or loans to employees or consultants which are approved by a majority
of the Board of Directors of the Company in good faith; (viii) any agreement as
in effect as of the Issuance Date or any amendment thereto (so long as any such
amendment is not disadvantageous to the Holders of the Notes in any material
respect) or any transaction contemplated thereby; (ix) the existence of, or the
performance by the Company or any of its Restricted Subsidiaries of its
obligations under the terms of, any stockholders agreement (including any
registration rights agreement or purchase agreement related thereto) to which it
is a party as of the Issuance Date and any similar agreements which it may enter
into thereafter; PROVIDED, HOWEVER, that the existence of, or the performance by
the Company or any of its Restricted Subsidiaries of obligations under any
future amendment to any such existing agreement or under any similar agreement
entered into after the Issuance Date shall only be permitted by this clause (ix)
to the extent that the terms of any such amendment or new agreement are not
otherwise disadvantageous to the Holders of the Notes in any material respect;
(x) the payment of all fees and expenses related to the Recapitalization; (xi)
transactions with customers, clients, suppliers, or purchasers or sellers of
goods or services, in each case in the ordinary course of business and otherwise
in compliance with the terms of this Indenture which are fair to the Company or
its Restricted Subsidiaries, in the reasonable determination of the Board of
Directors of the Company or the senior management thereof, or are on terms at
least as favorable as might reasonably have been obtained at such time from an
unaffiliated party; (xii) sales of accounts receivable, or participations
therein, in connection with any Receivables Facility; and (xiii) the Asset
Transfer.
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SECTION 1013. 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 consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to:
(a) (i) 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 (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries; except (in each case) for
such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Issuance Date, including pursuant to the Credit Facility and its
related documentation;
(2) this Indenture and the Notes;
(3) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
discussed in clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by
the Company or any Restricted Subsidiary in existence at the time of
such acquisition (but not created in contemplation thereof), 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;
(6) contracts for the sale of assets, including, without
limitation customary restrictions with respect to a Subsidiary
pursuant to an agreement that
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has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary;
(7) secured Indebtedness otherwise permitted to be incurred
pursuant to Sections 1010 and 1011 hereof that limit the right of the
debtor to dispose of the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business;
(9) other Indebtedness of Restricted Subsidiaries permitted to
be incurred subsequent to the Issuance Date pursuant to the provisions
of Section 1010 hereof;
(10) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
(11) customary provisions contained in leases and other
agreements entered into in the ordinary course of business;
(12) restrictions created in connection with any Receivables
Facility that, in the good faith determination of the Board of
Directors of the Company, are necessary or advisable to effect such
Receivables Facility; or
(13) any encumbrances or restrictions of the type referred to in
paragraphs (a), (b) and (c) above imposed by any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of the contracts, instruments
or obligations referred to in clauses (1) through (12) above, provided
that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are,
in the good faith judgment of the Company's Board of Directors, no
more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment
restrictions prior to such amendment, modification, restatement,
renewal, increase, supplement, refunding, replacement or refinancing.
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SECTION 1014. LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES.
(a) The Company shall not permit any Restricted Subsidiary to
guarantee the payment of any Indebtedness of the Company or any Indebtedness of
any other Restricted Subsidiary unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to this Indenture
providing for a Guarantee of payment of the Notes by such Restricted Subsidiary
except that (A) if the Notes are subordinated in right of payment to such
Indebtedness, the Guarantee under the supplemental indenture shall be
subordinated to such Restricted Subsidiary's guarantee with respect to such
Indebtedness substantially to the same extent as the Notes are subordinated to
such Indebtedness under this Indenture and (B) if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such guarantee
of such Restricted Subsidiary with respect to such Indebtedness shall be
subordinated in right of payment to such Restricted Subsidiary's Guarantee with
respect to the Notes substantially to the same extent as such Indebtedness is
subordinated to the Notes; (ii) such Restricted Subsidiary waives and will not
in any manner whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights against the
Company or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee; and (iii) such Restricted Subsidiary
shall deliver to the Trustee an Opinion of Counsel to the effect that (A) such
Guarantee of the Notes has been duly executed and authorized and (B) such
Guarantee of the Notes constitutes a valid, binding and enforceable obligation
of such Restricted Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity; PROVIDED that
this paragraph (a) shall not be applicable to any guarantee of any Restricted
Subsidiary (x) that (A) existed at the time such Person became a Restricted
Subsidiary of the Company and (B) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company or
(y) that guarantees the payment of Obligations of the Company or any Restricted
Subsidiary under the Credit Facility or any other bank facility which is
designated as Senior Indebtedness and any refunding, refinancing or replacement
thereof, in whole or in part, PROVIDED that such refunding, refinancing or
replacement thereof constitutes Senior Indebtedness and is not incurred pursuant
to a registered offering of securities under the Securities Act or a private
placement of securities (including under Rule 144A) pursuant to an exemption
from the registration requirements of the Securities Act, which private
placement provides for registration rights under the Securities Act (any
guarantee excluded by operations of this clause (y) being an "EXCLUDED
GUARANTEE").
(b) Notwithstanding the foregoing and the other provisions of this
Indenture, any Guarantee by a Restricted Subsidiary of the Notes shall provide
by its terms that it shall be
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automatically and unconditionally released and discharged upon (i) any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all of
the Company's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited by
this Indenture) or (ii) the release or discharge of the guarantee which resulted
in the creation of such Guarantee, except a discharge or release by or as a
result of payment under such guarantee.
SECTION 1015. LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS.
The Company shall not, and shall not permit any Guarantor to, directly
or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is
subordinate in right of payment to any Indebtedness of the Company or any
Indebtedness of any Guarantor, as the case may be, unless such Indebtedness is
either (a) pari passu in right of payment with the Notes or such Guarantor's
Guarantee, as the case may be or (b) subordinate in right of payment to the
Notes, or such Guarantor's Guarantee, as the case may be, in the same manner and
at least to the same extent as the Notes are subordinate to Senior Indebtedness
or such Guarantor's Guarantee is subordinate to such Guarantor's Senior
Indebtedness, as the case may be.
SECTION 1016. PURCHASE OF NOTES UPON A CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, unless the Company
has elected to redeem the Notes in connection with such Change of Control, the
Company will make an offer to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of the Notes pursuant to the offer described below
(the "CHANGE OF CONTROL OFFER") at a price in cash (the "CHANGE OF CONTROL
PAYMENT") equal to 101% of the aggregate principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of purchase.
Within 30 days following any Change of Control, the Company will mail a notice
to each Holder of Notes issued hereunder in the manner set forth in Section 106,
with a copy to the Trustee, with the following information: (1) a Change of
Control Offer is being made pursuant to this Section 1016, and that all Notes
properly tendered pursuant to such Change of Control Offer will be accepted for
payment; (2) the purchase price and the purchase date, which will be no earlier
than 30 days nor later than 60 days from the date such notice is mailed, except
as may be otherwise required by applicable law (the "CHANGE OF CONTROL PAYMENT
DATE"); (3) any Note not properly tendered will remain outstanding and continue
to accrue interest; (4) unless the Company defaults in the payment of the Change
of Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control Payment
Date; (5) Holders electing to have any Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent specified in the notice at
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the address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) Holders will be
entitled to withdraw their tendered Notes and their election to require the
Company to purchase such Notes, PROVIDED that the paying agent receives, not
later than the close of business on the last day of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes tendered for purchase, and a statement
that such Holder is withdrawing such Holder's tendered Notes and his election to
have such Notes purchased; and (7) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof.
(b) Prior to complying with the provisions of this Section 1016,
but in any event within 30 days following a Change of Control, the Company shall
either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under any outstanding Senior Indebtedness to permit the
repurchase of the Notes required by this Section 1016.
(c) On the Change of Control Payment Date, the Company shall, to
the extent permitted by law, (1) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (2) deposit
with the Paying Agent an amount equal to the aggregate Change of Control Payment
in respect of all Notes or portions thereof so tendered and (3) deliver, or
cause to be delivered, to the Trustee for cancellation the Notes so accepted
together with an Officers' Certificate stating that such Notes or portions
thereof have been tendered to and purchased by the Company. The Paying Agent
shall promptly mail to each Holder of Notes the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any, PROVIDED, that
each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
(d) 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 that such laws or regulations are applicable in connection with
the repurchase of Notes pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described herein by virtue thereof.
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SECTION 1017. ASSET SALES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, cause, make or suffer to exist an Asset Sale, unless (x) the
Company, or its Restricted Subsidiaries, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Company) of the assets sold or
otherwise disposed of and (y) at least 75% of the consideration therefor
received by the Company, or such Restricted Subsidiary, as the case may be, is
in the form of cash or Cash Equivalents; PROVIDED that the amount of (A) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Notes), that are assumed by the transferee of any such assets, (B) any notes or
other obligations received by the Company or 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 180 days following the
closing of such Asset Sale and (C) any Designated Noncash Consideration received
by the Company or any of its Restricted Subsidiaries in such Asset Sale having
an aggregate fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (C) that is at that time
outstanding, not to exceed the greater of (x) $35.0 million or (y) 15% of Total
Assets at the time of the receipt of such Designated Noncash Consideration (with
the fair market value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to subsequent changes in
value), shall be deemed to be cash for purposes of this provision and for no
other purpose.
(b) Within 365 days after the Company's or any Restricted
Subsidiary's receipt of the Net Proceeds of any Asset Sale, the Company or such
Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at its
option, (i) to permanently reduce Obligations under the Credit Facility (and to
correspondingly reduce commitments with respect thereto) or other Senior
Indebtedness or Pari Passu Indebtedness (PROVIDED that if the Company shall so
reduce Obligations under Pari Passu Indebtedness, it will equally and ratably
reduce Obligations under the Notes if the Notes are then prepayable or, if the
Notes may not be then prepaid, the Company shall make an offer (in accordance
with the procedures set forth below for an Asset Sale Offer) to all Holders to
purchase at 100% of the principal amount thereof the amount of Notes that would
otherwise be prepaid), (ii) to an investment in any one or more businesses,
capital expenditures or acquisitions of other assets in each case, used or
useful in a Similar Business and/or (iii) to make an investment in properties or
assets that replace the properties and assets that are the subject of such Asset
Sale. Pending the final application of any such Net Proceeds, the Company or
such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving
credit facility, if any, or otherwise invest such Net Proceeds in Cash
Equivalents or Investment Grade
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Securities. Any Net Proceeds from the Asset Sale that are not invested as
provided and within the time period set forth in the first sentence of this
paragraph will be deemed to constitute "EXCESS PROCEEDS." When the aggregate
amount of Excess Proceeds exceeds $15.0 million, the Company shall make an
offer to all Holders of Notes (an "ASSET SALE OFFER") to purchase the maximum
principal amount of Notes, that is an integral multiple of $1,000, 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
and Liquidated Damages, if any, to the date fixed for the closing of such offer
(the "OFFERED PRICE"). The Company shall commence an Asset Sale Offer with
respect to Excess Proceeds within 10 Business Days after the date on which the
aggregate amount of Excess Proceeds exceeds $15.0 million by giving to each
Holder of the Notes, with a copy to the Trustee, in the manner provided in
Section 106 a notice stating:
(i) that the Holder has the right to require the Company to
repurchase such Holder's Notes at the Offered Price, subject to proration
in the event the Excess Proceeds are less than the aggregate Offered Price
of all Notes tendered;
(ii) the date of purchase of Notes pursuant to the Asset Sale Offer
(the "ASSET SALE PURCHASE DATE"), which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed;
(iii) that the Offered Price will be paid to Holders electing to
have Notes purchased on the Asset Sale Purchase Date, provided that a
Holder must surrender its Note to the Paying Agent at the address specified
in the notice prior to the close of business at least five Business Days
prior to the Asset Sale Purchase Date;
(iv) any Note not tendered will continue to accrue interest pursuant
to its terms;
(v) that unless the Company defaults in the payment of the Offered
Price, any Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest on and after the Asset Sale Purchase Date;
(vi) that Holders will be entitled to withdraw their tendered Notes
and their election to require the Company to purchase such Notes, provided
that the Company receives, not later than the close of business on the
third Business Day preceding the Asset Sale Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Notes tendered for purchase, and a
statement that such Holder is withdrawing its election to have such Notes
purchased;
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(vii) that the Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof; and
(viii) the instructions a Holder must follow in order to have his
Notes purchased in accordance with this Section 1017.
To the extent that the aggregate amount of Notes tendered pursuant to
an 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 Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased in the
manner described in Section 1104. Upon completion of any such Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
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 Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Section 1017, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Indenture.
SECTION 1018. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 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 there is no Default or Event of Default which has occurred
and is continuing 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
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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) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, within 5 Business Days of any Officer becoming aware of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default.
SECTION 1019. REPORTS.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
deliver to the Trustee and to each Holder and to prospective purchasers of Notes
identified to the Company by the Initial Purchaser, within 15 days after it is
or would have been required to file such with the Commission, annual and
quarterly financial statements substantially equivalent to financial statements
that would have been included in reports filed with the Commission, if the
Company were subject to the requirements of Section 13 or 15(d) of the Exchange
Act, including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the Commission, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required.
FOR SO LONG AS ANY NOTES REMAIN OUTSTANDING, THE COMPANY SHALL FURNISH
TO THE HOLDERS AND TO SECURITIES ANALYSTS AND PROSPECTIVE INVESTORS, UPON THEIR
REQUEST, THE INFORMATION REQUIRED TO BE DELIVERED PURSUANT TO RULE 144A(d)(4)
UNDER THE SECURITIES ACT.
Delivery of reports, information and documents required by Section
1019 to the Trustee is for informational purposes only and the Trustee's receipt
of such shall not constitute notice of any information contained THEREIN or
determinable from information contained THEREIN, including the Company's
compliance with any of its covenants hereunder 9as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 1020. FURTHER ASSURANCES.
The Company shall, upon the request of the Trustee, execute and
deliver such further instruments and perform such further acts as may reasonably
be necessary or proper to carry out more effectively the provisions of this
Indenture.
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ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. REDEMPTION.
The Notes may or shall, as the case may be, be redeemed, as a whole or
from time to time in part, subject to the conditions and at the Redemption
Prices specified in the form of Note, together with accrued interest and
Liquidated Damages, if any, to the Redemption Date specified in the form of the
Note.
SECTION 1102. APPLICABILITY OF ARTICLE.
Redemption of Notes at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Notes pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Notes to be redeemed and shall deliver to the Trustee
such documentation and records as shall enable the Trustee to select the Notes
to be redeemed pursuant to Section 1104.
SECTION 1104. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED.
If less than all the Notes are to be redeemed, selection of such Notes
for redemption shall be made by the Trustee not more than 60 days prior to the
Redemption Date, from the Outstanding Notes not previously called for
redemption, in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed, or, if such Notes
are not so listed, on a pro rata basis, by lot or by such other method as the
Trustee shall deem fair and appropriate (and in such manner as complies with
applicable legal requirements) and which may provide for the selection for
redemption of portions of the principal of Notes; PROVIDED, HOWEVER, that no
Notes of less than $1,000 shall be redeemed in part.
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The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Notes selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
SECTION 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner provided for in
Section 106 at least 30 but not more than 60 days prior to the Redemption Date,
to each Holder of Notes to be redeemed at such Holder's registered address. The
Trustee shall give notice of redemption in the Company's name and at the
Company's expense; PROVIDED, HOWEVER, that the Company shall deliver to the
Trustee, at least 30 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 following items.
All notices of redemption shall identify the securities to be redeemed
and shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest and
Liquidated Damages, if any, to the Redemption Date payable as provided in
Section 1107, if any,
(3) if less than all Outstanding Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be outstanding after such partial
redemption,
(4) in case any Note is to be redeemed in part only, the notice which
relates to such Note shall state that on and after the Redemption Date,
upon surrender of such Note, the holder will receive, without charge, a new
Note or Notes of authorized denominations for the principal amount thereof
remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, and Liquidated Damages, if any,) to the Redemption Date
payable as provided in
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Section 1107) will become due and payable upon each such Note, or the
portion thereof, to be redeemed, and, unless the Company defaults in making
the redemption payment, that interest on Notes called for redemption (or
the portion thereof) will cease to accrue on and after said date,
(6) the place or places where such Notes are to be surrendered for
payment of the Redemption Price and accrued interest, if any, and
Liquidated Damages, if any,
(7) the name and address of the Paying Agent,
(8) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price,
(9) the CUSIP number, and that no representation is made as to the
accuracy or correctness of the CUSIP number, if any, listed in such notice
or printed on the Notes, and
(10) the paragraph of the Notes pursuant to which the Notes are to be
redeemed.
SECTION 1106. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and
hold in trust as provided in Section 1003) an amount of money sufficient to pay
the Redemption Price of, and accrued interest and Liquidated Damages, if any,
on, all the Notes which are to be redeemed on that date.
SECTION 1107. NOTES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Notes so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, and
Liquidated Damages, if any, to the Redemption Date), and from and after such
date (unless the Company shall default in the payment of the Redemption Price
and accrued interest and Liquidated Damages, if any,) such Notes shall cease to
bear interest. Upon surrender of any such Note for redemption in accordance
with said notice, such Note shall be paid by the Company at the Redemption
Price, together with accrued interest, if any, and Liquidated Damages, if any,
to the Redemption Date; PROVIDED, HOWEVER, that installments of interest whose
Stated Maturity is on or prior to the
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Redemption Date shall be payable to the Holders of such Notes, or one or more
Predecessor Notes, registered as such at the close of business on the relevant
Regular Record Date or Special Record Date, as the case may be, according to
their terms and the provisions of Section 311.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate borne by the Notes.
SECTION 1108. NOTES REDEEMED IN PART.
Any Note which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at the office or agency of the
Company maintained for such purpose pursuant to Section 1002 (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and deliver to
the Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Note so surrendered; PROVIDED that each such new Note will be in a principal
amount of $1,000 or integral multiple thereof.
ARTICLE TWELVE
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. COMPANY'S OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The Company and the Guarantors may, at their option by Board
Resolution, at any time, with respect to the Notes, elect to have either Section
1202 or Section 1203 be applied to all Outstanding Notes upon compliance with
the conditions set forth below in this Article Twelve.
SECTION 1202. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company shall be deemed to have been
discharged from its obligations with respect to all Outstanding Notes and each
Guarantor shall be deemed to have been discharged
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from its obligations with respect to its Guarantee on the date the conditions
set forth in Section 1204 are satisfied (hereinafter, "LEGAL DEFEASANCE"). For
this purpose, such Legal Defeasance means that the Company and any such
Guarantor shall be deemed to have paid and discharged the entire Indebtedness
represented by the Outstanding Notes, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 1205 and the other Sections of
this Indenture referred to in (A) and (B) below, and to have satisfied all its
other obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Notes to receive payments in respect of the principal of,
premium, if any, interest and Liquidated Damages, if any, on such Notes when
such payments are due, solely from the trust fund described in Section 1204 and
as more fully set forth in such Section, (B) the Company's obligations with
respect to such Notes under Sections 304, 305, 310, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder, and the
Company's obligations in connection therewith and (D) this Article Twelve.
Subject to compliance with this Article Twelve, the Company may
exercise its option under this Section 1202 notwithstanding the prior exercise
of its option under Section 1203 with respect to the Notes.
SECTION 1203. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company and each Guarantor shall be
released from its obligations under any covenant contained in Section 801 and in
Sections 1009 through 1019 with respect to the Outstanding Notes on and after
the date the conditions set forth below are satisfied (hereinafter, "COVENANT
DEFEASANCE"), and the Notes shall thereafter be deemed not to be "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 Notes will not be outstanding for accounting
purposes). For this purpose, such Covenant Defeasance means that, with respect
to the Outstanding 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
501(iii), but, except as specified above, the remainder of this Indenture and
such Notes shall be unaffected thereby.
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SECTION 1204. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Outstanding Notes:
(i) The Company must irrevocably deposit with the Trustee (or
another trustee satisfying the requirements of this Indenture who shall
agree to comply with the provisions of this Article Twelve applicable to
it) as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely to,
the benefit of the Holders of such Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to pay the
principal of, premium, if any, interest and Liquidated Damages, if any, due
on the Outstanding Notes on the Stated Maturity or on the applicable
Redemption Date as the case may be, of such principal, premium, if any, or
interest on the Outstanding Notes;
(ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, (A) the Company has received from, or there has
been published by, the United States Internal Revenue Service a ruling or
(B) since the Issuance Date, there has been a change in the applicable U.S.
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel in the United States shall confirm that,
subject to customary assumptions and exclusions, the Holders of the
Outstanding Notes will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Legal Defeasance and will be
subject to U.S. 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;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the Outstanding Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such Covenant Defeasance and will be subject to such 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;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency
<PAGE>
122
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(v) 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 Guarantor is a party or by which the Company or any Guarantor is bound;
(vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions 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 under
any applicable U.S. federal or state law, and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of
the Holders;
(vii) 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 defeating, hindering, delaying or defrauding any creditors of the
Company or any Guarantor or others; and
(viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which Opinion
of Counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance, as the case may be, have been
complied with.
SECTION 1205. DEPOSITED MONEY AND U.S. GOVERNMENT SECURITIES TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all
money and Government Securities (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "TRUSTEE") pursuant to Section 1204 in respect of the
Outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such Notes of
all sums due and to become due thereon in respect of principal (and premium, if
any) and interest, but such money need not be segregated from other funds except
to the extent required by law. Money and Government Securities so held in trust
are not subject to Article Thirteen.
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123
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the Government Securities
deposited pursuant to Section 1204 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 Notes.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Securities held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1206. REINSTATEMENT.
If the Trustee or any Paying Agent is unable to apply any money or
Government Securities in accordance with Section 1205 by reason of any legal
proceeding or by any 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 Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 1202 or 1203, as the case may be, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with Section
1205; PROVIDED, HOWEVER, that if the Company makes any payment of principal of
(or premium, if any) or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money and Government Securities held
by the Trustee or Paying Agent.
ARTICLE THIRTEEN
SUBORDINATION OF NOTES
SECTION 1301. NOTES SUBORDINATE TO SENIOR INDEBTEDNESS .
The Company covenants and agrees, and each Holder of a Note, by his
acceptance thereof, likewise covenants and agrees, for the benefit of the
holders, from time to time, of Senior Indebtedness that, to the extent and in
the manner hereinafter set forth in this Article, the Indebtedness represented
by the Notes and the payment of the principal of (and premium, if any) and
interest on each and all of the Notes and all other Subordinated Note
Obligations are hereby
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124
expressly made subordinate and subject in right of payment as provided in this
Article to the prior payment in full in cash equivalents of all Senior
Indebtedness, whether outstanding on the date of this Indenture or thereafter
incurred.
SECTION 1302. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash equivalents of such Senior Indebtedness before the
Holders of Notes shall be entitled to receive any payment with respect to
the Subordinated Note Obligations (except that Holders of Notes may receive
(i) shares of stock and any debt securities that are subordinated at least
to the same extent as the Notes to (a) Senior Indebtedness and (b) any
securities issued in exchange for Senior Indebtedness and (ii) payments and
other distributions made from the trusts described in Article Twelve); and
(2) until all Obligations with respect to Senior Indebtedness (as
provided in subsection (1) above) are paid in full in cash equivalents, any
distribution to which Holders would be entitled but for this Article shall
be made to holders of Senior Indebtedness (except that Holders of Notes may
receive (i) shares of stock and any debt securities that are subordinated
to at least the same extent as the Notes to (a) Senior Indebtedness and (b)
any securities issued in exchange for Senior Indebtedness and (ii) payments
and other distributions made from the trusts described in Article Twelve)
as their interests may appear.
SECTION 1303. SUSPENSION OF PAYMENT WHEN SENIOR INDEBTEDNESS IN
DEFAULT.
The Company may not make any payment upon or distribution in respect
of the Subordinated Note Obligations (other than (i) securities that are
subordinated to at least the same extent as the Notes to (a) Senior Indebtedness
and (b) any securities issued in exchange for Senior Indebtedness and (ii)
payments and other distributions made from the trusts described in Article
Twelve) until all Senior Indebtedness has been paid in full in cash equivalents
if:
(i) a default in the payment of any principal of, premium, if any, or
interest on, or of unreimbursed amounts under drawn letters of credit or in
respect of banker's acceptances or fees relating to letters of credit or
banker's acceptances constituting,
<PAGE>
125
Designated Senior Indebtedness occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Indebtedness (a "PAYMENT DEFAULT"); or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of the
Designated Senior Indebtedness to accelerate its maturity (a "NON-PAYMENT
DEFAULT") and the Trustee receives a notice of the default (a "PAYMENT
BLOCKAGE NOTICE") from a Person who may give it pursuant to Section 1313
hereof. No new period of payment blockage may be commenced unless and
until 365 days have elapsed since the effectiveness of the immediately
preceding Payment Blockage Notice. However, if any Payment Blockage Notice
within such 365-day period is given by or on behalf of any holders of
Designated Senior Indebtedness (other than the Bank Agent under the Credit
Facility), the Bank Agent may give another Payment Blockage Notice within
such period. In no event, however, may the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days
in the aggregate during any 365 consecutive day period. No nonpayment
default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice unless such default shall have been
cured or waived for a period of not less than 90 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) in the case of a payment default, upon the date on which such
default is cured or waived or shall have ceased to exist or such Designated
Senior Indebtedness shall have been discharged or paid in full in cash
equivalents, or
(2) in case of a nonpayment default, the earlier of (x) the date on
which such nonpayment default is cured or waived, (y) 179 days after the
date on which the applicable Payment Blockage Notice is received (each such
period, the "PAYMENT BLOCKAGE PERIOD") or (z) the date such Payment
Blockage Period shall be terminated by written notice to the Trustee from
the requisite holders of such Designated Senior Indebtedness necessary to
terminate such period or from their Representative, after which the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
<PAGE>
126
SECTION 1304. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 1305. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Subordinated Note Obligations at a time when such payment is prohibited by
Sections 1302 or 1303, such payment shall be held by the Trustee or such Holder,
for the benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Indebtedness as their interests may appear or
to their Representative under the indenture or other agreement (if any) pursuant
to which such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay such Senior Indebtedness in full
in cash equivalents in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the benefit of holders of Senior
Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article Thirteen, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
Thirteen, except if such payment is made as a result of the willful misconduct
or gross negligence of the Trustee.
SECTION 1306. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes that violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article Thirteen.
SECTION 1307. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Notes shall prevent the Company, at any time except during the
pendency of any case,
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127
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshalling of assets and liabilities of the
Company referred to in Section 1302 or under the conditions described in Section
1303, from making payments at any time of principal of (and premium, if any, on)
or interest on the Notes.
SECTION 1308. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness in cash
equivalents, the Holders shall be subrogated (equally and ratably with the
holders of all Pari Passu Indebtedness of the Company) to the rights of the
holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
Subordinated Note Obligations shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
of any cash, property or securities to which the Holders of the Notes or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Indebtedness by Holders of the Notes or on their behalf or by the
Trustee, shall, as among the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Notes, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness; it
being understood that the provisions of this Article are intended solely for the
purpose of determining the relative rights of the Holders of the Notes, on the
one hand, and the holders of Senior Indebtedness, on the other hand.
SECTION 1309. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Notes is intended to or shall
(a) impair, as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders the
principal of (and premium, if any) and interest on the Notes as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders and creditors of the
Company other than their rights in relation to holders of Senior Indebtedness;
or (c) prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness. If
the Company fails because of this Article to pay principal (or premium, if any)
or interest on a Note on the due date, the failure is still a Default or Event
of Default.
SECTION 1310. TRUSTEE TO EFFECTUATE SUBORDINATION.
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128
Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes. If the
Trustee does not file a proper proof of claim or proof of debt in the form
required in any proceeding referred to in Section 504 hereof at least 30 days
before the expiration of the time to file such claim, the Bank Agent (if the
Credit Facility is still outstanding) is hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
SECTION 1311. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
SECTION 1312. DISTRIBUTION OR NOTICE TO REPRESENTATIVE .
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article Thirteen, the Trustee and the Holders shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other acts pertinent thereto or to this Article
Thirteen.
SECTION 1313. NOTICE TO TRUSTEE.
(a) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Notes, unless and
until the Trustee shall have received written notice thereof from the Company,
the Bank
<PAGE>
129
Agent or a holder of Senior Indebtedness or from any trustee, fiduciary or agent
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to TIA Sections 315(a) through 315(d), shall be entitled in all respects
to assume that no such facts exist; PROVIDED, HOWEVER, that, if the Trustee
shall not have received the notice provided for in this Section at least three
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Note), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be received by it within three Business Days prior to such
date.
(b) Subject to TIA Sections 315(a) through 315(d), the Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1314. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to TIA Sections 315(a) through 315(d), and
the Holders of the Notes shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article;
PROVIDED that such court, trustee, receiver, custodian, assignee, agent or
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130
other Person has been apprised of, or the order, decree or certificate makes
reference to, the provisions of this Article.
SECTION 1315. RIGHTS OF TRUSTEE AS A HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEES' RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 607.
SECTION 1316. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "TRUSTEE"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; PROVIDED,
HOWEVER, that Section 1315 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1317. NO SUSPENSION OF REMEDIES.
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of Notes to take any action to accelerate the maturity of the
Notes pursuant to Article Five or to pursue any rights or remedies hereunder or
under applicable law, except as provided in Article Five.
SECTION 1318. MODIFICATION OF TERMS OF SENIOR INDEBTEDNESS.
Any renewal or extension of the time of payment of any Senior
Indebtedness or the exercise by the holders of Senior Indebtedness of any of
their rights under any instrument creating or evidencing Senior Indebtedness,
including, without limitation, the waiver of default thereunder, may be made or
done all without notice to or assent from the Holders or the Trustee.
No compromise, alteration, amendment, modification, extension, renewal
or other change of, or waiver, consent or other action in respect of, any
liability or obligation under or in respect of, or of any of the terms,
covenants or conditions of any indenture or other instrument
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131
under which any Senior Indebtedness is outstanding or of such Senior
Indebtedness, whether or not such release is in accordance with the provisions
of any applicable document, shall in any way alter or affect any of the
provisions of this Article Thirteen or of the Notes relating to the
subordination thereof.
SECTION 1319. CERTAIN TERMS.
For purposes of this Article Thirteen, (i) "CASH EQUIVALENTS" means
Government Securities with maturities of nine months or less and (ii) unless the
context clearly indicates otherwise, any payment or distribution to the Trustee
or any Holder in respect of any Subordinated Note Obligation shall include any
payment or distribution of any kind or character from any source, whether in
cash, property or securities, by set-off or otherwise, including any repurchase,
redemption or acquisition of the Notes and any direct or indirect payment
payable by reason of any other Indebtedness or Obligation being subordinated to
the Notes.
SECTION 1320. TRUST MONEYS NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary, payments
from cash or the proceeds of Government Securities held in trust under Article
Twelve hereof by the Trustee (or other qualifying trustee) and which were
deposited in accordance with the terms of Article Twelve hereof and not in
violation of Section 1303 hereof for the payment of principal of (and premium,
if any) and interest on the Notes shall not be subordinated to the prior payment
of any Senior Indebtedness or subject to the restrictions set forth in this
Article Thirteen, and none of the Holders shall be obligated to pay over any
such amount to the Company or any holder of Senior Indebtedness or any other
creditor of the Company.
This Indenture may be signed in any number of counterparts each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
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132
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
THE BOYDS COLLECTION, LTD.,
a Maryland corporation
By: /s/ Christine Bell
-------------------------------
Name: Christine Bell
Title: Chief Operating Officer
THE BANK OF NEW YORK,
as Trustee
By: /s/ Mary Beth Lewicki
-------------------------------
Name: Mary Beth Lewicki
Title: Assistant Vice President
<PAGE>
Exhibit 10.1
================================================================================
U.S.$365,000,000
CREDIT AGREEMENT
DATED AS OF APRIL 21, 1998
AMONG
THE BOYDS COLLECTION, LTD.,
AS BORROWER,
THE LENDERS LISTED HEREIN,
AS LENDERS,
DLJ CAPITAL FUNDING, INC.,
AS SYNDICATION AGENT,
THE FUJI BANK, LIMITED
NEW YORK BRANCH,
AS DOCUMENTATION AGENT,
AND
FLEET NATIONAL BANK,
AS ADMINISTRATIVE AGENT.
================================================================================
ARRANGED BY:
-----------
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE>
THE BOYDS COLLECTION, LTD.
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . .2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement . . . . . . . . . . . . . . . . . . . . . . . . 34
1.3 Other Definitional Provisions and Rules of Construction. . . . . 35
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . . 35
2.1 Commitments; Making of Loans; the Register; Notes. . . . . . . . 35
2.2 Interest on the Loans. . . . . . . . . . . . . . . . . . . . . . 42
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.4 Repayments, Prepayments and Reductions in Revolving Loan
Commitments; General Provisions Regarding Payments;
Application of Proceeds of Collateral and Payments Under the
Guaranties.. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
2.5 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 53
2.6 Special Provisions Governing LIBOR Loans.. . . . . . . . . . . . 53
2.7 Increased Costs; Capital Adequacy. . . . . . . . . . . . . . . . 55
2.8 Notice of Certain Costs; Obligation of Lenders and Issuing
Lenders to Mitigate. . . . . . . . . . . . . . . . . . . . . . . 60
2.9 Defaulting Lenders.. . . . . . . . . . . . . . . . . . . . . . . 61
2.10 Removal or Replacement of a Lender.. . . . . . . . . . . . . . . 62
SECTION 3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . 64
3.1 Issuance of Letters of Credit and Lenders' Purchase of
Participations Therein . . . . . . . . . . . . . . . . . . . . . 64
3.2 Letter of Credit Fees. . . . . . . . . . . . . . . . . . . . . . 67
3.3 Drawings and Reimbursement of Amounts Paid Under
Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 68
3.4 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . 70
3.5 Indemnification; Nature of Issuing Lenders' Duties . . . . . . . 71
3.6 Increased Costs and Taxes Relating to Letters of Credit. . . . . 72
SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT. . . . . . . . . . . 73
4.1 Conditions to Initial Loans. . . . . . . . . . . . . . . . . . . 74
4.2 Conditions to All Loans. . . . . . . . . . . . . . . . . . . . . 78
4.3 Conditions to Letters of Credit. . . . . . . . . . . . . . . . . 78
<PAGE>
Page
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . 79
5.1 Organization, Powers, Qualification, Good Standing,
Business and Subsidiaries. . . . . . . . . . . . . . . . . . . . 79
5.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . 80
5.3 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . 80
5.4 No Material Adverse Effect.. . . . . . . . . . . . . . . . . . . 81
5.5 Title to Properties; Liens.. . . . . . . . . . . . . . . . . . . 81
5.6 Litigation; Adverse Facts. . . . . . . . . . . . . . . . . . . . 81
5.7 Payment of Taxes.. . . . . . . . . . . . . . . . . . . . . . . . 81
5.8 Governmental Regulation. . . . . . . . . . . . . . . . . . . . . 82
5.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 82
5.10 Environmental Protection . . . . . . . . . . . . . . . . . . . . 83
5.11 Disclosure.. . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 84
6.1 Financial Statements and Other Reports.. . . . . . . . . . . . . 84
6.2 Corporate Existence, etc.. . . . . . . . . . . . . . . . . . . . 87
6.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . 88
6.4 Maintenance of Properties; Insurance.. . . . . . . . . . . . . . 88
6.5 Inspection Rights. . . . . . . . . . . . . . . . . . . . . . . . 88
6.6 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . 89
6.7 Execution of Subsidiary Guaranty by Future Domestic
Subsidiaries; Pledge of Stock of Future Direct Subsidiaries;
Ratable Credit Support . . . . . . . . . . . . . . . . . . . . . 89
6.8 Transactions with Affiliates.. . . . . . . . . . . . . . . . . . 90
6.9 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . 90
6.10 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 90
6.11 Conveyance of Assets . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 90
7.1 Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.2 Liens and Related Matters. . . . . . . . . . . . . . . . . . . . 92
7.3 Investments; Joint Ventures. . . . . . . . . . . . . . . . . . . 93
7.4 Guarantee Obligations. . . . . . . . . . . . . . . . . . . . . . 94
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . 95
7.6 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . 96
7.7 Restriction on Certain Fundamental Changes; Asset Sales and
Acquisitions.. . . . . . . . . . . . . . . . . . . . . . . . . . 97
7.8 Consolidated Capital Expenditures. . . . . . . . . . . . . . . . 98
7.9 Amendments of Documents Relating to Subordinated Indebtedness. . 99
SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 99
8.1 Failure to Make Payments When Due. . . . . . . . . . . . . . . . 99
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Page
8.2 Default in Other Agreements. . . . . . . . . . . . . . . . . . . 99
8.3 Breach of Certain Covenants. . . . . . . . . . . . . . . . . . .100
8.4 Breach of Warranty.. . . . . . . . . . . . . . . . . . . . . . .100
8.5 Other Defaults Under Loan Documents. . . . . . . . . . . . . . .100
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.. . . . . .100
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.. . . . . . .101
8.8 Judgments and Attachments. . . . . . . . . . . . . . . . . . . .101
8.9 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
8.10 Change of Control. . . . . . . . . . . . . . . . . . . . . . . .101
8.11 Material Invalidity of Guaranties; Material Failure of Security;
Repudiation of Obligations . . . . . . . . . . . . . . . . . . .101
SECTION 9. AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .103
9.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . .103
9.2 Powers and Duties; General Immunity. . . . . . . . . . . . . . .103
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.. . . . . . . . . . . . . . . . . . . . . . . .105
9.4 Right to Indemnity.. . . . . . . . . . . . . . . . . . . . . . .105
9.5 Successor Agents and Swing Line Lender.. . . . . . . . . . . . .106
9.6 Collateral Documents and Guaranties. . . . . . . . . . . . . . .106
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .107
10.1 Assignments and Participations in Loans and Letters of Credit. .107
10.2 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . .110
10.3 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . .111
10.4 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . .112
10.5 Ratable Sharing. . . . . . . . . . . . . . . . . . . . . . . . .112
10.6 Amendments and Waivers.. . . . . . . . . . . . . . . . . . . . .113
10.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
10.8 Survival of Representations, Warranties and Agreements.. . . . .115
10.9 Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . .115
10.10 Marshalling; Payments Set Aside. . . . . . . . . . . . . . . . .115
10.11 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . .116
10.12 Obligations Several; Independent Nature of Lenders' Rights.. . .116
10.13 Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . . .116
10.14 Applicable Law.. . . . . . . . . . . . . . . . . . . . . . . . .116
10.15 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . .116
10.16 Consent to Jurisdiction and Service of Process . . . . . . . . .117
10.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . .117
10.18 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . .118
10.19 Counterparts; Effectiveness. . . . . . . . . . . . . . . . . . .118
10.20 Other Transactions.. . . . . . . . . . . . . . . . . . . . . . .119
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10.21. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . .119
Signature pages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT
IV FORM OF TRANCHE A TERM NOTE
V FORM OF TRANCHE B TERM NOTE
VI FORM OF REVOLVING NOTE
VII FORM OF SWING LINE NOTE
VIII FORM OF OFFICER'S CLOSING DATE CERTIFICATE
IX FORM OF COMPLIANCE CERTIFICATE
X-A FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER AND FLOM, NEW YORK COUNSEL
X-B FORM OF OPINION OF SIMPSON THACHER & BARTLETT, NEW YORK COUNSEL TO LOAN
PARTIES
X-C FORM OF OPINION OF BALLARD SPAHR ANDREWS & INGERSOLL, MARYLAND COUNSEL TO
BORROWER
XI FORM OF ASSIGNMENT AGREEMENT
XII FORM OF CERTIFICATE RE NON-BANK STATUS
XIII FORM OF MASTER PLEDGE AGREEMENT
XIV FORM OF SUBSIDIARY GUARANTY
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1 SUBSIDIARIES OF COMPANY
5.6 LITIGATION
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING GUARANTEE OBLIGATIONS
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<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of April 21, 1998 and entered into
by and among THE BOYDS COLLECTION, LTD., a Maryland corporation ("BORROWER"),
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each
individually referred to herein as a "LENDER" and collectively as "LENDERS"),
DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication agent (in such capacity,
"SYNDICATION AGENT"), THE FUJI BANK, LIMITED NEW YORK BRANCH ("FUJI"), as
documentation agent for Lenders (in such capacity, "DOCUMENTATION AGENT"), and
FLEET NATIONAL BANK ("FLEET"), as administrative agent for Lenders (in such
capacity, "ADMINISTRATIVE AGENT").
RECITALS
WHEREAS, Bear (this and other capitalized terms used in these recitals
without definition being used as defined in subsection 1.1) has been formed by
KKR and its Affiliates for the purpose of acquiring, in the aggregate, not less
than 80% of the Shares;
WHEREAS, on or before the Closing Date, KKR and its Affiliates will
make a cash investment in Bear of not less than $184,000,000 in gross cash
proceeds (the "BEAR EQUITY AMOUNT") in consideration for all of the outstanding
common stock of Bear;
WHEREAS, on the Closing Date, (i) in connection with the
Recapitalization, (a) Borrower will repurchase $473,000,000 of the Shares and
(b) Existing Shareholders will retain $229,000,000 of the Shares, in each case
in accordance with the terms of the Recapitalization Agreement, (ii) Bear will
purchase from Existing Shareholders approximately 80% of the aggregate amount of
the Shares for cash in an amount equal to $184,000,000 and Existing Shareholders
will retain approximately 20% of the Shares valued at $45,000,000, and (iii)
Borrower will issue and sell not less than approximately $165,000,000 in
aggregate principal amount of Senior Subordinated Debt;
WHEREAS, Lenders have agreed to extend certain credit facilities to
Borrower, the proceeds of which will be used (i) together with the proceeds of
the issuance and sale of the Senior Subordinated Debt and the proceeds of the
Bear Equity Amount, to fund that portion of the Recapitalization Financing
Requirements required to be funded on the Closing Date, and (ii) to provide
financing for working capital and other general corporate purposes of Borrower
and its Subsidiaries; and
WHEREAS, Borrower desires to secure all of the Obligations hereunder and
under the other Loan Documents by granting to Administrative Agent, on behalf of
Lenders, a first priority pledge of (i) 100% of the capital stock (or other
equivalent equity interest) of each of its direct Domestic Subsidiaries and (ii)
65% of the capital stock (or other equivalent equity interest) of each of its
direct Material Foreign Subsidiaries;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower, Lenders, Syndication Agent,
Documentation Agent and Administrative Agent agree as follows:
SECTION 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . .DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"ACQUISITION" means the acquisition by Borrower or any of its
Subsidiaries (by purchase or otherwise) of all or substantially all of the
business, property or fixed assets of, or the stock or other evidence of
beneficial ownership of, any Person or any division, business unit or line of
business of any Person.
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.
"ADMINISTRATIVE AGENT FEE LETTER" means that certain Fee Letter dated
April 21, 1998 of Administrative Agent to Borrower and accepted by Borrower on
April 21, 1998.
"AFFECTED LENDER" has the meaning assigned to that term in subsection
2.6C.
"AFFILIATE", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to (i) vote 10% or more of the Voting Stock of such
Person or (ii) direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or by contract
or otherwise.
"AGENTS" shall mean Syndication Agent and Administrative Agent.
"AGREEMENT" means this Credit Agreement dated as of the date hereof,
as it may be amended, supplemented or otherwise modified from time to time.
"APPLICABLE COMMITMENT FEE PERCENTAGE" means with respect to any date
of determination, a rate per annum equal to the percentage set forth below
opposite the Applicable Leverage Ratio in effect as of such date of
determination, any change in the Applicable Commitment Fee Percentage to be
effective on the date of any corresponding change in the Applicable Leverage
Ratio:
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<PAGE>
APPLICABLE LEVERAGE RATIO APPLICABLE COMMITMENT FEE PERCENTAGE
6.25:1.00 or greater 0.50%
5.50:1.00 or greater, but
less than 6.25:1.00 0.425%
5.00:1.00 or greater, but
less than 5.50:1.00 0.375%
4.50:1.00 or greater, but
less than 5.00:1.00 0.375%
4.00:1.00 or greater, but
less than 4.50:1.00 0.350%
3.50:1.00 or greater, but
less than 4.00:1.00 0.300%
less than 3.50:1.00 0.250%
"APPLICABLE LEVERAGE RATIO" means with respect to any date of
determination, the Consolidated Leverage Ratio set forth in the Pricing
Certificate (as defined below) in effect for the Pricing Period (as defined
below) in which such date of determination occurs. For purposes of this
definition, (i) "PRICING CERTIFICATE" means an Officer's Certificate of Borrower
certifying as to the Consolidated Leverage Ratio as of the last day of any
Fiscal Quarter and setting forth the calculation of such Consolidated Leverage
Ratio in reasonable detail, which Officer's Certificate may be delivered to
Agents at any time on or after the date of delivery by Borrower of the
Compliance Certificate (the "RELATED COMPLIANCE CERTIFICATE") with respect to
the period ending on the last day of such Fiscal Quarter pursuant to subsection
6.1(iii), and (ii) "PRICING PERIOD" means each period commencing on the first
Business Day after the delivery to Agents of a Pricing Certificate and ending on
the first Business Day after the next Pricing Certificate is delivered to
Agents; PROVIDED that, anything contained in this definition to the contrary
notwithstanding, (a) the Pricing Certificate in respect of the first Pricing
Period may be delivered at any time on or after the date upon which the
Compliance Certificate for the first Fiscal Quarter following the Closing Date
is delivered or required to be delivered by Borrower to Agents pursuant to
subsection 6.1(iii) and shall relate to the most recent financial statements
delivered by Borrower to Agents pursuant to subsection 6.1(i), (b) the
Applicable Leverage Ratio for the period from the Closing Date to but excluding
the date of commencement of such first Pricing Period shall be deemed to be
5.50:1.00, and (c) in the event that, after the commencement of the first
Pricing Period, (X) Borrower fails to deliver a Pricing Certificate to Agents
setting forth the Consolidated Leverage Ratio as of the last day of any Fiscal
Quarter on or before the last day (the "CUTOFF DATE") on which Borrower is
required to deliver the Related Compliance Certificate and (Y) Administrative
Agent determines (each such determination being an "AGENT
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<PAGE>
DETERMINATION") on or after the Cutoff Date (on the basis of the Related
Compliance Certificate or a Pricing Certificate delivered after the Cutoff Date)
that the Applicable Leverage Ratio that would have been in effect if Borrower
had delivered a Pricing Certificate on the Cutoff Date is greater than the
Consolidated Leverage Ratio set forth in the most recent Pricing Certificate
actually delivered by Borrower, then (1) the Applicable Leverage Ratio in effect
for the period from the Cutoff Date to the date of delivery by Borrower of the
next Pricing Certificate (or, if earlier, the next date on which an Agent
Determination is made) shall be the Consolidated Leverage Ratio determined
pursuant to the Agent Determination and (2) on the first Business Day after
Administrative Agent delivers written notice to Borrower of any Agent
Determination, Borrower shall pay to Administrative Agent, for distribution (as
appropriate) to Lenders, an aggregate amount equal to the additional interest,
letter of credit fees and commitment fees Borrower would have been required to
pay in respect of all Loans, Letters of Credit or Commitments in respect of
which any interest or fees have been paid by Borrower during the period from the
Cutoff Date to the date such notice is given by Administrative Agent to Borrower
if the amount of such interest and fees had been calculated using the Applicable
Leverage Ratio based on such Agent Determination.
"APPLICABLE TRANCHE A BASE RATE MARGIN" means with respect to any date
of determination, a rate per annum equal to the percentage set forth below
opposite the Applicable Leverage Ratio in effect as of such date of
determination, any change in any such Applicable Tranche A Base Rate Margin to
be effective on the date of any corresponding change in the Applicable Leverage
Ratio:
APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE A BASE RATE MARGIN
5.50:1.00 or greater 1.000%
5.00:1.00 or greater, but
less than 5.50:1.00 0.750%
4.50:1.00 or greater, but
less than 5.00:1.00 0.325%
4.00:1.00 or greater, but
less than 4.50:1.00 0.125%
3.50:1.00 or greater, but
less than 4.00:1.00 0.000%
3.00:1.00 or greater, but
less than 3.50:1.00 0.000%
less than 3.00:1.00 0.000%
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<PAGE>
"APPLICABLE TRANCHE A LIBOR MARGIN" means, at any date of
determination, a rate per annum equal to the percentage set forth below opposite
the Applicable Leverage Ratio in effect as of such date of determination, any
change in any such Applicable Tranche A LIBOR Margin to be effective on the date
of any corresponding change in the Applicable Leverage Ratio:
APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE A LIBOR MARGIN
5.50:1.00 or greater 2.250%
5.00:1.00 or greater, but
less than 5.50:1.00 2.000%
4.50:1.00 or greater, but
less than 5.00:1.00 1.625%
4.00:1.00 or greater, but
less than 4.50:1.00 1.375%
3.50:1.00 or greater, but
less than 4.00:1.00 1.125%
3.00:1.00 or greater, but
less than 3.50:1.00 0.875%
less than 3.00:1.00 0.625%
"APPLICABLE TRANCHE B BASE RATE MARGIN" means, at any date of
determination, a rate per annum equal to the percentage set forth below opposite
the Applicable Leverage Ratio in effect as of such date of determination, any
change in any such Applicable Tranche B Base Rate Margin to be effective on the
date of any corresponding change in the Applicable Leverage Ratio:
APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE B BASE RATE MARGIN
5.00:1.00 or greater 1.250%
4.00:1.00 or greater, but
less than 5.00:1.00 1.000%
less than 4.00:1.00 0.750%
"APPLICABLE TRANCHE B LIBOR MARGIN" means, at any date of
determination, a rate per annum equal to the percentage set forth below opposite
the Applicable Leverage Ratio in effect as of such date of determination, any
change in any such Applicable Tranche B LIBOR
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<PAGE>
Margin to be effective on the date of any corresponding change in the Applicable
Leverage Ratio:
APPLICABLE LEVERAGE RATIO APPLICABLE TRANCHE B LIBOR MARGIN
5.00:1.00 or greater 2.500%
4.00:1.00 or greater, but
less than 5.00:1.00 2.250%
less than 4.00:1.00 2.000%
"ASSET SALE" means the sale by Borrower or any of its Subsidiaries to
any Third Party of (i) any of the stock or other ownership interests of any of
Borrower's Subsidiaries, (ii) substantially all of the assets of any division or
line of business of Borrower or any of its Subsidiaries, or (iii) any other
assets (whether tangible or intangible) of Borrower or any of its Subsidiaries
outside of the ordinary course of business (other than any other such assets to
the extent that the aggregate value of such assets sold in any single
transaction or related series of transactions is equal to $250,000 or less).
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially
the form of EXHIBIT XI annexed hereto.
"AVAILABLE AMOUNT" means, as of any date of determination, an amount
equal to (i) the aggregate amount of net cash proceeds received by Borrower
after the Closing Date in respect of any equity contributions made to Borrower
by, or any issuances of equity Securities by Borrower to, any Third Party other
than an Unrestricted Subsidiary (other than proceeds from purchases of capital
stock of Borrower to the extent such purchases are financed with the proceeds of
Investments permitted under subsection 7.3(ii)) PLUS (ii) the aggregate amount
of Retained Excess Cash Flow (as defined in subsection 2.4B(iii)(b)) as of such
date PLUS (iii) the aggregate amount of Retained Prepayments (as defined in
subsection 2.4B(iv)(c)) as of such date MINUS (iv) any proceeds received by
Borrower from the issuance of new shares of its common stock to the extent such
proceeds are used as provided in subsection 7.5(iii).
"AVAILABLE AMOUNT USAGE" means, as of any date of determination, an
amount equal to the sum of (i) the aggregate amount of Investments made pursuant
to subsection 7.3(v)(b) as of such date PLUS (ii) the aggregate amount of
Restricted Junior Payments made pursuant to subsection 7.5(ii) on or prior to
such date (other than any such Restricted Junior Payments made pursuant to a
Refinancing (as defined in the definition of "Refinancing Sub Debt")) PLUS (iii)
the aggregate amount of any Refinancing Premiums (as defined in the definition
of "Refinancing Sub Debt") paid by Borrower on or prior to such date.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
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<PAGE>
"BASE RATE" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"BASE RATE LOANS" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"BEAR" means Bear Acquisition, Inc., a Delaware corporation.
"BEAR EQUITY AMOUNT" has the meaning assigned to that term in the
recitals to this Agreement.
"BORROWER" has the meaning assigned to that term in the introduction
to this Agreement.
"BUSINESS DAY" means, for all purposes other than as covered by clause
(ii) below, (i) any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of New York City, New York or Boston, Massachusetts or is
a day on which banking institutions located in such state are authorized or
required by law or other governmental action to close and, (ii) with respect to
all notices, determinations, fundings and payments in connection with LIBOR or
any LIBOR Loans, any day that is a Business Day described in clause (i) above
and that is also (a) a day for trading by and between banks in Dollar deposits
in the London interbank market and (b) a day on which banking institutions are
open for business in London.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in a Deposit Account.
"CASH EQUIVALENTS" means (i) marketable securities (a) issued or
directly and unconditionally guaranteed as to interest and principal by the
United States Government or (b) issued by any agency of the United States the
obligations of which are backed by the full faith and credit of the United
States, in each case maturing within 24 months after the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within 24 months after the date
of acquisition thereof and having, at the time of the acquisition thereof, an
investment grade rating generally obtainable from either Standard & Poor's
Ratings Group ("S&P") or Moody's Investors Service, Inc. ("MOODY'S"); (iii)
commercial paper maturing no more than 12 months from the date of creation
thereof and having, at the time of the acquisition thereof, a rating of at least
A-2 from S&P or at least P-2 from Moody's; (iv) domestic and eurodollar
certificates of deposit or bankers' acceptances maturing within 24 months after
the date of acquisition thereof and issued or accepted by any Lender or by any
other commercial bank that has combined capital and surplus of not less than
$250,000,000; (v) repurchase agreements with a term of not more than 30 days for
underlying
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<PAGE>
securities of the types described in clauses (i), (ii) and (iv) above entered
into with any commercial bank meeting the requirements specified in clause (iv)
above or with any securities dealer of recognized national standing; (vi) shares
of investment companies that are registered under the Investment Company Act of
1940, as amended and that invest solely in one or more of the types of
investments referred to in clauses (i) through (v) above; and (vii) in the case
of any Foreign Subsidiary, high quality, short-term liquid Investments made by
such Foreign Subsidiary in the ordinary course of managing its surplus cash
position in a manner consistent with past practices.
"CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in
the form of EXHIBIT XII annexed hereto delivered by a Lender to Administrative
Agent pursuant to subsection 2.7B(iv).
"CHANGE OF CONTROL" means, and shall be deemed to have occurred, if:
(i)(a) KKR, its Affiliates and the Management Group shall at any time not own,
in the aggregate, directly or indirectly, beneficially and of record, at least
35% of the outstanding Voting Stock of Borrower (other than as the result of one
or more widely distributed offerings of common stock of Borrower, in each case
whether by Borrower or by KKR, its Affiliates or the Management Group) and/or
(b) any person, entity or "group" (within the meaning of Section 13(d) or 14(d)
of the Exchange Act) shall at any time have acquired direct or indirect
beneficial ownership of a percentage of the outstanding Voting Stock of Borrower
that exceeds the percentage of such Voting Stock then beneficially owned, in the
aggregate, by KKR, its Affiliates and the Management Group, UNLESS, in the case
of either clause (a) or (b) above, KKR, its Affiliates and the Management Group
shall, at the relevant time, have the collective right or ability, either by
contract or pursuant to a written proxy or other written evidence of voting
power, to elect or designate for election a majority of the Board of Directors
of Borrower; and/or (ii) at any time Continuing Directors shall not constitute a
majority of the Board of Directors of Borrower. For purposes of this
definition, "CONTINUING DIRECTOR" means, as of any date of determination, an
individual (A) who is a member of the Board of Directors of Borrower on the
Closing Date, (B) who, as of such date of determination, has been a member of
such Board of Directors for at least the 12 preceding months (or, if such date
of determination occurs during the period comprising the first 12 months after
the Closing Date, since the Closing Date), or (C) who has been nominated to be a
member of such Board of Directors, directly or indirectly, by KKR or Persons
nominated by KKR or who has been nominated to be a member of such Board of
Directors by a majority of the other Continuing Directors then in office.
"CLASS" means, as applied to Lenders, each of the following three
classes of Lenders: (i) Lenders having Revolving Loan Exposure, (ii) Lenders
having Tranche A Term Loan Exposure and (iii) Lenders having Tranche B Term Loan
Exposure.
"CLOSING DATE" means the date on or before June 30, 1998 (which shall
be a Business Day), on which the initial Loans are made.
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"COLLATERAL" means all of the personal property (including capital
stock (or other equivalent equity interest)) in which Liens are purported to be
granted pursuant to the Collateral Documents as security for the Obligations.
"COLLATERAL DOCUMENTS" means the Pledge Agreements, this Agreement
(with respect to Section 8 hereof) and any security documents that may be
entered into from time to time after the Closing Date by any Subsidiary of
Borrower pursuant to subsection 6.7B or by Borrower pursuant to Section 8.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Borrower or
any of its Subsidiaries in the ordinary course of business of Borrower or such
Subsidiary.
"COMMITMENTS" means the commitments of Lenders to make Loans as set
forth in subsection 2.1A.
"COMMODITIES AGREEMENT" means any forward commodities contract,
commodities futures contract, commodities option contract or similar agreement
or arrangement to which Borrower or any of its Subsidiaries is a party.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT IX annexed hereto delivered to Agents and Lenders by Borrower
pursuant to subsection 6.1(iii).
"CONFIDENTIAL INFORMATION MEMORANDUM" means that certain Confidential
Information Memorandum relating to Borrower dated April, 1998.
"CONSOLIDATED ADJUSTED EBITDA" means, with respect to any Person for
any period, an amount equal to (i) Consolidated Net Income PLUS (ii) to the
extent the following items are deducted in calculating such Consolidated Net
Income, the sum, without duplication, of the amounts for such period of (a)
Consolidated Interest Expense, (b) taxes computed on the basis of income, (c)
total depreciation expense, (d) total amortization expense (including
amortization of deferred financing fees), (e) any expenses or charges incurred
in connection with any issuance of debt or equity Securities (including upfront
fees payable in respect of bank facilities), (f) any restructuring charges or
reserves, (g) any expenses or charges relating to the Recapitalization, (h) any
fees and expenses related to Acquisitions and Investments permitted hereunder,
(i) any other non-cash charges, (j) any deduction for minority interest expense,
and (k) any other non-recurring charges MINUS (iii) to the extent the following
items are added in calculating such Consolidated Net Income, the sum, without
duplication, of the amounts for such period of (a) any non-recurring gains, and
(b) any non-cash gains, all of the foregoing as determined on a consolidated
basis for such Person and its Subsidiaries in conformity with GAAP; PROVIDED
that (X) Consolidated Adjusted EBITDA of any Included Pro Forma Entity (other
than any Unrestricted Subsidiary redesignated as a Subsidiary of Borrower) shall
be increased (if positive)
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or decreased (if negative) by any Pro Forma Adjustment applicable thereto and
(Y) Consolidated Adjusted EBITDA of Borrower and its Subsidiaries shall be
increased (if positive) or decreased (if negative) by the Net EBITDA Adjustment.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized as principal on the consolidated balance sheet of Borrower and its
Subsidiaries) by Borrower and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Borrower and its Subsidiaries; PROVIDED that Consolidated Capital
Expenditures shall not include (i) any such expenditures constituting all or a
portion of the purchase price in connection with any Acquisition, (ii) any such
expenditures made in connection with the replacement, substitution, repair or
restoration of any assets to the extent financed (a) with insurance proceeds
received by Borrower or any of its Subsidiaries on account of the loss of, or
any damage to, the assets being replaced, substituted for, repaired or restored
or (b) with the proceeds of any compensation awarded to Borrower or any of its
Subsidiaries as a result of the taking, by eminent domain or condemnation, of
the assets being replaced or substituted for, (iii) the purchase price of any
equipment that is purchased simultaneously with the trade-in of any existing
equipment by Borrower or any of its Subsidiaries to the extent that the gross
amount of such purchase price is reduced by any credit granted by the seller of
such equipment for such equipment being traded in, or (iv) the purchase price of
any property, plant or equipment purchased within one year of the consummation
of any Asset Sale or any other sale by Borrower or any of its Subsidiaries of
any other property, plant or equipment to the extent purchased with the Net
Asset Sale Proceeds of such Asset Sale or the proceeds of such other sale.
"CONSOLIDATED CURRENT ASSETS" means, as at any date of determination,
the total assets of Borrower and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP, EXCLUDING
Cash and Cash Equivalents.
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Borrower and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP, EXCLUDING the current portions of Funded Debt.
"CONSOLIDATED EXCESS CASH FLOW" means, for any Fiscal Year, an amount
(if positive) equal to (i) the sum, without duplication, of the amounts for such
Fiscal Year of (a) Consolidated Net Income, (b) the amount of all non-cash
charges to the extent deducted in arriving at such Consolidated Net Income, (c)
any net decrease in Consolidated Working Capital since the end of the preceding
Fiscal Year, and (d) the aggregate net non-cash loss realized by Borrower and
its Subsidiaries in connection with the sale, lease, transfer or other
disposition of assets by Borrower and its Subsidiaries during such Fiscal Year
(other than sales in the ordinary course of business), to the extent deducted in
arriving at such Consolidated Net Income, MINUS (ii) the sum, without
duplication, of the amounts for such Fiscal Year of (a) the amount of all
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non-cash credits to the extent added in arriving at such Consolidated Net
Income, (b) Consolidated Capital Expenditures actually paid in Cash during such
Fiscal Year (net of the principal amount of any Indebtedness incurred to finance
such Consolidated Capital Expenditures, whether incurred in such Fiscal Year or
in the immediately succeeding Fiscal Year), (c) the aggregate amount of all
prepayments of Revolving Loans and Swing Line Loans to the extent accompanied by
permanent reductions in the Revolving Loan Commitments, (d) the aggregate amount
of all principal payments in respect of any Indebtedness of Borrower or any of
its Subsidiaries (including the Term Loans and the principal component of any
payments in respect of Capital Leases), other than (1) any mandatory prepayments
of the Term Loans pursuant to subsection 2.4B(iii), (2) any prepayments of
Indebtedness with the proceeds of other Indebtedness, or (3) repayments in
respect of any revolving credit facility except to the extent there is a
permanent reduction in commitments thereunder in connection with such
repayments, (e) any net increase in Consolidated Working Capital since the end
of the preceding Fiscal Year, (f) the aggregate net non-cash gain realized by
Borrower and its Subsidiaries in connection with the sale, lease, transfer or
other disposition of assets by Borrower and its Subsidiaries during such Fiscal
Year (other than sales in the ordinary course of business), (g) the aggregate
amount of all Cash payments made by Borrower and its Subsidiaries in respect of
long-term liabilities of Borrower or any of its Subsidiaries other than
Indebtedness, (h) the aggregate amount of new Investments made in Cash in
accordance with subsection 7.3(v), (i) the aggregate amount of Cash
consideration paid in connection with any Acquisitions (net of any such
consideration paid out of any Net Asset Sale Proceeds), (j) the aggregate amount
of Restricted Junior Payments made in accordance with subsection 7.5(i) (to the
extent such Restricted Junior Payments are required by the terms of the
applicable management and/or employee stock plan, stock subscription agreement
or shareholder agreement), (ii) and (v), (k) the aggregate amount of any
expenditures actually made in Cash by Borrower and its Subsidiaries during such
Fiscal Year (including expenditures for the payment of financing fees) to the
extent such expenditures are not expensed during such Fiscal Year, (l) the
aggregate amount of any net currency gains realized by Borrower and its
Subsidiaries during such Fiscal Year that are prohibited from being repatriated
to the United States, and (m) the aggregate amount of any premium, make-whole or
penalty payments actually paid in cash during such Fiscal Year that are required
in connection with any prepayment of Indebtedness and that are accounted for by
Borrower as extraordinary items, all of the foregoing as determined on a
consolidated basis for Borrower and its Subsidiaries in accordance with GAAP.
"CONSOLIDATED GROSS SALES REVENUES" means, for any Fiscal Year, an
amount equal to gross sales revenues of Borrower and its Subsidiaries for such
Fiscal Year on a consolidated basis determined in conformity with GAAP; PROVIDED
that, for purposes of calculating such gross sales revenues, (i) the gross sales
revenues of any business acquired during such Fiscal Year in an Acquisition
permitted under subsection 7.7(ii) shall be determined on a pro forma basis
(based on assumptions believed by Borrower in good faith to be reasonable) as if
such Acquisition had been consummated on the first day of such Fiscal Year and
(ii) the gross sales revenues of any business sold or otherwise disposed of by
Borrower or any of its Subsidiaries during such Fiscal Year shall be excluded in
their entirety.
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"CONSOLIDATED GROSS SALES REVENUES ADJUSTMENT" means, for any Fiscal
Year, 5% of the amount equal to (i) the increase (if any) of consolidated gross
sales revenues of Borrower and its Subsidiaries for such Fiscal Year
attributable to any business acquired during such Fiscal Year in an Acquisition
permitted under subsection 7.7(ii) MINUS (ii) the decrease (if any) in such
consolidated gross sales revenues attributable to any business sold or otherwise
disposed of by Borrower or any of its Subsidiaries during such Fiscal Year.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, an amount equal to, without duplication, (i) total interest expense
(including that portion attributable to Capital Leases in accordance with GAAP,
capitalized interest and any administrative agency or commitment or other
similar fees payable in respect of bank facilities) of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, with
respect to all outstanding Indebtedness of such Person and its Subsidiaries,
including all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financings and net costs
under Interest Rate Agreements, but excluding, however, (a) any interest expense
(including amortization of discount, amortization of debt issuance costs, and
amortization of any other charges relating to the Recapitalization) not payable
in Cash during such period and (b) any amounts referred to in subsection 2.3
payable to Administrative Agent, Syndication Agent, Documentation Agent and
Lenders on or before the Closing Date MINUS (ii) total interest income of such
Person and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, but excluding, however, any interest income not received in Cash
during such period; PROVIDED that Consolidated Interest Expense of Borrower and
its Subsidiaries shall be increased (if positive) or decreased (if negative) by
the Net Interest Adjustment.
"CONSOLIDATED LEVERAGE RATIO" means, as of the last day of any Fiscal
Quarter, the ratio of (i) Consolidated Total Debt as of such date to (ii)
Consolidated Adjusted EBITDA of Borrower and its Subsidiaries for the
four-Fiscal Quarter period ending on such date.
"CONSOLIDATED NET INCOME" means, with respect to any Person (the
"SUBJECT PERSON") for any period, the net income (or loss) of the Subject Person
and its Subsidiaries on a consolidated basis for such period taken as a single
accounting period determined in conformity with GAAP; PROVIDED that there shall
be excluded (i) the income (or loss) of any Person in which any other Person
(other than the Subject Person or any of its Subsidiaries) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Subject Person or any of its Subsidiaries by the other Person during
such period, (ii) the income (or loss) of any Person accrued prior to the date
it becomes a Subsidiary of the Subject Person or is merged into or consolidated
with the Subject Person or any of its Subsidiaries or that Person's assets are
acquired by the Subject Person or any of its Subsidiaries, (iii) any after-tax
gains or losses, and any related fees and expenses, in each case to the extent
attributable to Asset Sales or returned surplus assets of any Pension Plan, (iv)
any translation currency gains and losses, and (v) (to the extent not included
in clauses (i) through (iv) above) any net extraordinary gains or net
extraordinary losses.
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"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Borrower and its
Subsidiaries under clauses (i), (ii) and (iii) of the definition of
"Indebtedness" (but only to the extent, in the case of said clause (iii), of any
drawings honored under letters of credit and not yet reimbursed by Borrower or
any of its Subsidiaries), as determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED WORKING CAPITAL" means, as at any date of determination,
the excess (or deficit) of Consolidated Current Assets over Consolidated Current
Liabilities.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement, currency futures contract, currency option contract, synthetic
currency exchange rate cap or other similar agreement or arrangement to which
Borrower or any of its Subsidiaries is a party.
"DEFAULTING LENDER" has the meaning assigned to that term in
subsection 2.9.
"DEFAULT PERIOD" has the meaning assigned to that term in subsection
2.9.
"DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"DLJ" has the meaning assigned to that term in the introduction to
this Agreement.
"DOCUMENTATION AGENT" has the meaning assigned to that term in the
introduction to this Agreement.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"DOMESTIC SUBSIDIARY" means any Subsidiary of Borrower that is not a
Foreign Subsidiary.
"ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; PROVIDED that
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(x) such bank is acting through a branch or agency located in the United States
or (y) such bank is organized under the laws of a country that is a member of
the Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses including insurance companies,
mutual funds and lease financing companies; and (B) any Lender, any Affiliate of
any Lender and, with respect to any Lender that is an investment fund that
invests in commercial loans, any other investment fund that invests in
commercial loans and that is managed by the same investment advisor as such
Lender or by an Affiliate of such investment advisor; PROVIDED that no Affiliate
of Borrower shall be an Eligible Assignee.
"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by Borrower or any of its Subsidiaries (i) in the ordinary course of such
Person's business or (ii) as required in connection with a financing transaction
or an acquisition or disposition of real estate) or proceedings relating in any
way to any Environmental Law (for purposes of this definition, "CLAIMS"),
including (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law and (b) any and all Claims by any
Third Party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"ENVIRONMENTAL LAWS" means any and all present and future laws,
statutes, ordinances, rules, regulations, requirements, restrictions, permits,
orders, and determinations of any governmental authority that have the force and
effect of law, and that pertain to pollution (including hazardous, toxic or
dangerous substances), natural resources or the environment, whether federal,
state, or local, domestic or foreign including environmental response laws such
as the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 and
as the same may be further amended (hereinafter collectively called "CERCLA").
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with Borrower or any of its Subsidiaries
within the meaning of Section 414(b) or (c) of the Internal Revenue Code or (for
purposes of provisions of the Internal Revenue Code relating to Section 412 of
the Internal Revenue Code) Section 414(m) or (o) of the Internal Revenue Code.
"ERISA EVENT" means any of the following events or occurrences if such
event or occurrence could, individually or in the aggregate, reasonably be
expected to have a Material
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Adverse Effect: (i) the failure to make a required contribution to a Pension
Plan; (ii) a withdrawal by Borrower, any of its Subsidiaries or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA), or a cessation of operation which is treated as such a withdrawal under
Section 4062(e) of ERISA; (iii) a complete or partial withdrawal by Borrower,
any of its Subsidiaries or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization or is insolvent
pursuant to Section 4241 or 4245 of ERISA; (iv) the filing of a notice of intent
to terminate, the treatment of a Plan amendment as a termination under Section
4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate, in each case with respect to a Pension Plan or Multiemployer Plan;
(v) an event or condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; (vi) the
imposition of any liability upon Borrower, any of its Subsidiaries or any ERISA
Affiliate under Title IV of ERISA (other than with respect to PBGC premiums due
but not delinquent under Section 4007 of ERISA) upon Borrower, any of its
Subsidiaries or any ERISA Affiliate; (vii) the imposition of a Lien pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA
with respect to any Pension Plan; (viii) receipt from the Internal Revenue
Service of notice of the failure of any Pension Plan (or any other Plan intended
to qualify under Section 401(a) of the Internal Revenue Code) to qualify under
Section 401(a) of the Internal Revenue Code, or the failure of any trust forming
part of any Pension Plan to qualify for exemption from taxation under Section
501(a) of the Internal Revenue Code; or (ix) the violation of any applicable
foreign law, or an event or occurrence that is comparable to any of the
foregoing events or occurrences, in either case with respect to a Plan that is
not subject to regulation under ERISA by reason of Section 4(b)(4) of ERISA.
"EVENT OF DEFAULT" means each of the events set forth in Section 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXCLUDED PRO FORMA ENTITY" means, for any period, (i) any Person,
property, business or asset (other than an Unrestricted Subsidiary) that is
sold, transferred or otherwise disposed of by Borrower or any of its
Subsidiaries to a Third Party during such period; PROVIDED that, for purposes of
calculating any consolidated financial information for any Excluded Pro Forma
Entity to be used in determining the Net EBITDA Adjustment or Net Interest
Adjustment for such period, financial information pertaining to any Person,
property, business or asset that was related to such Excluded Pro Forma Entity
but that was not disposed of by Borrower or such Subsidiary shall not be
consolidated with the relevant financial information of the Excluded Pro Forma
Entity and (ii) any Subsidiary of Borrower that is redesignated as an
Unrestricted Subsidiary during such period.
"EXISTING CREDIT AGREEMENT" means that certain letter agreement dated
as of August 14, 1997, made by Corestates Bank, N.A. ("EXISTING LENDER"), and
accepted by Borrower on August 19, 1997, as amended by that certain letter
agreement dated as of January
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23, 1998, made by Existing Lender and accepted by Borrower on January 28, 1998,
relating to a line of credit extended by Existing Lender to Borrower in an
aggregate amount of $15,000,000.
"EXISTING SHAREHOLDERS" means Gary M. Lowenthal and certain trusts
formed by or related to him and/or Justina J. Lowenthal owning prior to the
consummation of the Recapitalization, in the aggregate, 100% of the Shares.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"FEE LETTERS" means, collectively, the Administrative Agent Fee Letter
and the Syndication Agent Fee Letter.
"FINANCIAL PLAN" has the meaning assigned to that term in subsection
6.1(ix).
"FIRST PRIORITY" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral and (ii) such Lien is
the only Lien (other than Permitted Encumbrances) to which such Collateral is
subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Borrower and its Subsidiaries
ending on December 31 of each calendar year (or any other date to which such
Fiscal Year-end is changed pursuant to subsection 6.10).
"FLEET" has the meaning assigned to that term in the introduction to
this Agreement.
"FOREIGN SUBSIDIARY" means any Subsidiary of Borrower which is
organized under the laws of any jurisdiction outside of the United States of
America.
"FUJI" has the meaning assigned to that term in the introduction to
this Agreement.
"FUNDED DEBT", as applied to any Person, means all Indebtedness for
borrowed money of that Person (including any current portions thereof) which by
its terms or by the terms of any instrument or agreement relating thereto
matures more than one year from, or is directly
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renewable or extendable at the option of that Person to a date more than one
year from (including an option of that Person under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of one year or more from), the date of the creation thereof.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative
Agent and Swing Line Lender located at One Federal Street, Third Floor, Boston,
MA 02211 or (ii) such other office of Administrative Agent and/or Swing Line
Lender as may from time to time hereafter be designated as such in a written
notice delivered by Administrative Agent and/or Swing Line Lender to Borrower
and each Lender.
"FUNDING DATE" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in 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 may be approved by a significant segment of
the accounting profession in the United States, in each case as the same are
applicable to the circumstances as of the date of determination.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state,
local or foreign governmental authority, agency or court.
"GUARANTEE OBLIGATIONS" means, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness of any other
Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including any obligation of such Person, whether or not contingent, (i) to
purchase any such Indebtedness or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (a) for the purchase or
payment of any such Indebtedness or (b) to maintain working capital or equity
capital of the Primary Obligor or otherwise to maintain the net worth or
solvency of the Primary Obligor, (iii) to purchase property, Securities or
services primarily for the purpose of assuring the owner of any such
Indebtedness of the ability of the Primary Obligor to make payment of such
Indebtedness or (iv) otherwise to assure or hold harmless the owner of such
Indebtedness against loss in respect thereof; PROVIDED, HOWEVER, that the term
"Guarantee Obligations" shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the Indebtedness in respect of which such Guarantee
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith.
"GUARANTIES" means the Subsidiary Guaranty and any guaranty entered
into by any Subsidiary of Borrower pursuant to subsection 6.7B.
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"HAZARDOUS MATERIALS" means any substance that is defined or listed as
a hazardous, toxic or dangerous substance under any present or future
Environmental Law or that is otherwise regulated or prohibited or subject to
investigation or remediation under any present or future Environmental Law
because of its hazardous, toxic, or dangerous properties, including (i) any
substance that is a "hazardous substance" under CERCLA (as defined in the
definition of "ENVIRONMENTAL LAWS") and (ii) petroleum wastes or products.
"HEDGE AGREEMENT" means any Interest Rate Agreement, Commodities
Agreement or Currency Agreement designed to hedge against fluctuations in
interest rates, the price or availability of commodities, or currency values,
respectively.
"INCLUDED PRO FORMA ENTITY" means, for any period, (i) any Person,
property, business or asset (other than an Unrestricted Subsidiary) that is
acquired by Borrower or any of its Subsidiaries from a Third Party during such
period and not subsequently sold, transferred or otherwise disposed of by
Borrower or such Subsidiary to a Third Party during such period; PROVIDED that,
for purposes of calculating any consolidated financial information for any
Included Pro Forma Entity to be used in determining the Net EBITDA Adjustment or
Net Interest Adjustment for such period, financial information pertaining to any
Person, property, business or asset that was related to such Included Pro Forma
Entity but that was not acquired by Borrower or such Subsidiary shall not be
consolidated with the relevant financial information of the Included Pro Forma
Entity and (ii) any Unrestricted Subsidiary that is redesignated as a Subsidiary
of Borrower during such period.
"INDEBTEDNESS", as applied to any Person, means (i) all indebtedness
of such Person for borrowed money, (ii) that portion of obligations with respect
to Capital Leases that is properly classified as a liability on a balance sheet
of such Person in conformity with GAAP, (iii) any obligation incurred by such
Person in connection with banker's acceptances and the maximum aggregate amount
from time to time available for drawing under all outstanding letters of credit
issued for the account of such Person together, without duplication, with the
amount of all honored but unreimbursed drawings thereunder, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
(excluding any such obligations incurred under ERISA), which purchase price (a)
is due more than six months from the date of incurrence of the obligation in
respect thereof and (b) would be shown on the liability side of the balance
sheet of such Person in accordance with GAAP, (v) all monetary obligations of
such Person under Hedge Agreements (it being understood that monetary
obligations under Interest Rate Agreements, Commodities Agreements and Currency
Agreements other than Hedge Agreements constitute Investments and not
Indebtedness), and (vi) all indebtedness referred to in clauses (i) through (iv)
above secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person; PROVIDED that the
term "Indebtedness" shall in no event include any trade payables or accrued
expenses arising in the ordinary course of business.
"INDEMNITEE" has the meaning assigned to that term in subsection 10.3.
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"INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of Borrower and its Subsidiaries as currently conducted
that are material to the condition (financial or otherwise), business or
operations of Borrower and its Subsidiaries, taken as a whole.
"INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan,
each March 31, June 30, September 30 and December 31 of each year, commencing on
the first such date to occur after the Closing Date, and (ii) with respect to
any LIBOR Loan, the last day of each Interest Period applicable to such Loan;
PROVIDED that, in the case of each Interest Period of longer than three months,
"Interest Payment Date" shall also include each date that is three months, or an
integral multiple thereof, after the commencement of such Interest Period.
"INTEREST PERIOD" has the meaning assigned to that term in subsection
2.2B.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Borrower or any of its Subsidiaries is a
party.
"INTEREST RATE DETERMINATION DATE" means with respect to any Interest
Period relating to a Loan, the second Business Day prior to the first day of
such Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"INVESTMENT" means (i) any purchase or other acquisition by Borrower
or any of its Subsidiaries of, or of a beneficial interest in, any Securities of
any other Person (other than a Person that prior to such purchase or acquisition
was a Subsidiary of Borrower), (ii) any loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Borrower or any of its Subsidiaries to any Third Party, including all
indebtedness and accounts receivable from that Third Party that are not current
assets or did not arise from sales to that Third Party in the ordinary course of
business, (iii) the designation of any Person as an Unrestricted Subsidiary, or
(iv) any monetary obligations under Interest Rate Agreements, Commodities
Agreements or Currency Agreements not constituting Hedge Agreements. The amount
of any Investment shall be (A) the original cost of such Investment (determined,
in the case of an Investment described in clause (iii) above, as provided in the
definition of "Subsidiary", without any adjustments for increases or decreases
in value, or write-ups, write-downs or write-offs with respect to such
Investment, MINUS (B) the lesser of (1) the aggregate amount of any repayments,
redemptions, dividends or distributions thereon or proceeds from the sale
thereof, in each case to the extent of Cash payments (including any Cash
received by way of deferred payment pursuant to, or monetization of, a note
receivable or otherwise, but only as and when so received) actually received by
Borrower or the applicable Subsidiary of Borrower, and (2) the aggregate amount
described in the immediately preceding clause (A).
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"ISSUING LENDER" means, as the context may require, Fleet, any Person
serving as a successor Administrative Agent hereunder, in its capacity as issuer
of the Letters of Credit and/or at the request of Administrative Agent and the
consent of Borrower, another Lender or an Affiliate of Administrative Agent that
may issue one or more Letters of Credit hereunder.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; PROVIDED
that in no event shall any corporate Subsidiary of any Person be considered to
be a Joint Venture to which such Person is a party.
"KKR" means Kohlberg Kravis Roberts & Co. L.P.
"LENDER" and "LENDERS" means the persons identified as "Lenders" and
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall
include Swing Line Lender unless the context otherwise requires; PROVIDED that
the term "LENDERS", when used in the context of a particular Commitment, shall
mean Lenders having that Commitment.
"LENDING OFFICE" means, as to any Lender, the office or offices of
such Lender specified on SCHEDULE 2.1 annexed hereto (with respect to Lenders
listed on the signature pages hereof) or in the Assignment Agreement pursuant to
which it became or becomes a Lender, or such other office or offices as such
Lender may have or may from time to time hereafter designate as such in a
written notice delivered by such Lender to Borrower and Administrative Agent.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of Borrower pursuant to subsection 3.1.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding
(whether or not the conditions to drawing can be met thereunder) PLUS (ii) the
aggregate amount of all drawings under Letters of Credit honored by Issuing
Lenders and not theretofore reimbursed by Borrower (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection
3.3B).
"LIBOR" means, for any Interest Rate Determination Date with respect
to an Interest Period for a LIBOR Loan, the rate per annum determined on the
basis of the London interbank offered rate for Dollar deposits with maturities
comparable to such Interest Period as of approximately 11:00 A.M. (London time)
on such Interest Rate Determination Date as set forth on Telerate Page 3750;
PROVIDED that in the event such rate does not appear on Page 3750 (or otherwise)
of the Telerate Service, "LIBOR" for purposes of this paragraph shall be
determined by reference to (i) such other publicly available service for
displaying interest rates for deposits in Dollars as may be agreed upon by
Borrower and Administrative Agent or (ii) in the absence of
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such agreement, the arithmetic average (rounded upward to the nearest 1/16 of
one percent) of the offered quotations, if any, to first class banks in the
London interbank market for Dollars by Reference Lenders for Dollar deposits of
amounts in same day funds comparable to the respective principal amounts of the
LIBOR Loans of Reference Lenders for which LIBOR is then being determined (which
principal amount shall be deemed to be $1,000,000 in the case of any Reference
Lender not making, converting to or continuing such a LIBOR Loan) with
maturities comparable to such Interest Period as of approximately 10:00 A.M.
(Boston, Massachusetts time) on such Interest Rate Determination Date; PROVIDED
that if any Reference Lender fails to provide Administrative Agent with its
aforementioned quotation then LIBOR shall be determined based on the
quotation(s) provided to Administrative Agent by the other Reference Lender(s).
"LIBOR LOANS" means Loans bearing interest at rates determined by
reference to LIBOR as provided in subsection 2.2A.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or other similar encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any other similar
preferential arrangement having the practical effect of any of the foregoing.
"LOAN" or "LOANS" means one or more of the Tranche A Term Loans,
Tranche B Term Loans, Revolving Loans or Swing Line Loans or any combination
thereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of
Credit (and any applications for Letters of Credit), the Guaranties and the
Collateral Documents.
"LOAN PARTY" means Borrower, each Subsidiary Guarantor and each
Subsidiary executing and delivering a Loan Document after the Closing Date
pursuant to subsection 6.7B, and "LOAN PARTIES" means all such Persons,
collectively.
"MANAGEMENT GROUP" means, at any time, the Chairman of the Board, the
President, the chief executive officer, the chief operating officer, any
Executive Vice President or Vice President, the Treasurer and the Secretary of
Borrower at such time.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"MASTER PLEDGE AGREEMENT" means the Master Pledge Agreement executed
and delivered on the Closing Date by Borrower and Administrative Agent,
substantially in the form of EXHIBIT XIII annexed hereto, as such Master Pledge
Agreement may thereafter be amended, supplemented or otherwise modified from
time to time.
"MATERIAL ADVERSE EFFECT" means any circumstance or condition
affecting the business, assets, operations, properties or financial condition of
Borrower and its Subsidiaries,
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taken as a whole, that would materially adversely affect (a) the ability of Loan
Parties, taken as a whole, to perform their obligations under this Agreement and
the other Loan Documents, taken as a whole, or (b) the rights and remedies of
Agents and Lenders under this Agreement and the other Loan Documents, taken as a
whole.
"MATERIAL FOREIGN SUBSIDIARY" means a Material Subsidiary that is a
Foreign Subsidiary.
"MATERIAL SUBSIDIARY" means each Subsidiary of Borrower now existing
or hereafter acquired or formed by Borrower which, on a consolidated basis for
such Subsidiary and its Subsidiaries, (a) for the most recent Fiscal Year
accounted for more than 5% of the consolidated gross revenues of Borrower and
its Subsidiaries or (b) as at the end of such Fiscal Year, was the owner of more
than 5% of the consolidated total assets of Borrower and its Subsidiaries.
"MOODY'S" has the meaning assigned to that term in the definition of
"Cash Equivalents".
"MULTIEMPLOYER PLAN" means a "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA, with respect to which Borrower, any of its
Subsidiaries or any ERISA Affiliate may have liability.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment pursuant to, or
by monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale, net of (i) the costs and expenses
relating to such Asset Sale, (ii) all taxes paid or estimated to be payable in
connection with such Asset Sale, (iii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than the Loans) that is secured by a Lien on the stock or assets in question and
that is required to be repaid under the terms thereof as a result of such Asset
Sale and (iv) the amount of any reasonable reserves established in accordance
with GAAP against any liabilities (other than taxes described in clause (ii)
above) that are (a) associated with the assets that are the subject of such
Asset Sale and (b) retained by Borrower or any of its Subsidiaries; PROVIDED
that (X) in the event the amount of any taxes estimated to be payable as
described in clause (ii) above exceeds the amount actually paid, Borrower or the
applicable Subsidiary shall be deemed to have received Net Asset Sale Proceeds
in the amount of such excess on the date such taxes are paid, and (Y) upon any
subsequent reduction in the amount of any reserve described in clause (iv) above
(other than in connection with a payment by Borrower or the applicable
Subsidiary in respect of the applicable liability), Borrower or the applicable
Subsidiary shall be deemed to have received Net Asset Sale Proceeds on the date
and in the amount of such reduction.
"NET EBITDA ADJUSTMENT" means, for any period, an amount equal to (i)
the sum of the aggregate of the amounts of Consolidated Adjusted EBITDA for any
Included Pro Forma Entities (calculated for the entire such period for each such
Included Pro Forma Entity as
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if such Included Pro Forma Entity had become an Included Pro Forma Entity on the
first day of such period) MINUS (ii) the sum of the aggregate of the amounts of
Consolidated Adjusted EBITDA for any Excluded Pro Forma Entities (calculated for
the entire such period for each such Excluded Pro Forma Entity, including any
portion thereof prior to the date on which it became an Excluded Pro Forma
Entity).
"NET INTEREST ADJUSTMENT" means, for any period, an amount equal to
(i) the sum of the aggregate of the amounts of Consolidated Interest Expense for
any Included Pro Forma Entities (calculated for the entire such period for each
such Included Pro Forma Entity, including any portion thereof prior to the date
on which it became an Included Pro Forma Entity, in each case on a pro forma
basis as if any Indebtedness of such Included Pro Forma Entity that was
incurred, assumed or prepaid in connection with the transaction pursuant to
which it became an Included Pro Forma Entity had been incurred, assumed or
prepaid on the first day of such period) MINUS (ii) the sum of the aggregate of
the amounts of Consolidated Interest Expense for any Excluded Pro Forma Entities
(calculated for the entire such period for each such Excluded Pro Forma Entity,
including any portion thereof prior to the date on which it became an Excluded
Pro Forma Entity).
"NEWSUB" means Boyds Operations, Inc., a Delaware corporation
newly-formed on or prior to the Closing Date and wholly-owned by Borrower.
"NON-EXCLUDED TAX" has the meaning assigned to that term in subsection
2.7B(i).
"NOTES" means one or more of the Tranche A Term Notes, Tranche B Term
Notes, Revolving Notes or Swing Line Note or any combination thereof.
"NOTICE OF BORROWING" means a notice substantially in the form of
EXHIBIT I annexed hereto delivered by Borrower to Administrative Agent pursuant
to subsection 2.1B with respect to a proposed borrowing.
"NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in
the form of EXHIBIT II annexed hereto delivered by Borrower to Administrative
Agent pursuant to subsection 2.2D with respect to a proposed conversion or
continuation of the applicable basis for determining the interest rate with
respect to the Loans specified therein.
"NOTICE OF REQUEST FOR ISSUANCE OF LETTER OF CREDIT" means a notice
substantially in the form of EXHIBIT III annexed hereto delivered by Borrower to
Administrative Agent pursuant to subsection 3.1B(i) with respect to the proposed
issuance of a Letter of Credit.
"OBLIGATIONS" means all monetary obligations of every nature of each
Loan Party from time to time owed to Agents, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.
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"OFFICER'S CERTIFICATE" means, as applied to any corporation, a
certificate executed on behalf of such corporation by a Responsible Officer
thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PENSION PLAN" means a pension plan as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan), with respect to which Borrower, any of
its Subsidiaries or any ERISA Affiliate may have any liability.
"PERMITTED ENCUMBRANCES" means the following types of Liens:
(i) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that payment thereof is otherwise not, at the time, required by subsection 6.3;
(ii) Liens in respect of property or assets imposed by law, such as
carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or
other similar Liens arising in the ordinary course of business, in each case so
long as such Liens do not, individually or in the aggregate, have a Material
Adverse Effect;
(iii) Liens (other than any Lien imposed pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of business
(exclusive of obligations in respect of payments for borrowed money);
(iv) Liens incurred in the ordinary course of business on securities
to secure repurchase and reverse repurchase obligations in respect of such
securities;
(v) Liens consisting of judgment or judicial attachment liens in
circumstances not constituting an Event of Default under subsection 8.8;
(vi) easements, rights-of-way, restrictions, minor defects or
irregularities of title and other similar encumbrances not interfering in any
material respect with the business of Borrower and its Subsidiaries, taken as a
whole;
(vii) Liens securing obligations in respect of Capital Leases on
the assets subject to such Capital Leases; PROVIDED that such Capital Leases are
otherwise permitted hereunder.
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(viii) Liens arising solely by virtue of any statutory or common
law provision relating to bankers' liens, rights of set-off or similar rights
and remedies with respect to deposit accounts or other funds maintained with a
creditor depository institution; PROVIDED that the applicable deposit account is
not a cash collateral account;
(ix) any interest or title of a lessor, or secured by a lessor's
interest under, any lease permitted by this Agreement;
(x) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xi) Liens on goods the purchase price of which is financed by a
Commercial Letter of Credit issued for the account of Borrower; PROVIDED that
such Lien secures only the obligations of Borrower or such Subsidiary in respect
of such Commercial Letter of Credit to the extent permitted under this
Agreement; and
(xii) leases or subleases granted to others not interfering in any
material respect with the business of Borrower and its Subsidiaries, taken as a
whole.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"PLAN" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower or any of its Subsidiaries sponsors or maintains, or to
which Borrower or any of its Subsidiaries makes, is making or is obligated to
make contributions, or to which Borrower or any of its Subsidiaries may have any
liability, and includes any Pension Plan.
"PLEDGE AGREEMENTS" means the Master Pledge Agreement and any pledge
agreements or other similar instruments that Borrower may enter into from time
to time after the Closing Date with respect to any Material Foreign Subsidiary
pursuant to the terms of the Master Pledge Agreement, as such agreements or
instruments may thereafter be amended, supplemented or otherwise modified from
time to time.
"PLEDGED COLLATERAL" means, collectively, the "Pledged Collateral" as
defined in each Pledge Agreement.
"POTENTIAL EVENT OF DEFAULT" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
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"PRIME RATE" means the rate that Fleet announces from time to time as
its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Fleet or any other Lender may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.
"PRO FORMA ADJUSTMENT" means, for any period with respect to any
Included Pro Forma Entity (other than an Unrestricted Subsidiary redesignated as
a Subsidiary of Borrower, for which there shall be no Pro Forma Adjustment), the
pro forma increase or decrease in the Consolidated Adjusted EBITDA of such
Included Pro Forma Entity that Borrower in good faith predicts will occur as a
result of reasonably identifiable and supportable net cost savings or additional
net costs or a reasonably identifiable and supportable increase in sales volume,
as the case may be, that will be realizable during such period by combining the
operations of such Included Pro Forma Entity with the operations of Borrower and
its Subsidiaries; PROVIDED that, so long as such net cost savings or additional
net costs or increase in sales volume will be realizable at any time during such
period it shall be assumed, for purposes of projecting such pro forma increase
or decrease in such Consolidated Adjusted EBITDA, that such net cost savings or
additional net costs or increase in sales volume will be realizable during the
entire such period; and PROVIDED, FURTHER that any such pro forma increase or
decrease in such Consolidated Adjusted EBITDA shall be without duplication of
any net cost savings or additional net costs or increase in sales volume
actually realized during such period and already included in such Consolidated
Adjusted EBITDA.
"PRO FORMA ADJUSTMENT CERTIFICATE" shall mean a certificate of a
Responsible Officer of Borrower delivered pursuant to subsection 6.1(xii)
setting forth the information described in clause (d) of subsection 6.1(iii).
"PRO RATA SHARE" means (i) with respect to all payments, computations
and other matters relating to the Tranche A Term Loan Commitment or the Tranche
A Term Loan of any Lender, the percentage obtained by DIVIDING (x) the Tranche A
Term Loan Exposure of that Lender BY (y) the aggregate Tranche A Term Loan
Exposure of all Lenders, (ii) with respect to all payments, computations and
other matters relating to the Tranche B Term Loan Commitment or the Tranche B
Term Loan of any Lender, the percentage obtained by DIVIDING (x) the Tranche B
Term Loan Exposure of that Lender BY (y) the aggregate Tranche B Term Loan
Exposure of all Lenders, (iii) with respect to all payments, computations and
other matters relating to the Revolving Loan Commitment or the Revolving Loans
of any Lender or any Letters of Credit issued or participations therein
purchased by any Lender or any participations in any Swing Line Loans purchased
by any Lender, the percentage obtained by DIVIDING (x) the Revolving Loan
Exposure of that Lender BY (y) the aggregate Revolving Loan Exposure of all
Lenders, and (v) for all other purposes with respect to each Lender, the
percentage obtained by DIVIDING (x) the sum of the Tranche A Term Loan Exposure
of that Lender PLUS the Tranche B Term Loan Exposure of that Lender PLUS the
Revolving Loan Exposure of that Lender BY (y) the sum of the aggregate Tranche A
Term Loan Exposure of all Lenders PLUS the aggregate Tranche B Term Loan
Exposure of all Lenders PLUS the aggregate Revolving Loan Exposure of
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all Lenders, in any such case as the applicable percentage may be adjusted by
assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share
of each Lender for purposes of each of clauses (i), (ii) and (iii) of the
preceding sentence is set forth opposite the name of that Lender in SCHEDULE 2.1
annexed hereto.
"RECAPITALIZATION" means, collectively, (i) the transactions
contemplated by the Recapitalization Agreement, (ii) the issuance of the Senior
Subordinated Debt and (iii) the related transactions in respect of the Shares
rolled-over by the Existing Shareholders, including the purchase of Shares by
Bear.
"RECAPITALIZATION AGREEMENT" means that certain Recapitalization and
Stock Purchase Agreement, dated as of March 6, 1998 by and among Borrower, Bear
and the Existing Shareholders, in the form delivered to Agents and Lenders prior
to their execution of this Agreement and as such agreement may be amended from
time to time thereafter.
"RECAPITALIZATION FINANCING REQUIREMENTS" means the aggregate of all
amounts necessary (i) to pay the aggregate cash consideration payable to all
holders of Shares pursuant to the Recapitalization Agreement upon consummation
of the Recapitalization, and (ii) to pay Transaction Costs.
"REFERENCE LENDERS" means Fleet, DLJ and Fuji.
"REFINANCING SUB DEBT" means Indebtedness of Borrower issued in
exchange for, or the proceeds of which are used to repurchase, redeem, defease
or otherwise prepay or retire (collectively, to "REFINANCE" or a "REFINANCING"),
Senior Subordinated Debt; PROVIDED that (i) the aggregate principal amount of
such Indebtedness shall not exceed the sum of (a) the aggregate principal amount
of Senior Subordinated Debt thereby Refinanced PLUS (b) the amount of any tender
premium, call premium or similar premium (any such premium being a "REFINANCING
PREMIUM") paid by Borrower in connection with such Refinancing, (ii) such
Indebtedness is unsecured and is not guarantied by any Subsidiary of Borrower,
and (iii) the terms of such Indebtedness (including the maturity, amortization
schedule, covenants, defaults, remedies, subordination provisions and other
material terms thereof) shall be no less favorable in any material respect to
Lenders than the other terms of the Senior Subordinated Debt.
"REFINANCING SUB DEBT INDENTURE" means the Indenture pursuant to which
any Refinancing Sub Debt is issued, as such indenture may be amended from time
to time.
"REFUNDED SWING LINE LOANS" has the meaning assigned to that term in
subsection 2.1A(iv).
"REGISTER" has the meaning assigned to that term in subsection 2.1D.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
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"REIMBURSEMENT DATE" has the meaning assigned to that term in
subsection 3.3B.
"RELATED AGREEMENTS" means, collectively, the Recapitalization
Agreement and the Senior Subordinated Debt Documents.
"REQUISITE CLASS LENDERS" means, at any time of determination (i) for
the Class of Lenders having Revolving Loan Exposure, Lenders having or holding
more than 50% of the aggregate Revolving Loan Exposure of all Lenders, (ii) for
the Class of Lenders having Tranche A Term Loan Exposure, Lenders having or
holding more than 50% of the aggregate Tranche A Term Loan Exposure of all
Lenders, and (iii) for the Class of Lenders having Tranche B Term Loan Exposure,
Lenders having or holding more than 50% of the aggregate Tranche B Term Loan
Exposure of all Lenders.
"REQUISITE LENDERS" means Lenders having or holding more than 50% of
the sum of the aggregate Tranche A Term Loan Exposure of all Lenders PLUS the
aggregate Tranche B Term Loan Exposure of all Lenders PLUS the aggregate
Revolving Loan Exposure of all Lenders.
"RESPONSIBLE OFFICER" means, with respect to any Person, its chief
executive officer, chief operating officer, president, or any vice president,
managing director, treasurer, controller or other officer of such Person having
substantially the same authority and responsibility; PROVIDED that, with respect
to compliance with financial covenants or the delivery of financial statements
and related financial reports, "RESPONSIBLE OFFICER" means the chief financial
officer, treasurer or controller of Borrower, or any other Responsible Officer
of Borrower whose responsibilities include substantially the same authority and
responsibility.
"RESTRICTED ACQUISITION SUBSIDIARY" means (i) a Subsidiary of Borrower
that is (a) first created or acquired by Borrower or any of its Subsidiaries
after the Closing Date in connection with an Acquisition and (b) designated as a
"Restricted Acquisition Subsidiary" pursuant to a written notice delivered by
Borrower to Agents prior to the consummation of such Acquisition; PROVIDED that
Borrower may, by written notice to Agents, redesignate any Restricted
Acquisition Subsidiary as a Subsidiary that is not a Restricted Acquisition
Subsidiary so long as, after giving effect to the aggregate principal amount of
any outstanding Indebtedness of such Restricted Acquisition Subsidiary that was
originally incurred pursuant to subsection 7.1(ix) as if such Indebtedness were
being incurred by such Restricted Acquisition Subsidiary as of the date of such
redesignation, no Event of Default or Potential Event of Default shall have
occurred and be continuing or would result therefrom and (ii) any Subsidiary of
a Restricted Acquisition Subsidiary described in the foregoing clause (i).
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Borrower now or hereafter outstanding, except a dividend payable solely in
shares of common stock of Borrower or payable solely in shares of that class of
stock to the holders of that class, (ii) any redemption, retirement,
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sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of stock of Borrower now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Borrower now or hereafter outstanding, and (iv) any payment or
prepayment of principal of, or redemption, purchase, retirement, defeasance
(including in-substance or legal defeasance), sinking fund or similar payment
with respect to, any Subordinated Indebtedness.
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make
Revolving Loans to Borrower pursuant to subsection 2.1A(iii), and "REVOLVING
LOAN COMMITMENTS" means such commitments of all Lenders in the aggregate.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means the earliest of (i)
June 30, 1998 if the initial Term Loans are not made on or before that date,
(ii) the seventh anniversary of the Closing Date and (iii) such earlier date on
which the Revolving Loan Commitments may be terminated pursuant to subsection
2.4B or Section 8.
"REVOLVING LOAN EXPOSURE" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Revolving Loan
Commitments, that Lender's Revolving Loan Commitment and (ii) after the
termination of the Revolving Loan Commitments, the sum, without duplication, of
(a) the aggregate outstanding principal amount of the Revolving Loans of that
Lender PLUS (b) in the event that Lender is an Issuing Lender, the aggregate
Letter of Credit Usage in respect of all Letters of Credit issued by that Lender
(in each case net of any participations purchased by other Lenders in such
Letters of Credit or any unreimbursed drawings thereunder) PLUS (c) the
aggregate amount of all participations purchased by that Lender in any
outstanding Letters of Credit or any unreimbursed drawings under any Letters of
Credit PLUS (d) in the case of Swing Line Lender, the aggregate outstanding
principal amount of all Swing Line Loans (net of any participations therein
purchased by other Lenders) PLUS (e) the aggregate amount of all participations
purchased by that Lender in any outstanding Swing Line Loans, in each case
without duplication.
"REVOLVING LOANS" means the Loans made by Lenders to Borrower pursuant
to subsection 2.1A(iii).
"REVOLVING NOTES" means (i) any promissory notes of Borrower issued
pursuant to subsection 2.1E to evidence the Revolving Loans of any Lenders and
(ii) any promissory notes issued by Borrower pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Revolving Loan
Commitments and Revolving Loans of any Lenders, in each case substantially in
the form of EXHIBIT VI annexed hereto, as they may be amended, supplemented or
otherwise modified from time to time.
"S&P" has the meaning assigned to that term in the definition of "Cash
Equivalents".
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"SEC" means the Securities and Exchange Commission or any successor
thereto.
"SECURITIES" means any stock, shares, partnership interests, limited
liability company interests, voting trust certificates, certificates of interest
or participation in any profit-sharing agreement or arrangement, options,
warrants, bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SENIOR SUBORDINATED DEBT" means the $165,000,000 in aggregate
principal amount of Senior Subordinated Debt Notes.
"SENIOR SUBORDINATED DEBT DOCUMENTS" means the Senior Subordinated
Debt Indenture, the Senior Subordinated Debt Notes and the Senior Subordinated
Debt Guarantee, collectively.
"SENIOR SUBORDINATED DEBT GUARANTEE" means any subordinated guaranty
made by Subsidiaries of Borrower in favor of the holders of the Senior
Subordinated Debt Notes pursuant to the Senior Subordinated Debt Indenture, the
subordination provisions of which shall be on terms substantially the same as
the subordination provisions in the Senior Subordinated Debt Indenture, as such
subordinated guaranty may be amended from time to time.
"SENIOR SUBORDINATED DEBT INDENTURE" means the indenture pursuant to
which the Senior Subordinated Debt is issued, as such indenture may be amended
from time to time.
"SENIOR SUBORDINATED DEBT NOTES" means the 9% Senior Subordinated
Notes due 2008 of Borrower issued pursuant to the Senior Subordinated Debt
Indenture and substantially in the form set forth in Article II thereof, as such
Senior Subordinated Notes may be amended from time to time.
"SHARES" means the outstanding common stock of Borrower, par value
$1.00 per share.
"STANDBY LETTER OF CREDIT" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness of
Borrower or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers' compensation liabilities of
Borrower or any of its Subsidiaries, (iii) the obligations of third party
insurers of Borrower or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers, (iv) obligations with respect
to Capital Leases or operating leases
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of Borrower or any of its Subsidiaries, and (v) other lawful corporate purposes
of Borrower or any of its Subsidiaries.
"SUBORDINATED INDEBTEDNESS" means (i) the Indebtedness of Borrower
evidenced by the Senior Subordinated Debt, and (ii) the Indebtedness of Borrower
evidenced by any Refinancing Sub Debt.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof; PROVIDED that, with respect to Borrower or any of its Subsidiaries, the
term "Subsidiary" shall not include any Unrestricted Subsidiary; and PROVIDED,
FURTHER that Borrower shall be permitted from time to time to (i) designate any
Unrestricted Subsidiary as a "Subsidiary" of Borrower hereunder by written
notice to Agents, so long as (a) no Event of Default or Potential Event of
Default shall have occurred and be continuing or shall be caused thereby and (b)
the provisions of subsection 6.7 shall have been complied with in respect of
such newly-designated Subsidiary, or (ii) designate any Subsidiary of Borrower
that is formed or acquired after the Closing Date, or any Person that, as a
result of the acquisition after the Closing Date by Borrower or any of its
Subsidiaries of any equity Securities of such Person, would otherwise be a
Subsidiary of Borrower hereunder, to be an "Unrestricted Subsidiary" by written
notice to Agents so long as (1) after giving effect to such designation as an
Investment in such Unrestricted Subsidiary (calculated as an amount equal to the
sum of (X) the net worth of the Subsidiary or other Person so designated (the
"DESIGNATED PERSON") immediately prior to such designation (such net worth to be
calculated, in the case of a Designated Person that is currently a Subsidiary of
Borrower, without regard to any Obligations of such Subsidiary under the
Subsidiary Guaranty) and (Y) the aggregate principal amount of any Indebtedness
owed by the Designated Person to Borrower or any of its Subsidiaries immediately
prior to such designation, all calculated, except as set forth in the
parenthetical to clause (X) above, on a consolidated basis in accordance with
GAAP), Borrower shall be in compliance with the provisions of subsection 7.3(v),
(2) no Subsidiary is a Subsidiary of such Unrestricted Subsidiary, (3) on or
promptly after the date of designation of such Person as such Unrestricted
Subsidiary, such Unrestricted Subsidiary shall enter into a tax sharing
agreement with Borrower that provides (as determined by Borrower in good faith)
for an appropriate allocation of tax liabilities and benefits, and (4) no
recourse whatsoever (whether by contract or by operation of law or otherwise)
may be had to Borrower or any of its Subsidiaries or any of their respective
properties or assets for any obligations of such Unrestricted Subsidiary except
to the extent that the aggregate maximum amount of such recourse constitutes (X)
an Investment permitted under subsection 7.3(v) or (Y) a Guarantee Obligation
permitted under subsection 7.4(vii).
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"SUBSIDIARY GUARANTOR" means any Domestic Subsidiary that executes and
delivers a counterpart of the Subsidiary Guaranty on the Closing Date or from
time to time thereafter pursuant to subsection 6.7.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and
delivered by existing Domestic Subsidiaries on the Closing Date and to be
executed and delivered by additional Domestic Subsidiaries from time to time
thereafter in accordance with subsection 6.7A, substantially in the form of
EXHIBIT XIV annexed hereto, as such Subsidiary Guaranty may thereafter be
amended, supplemented or otherwise modified from time to time.
"SUPERMAJORITY CLASS LENDERS" means, at any time of determination (i)
for the Class of Lenders having Revolving Loan Exposure and/or Tranche A Term
Loan Exposure, Lenders having or holding more than 66-2/3% of the sum of (x) the
aggregate Revolving Loan Exposure of all Lenders and (y) the aggregate Tranche A
Term Loan Exposure of all Lenders, and (ii) for the Class of Lenders having
Tranche B Term Loan Exposure, Lenders having or holding more than 66-2/3% of the
aggregate Tranche B Term Loan Exposure of all Lenders.
"SWING LINE LENDER" means Fleet, or any Person serving as a successor
Administrative Agent hereunder, in its capacity as Swing Line Lender hereunder.
"SWING LINE LOAN COMMITMENT" means the commitment of Swing Line Lender
to make Swing Line Loans to Borrower pursuant to subsection 2.1A(iv).
"SWING LINE LOANS" means the Loans made by Swing Line Lender to
Borrower pursuant to subsection 2.1A(iv).
"SWING LINE NOTE" means (i) any promissory note of Borrower issued
pursuant to subsection 2.1E to evidence the Swing Line Loans of Swing Line
Lender and (ii) any promissory note issued by Borrower to any successor
Administrative Agent and Swing Line Lender pursuant to the last sentence of
subsection 9.5B, in each case substantially in the form of EXHIBIT VII annexed
hereto, as it may be amended, supplemented or otherwise modified from time to
time.
"SYNDICATION AGENT" has the meaning assigned to that term in the
introduction to this Agreement.
"SYNDICATION AGENT FEE LETTER" means that certain Fee Letter dated
April 1, 1998 of Syndication Agent and Donaldson, Lufkin & Jenrette Securities
Corporation ("ARRANGER") to Borrower and accepted by Borrower on April 2, 1998.
"TAX" or "TAXES" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; PROVIDED that "TAX ON THE OVERALL NET INCOME" of a Person shall be
construed as a reference to a tax imposed by the
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jurisdiction in which that Person is organized or in which that Person's
principal office (and/or, in the case of a Lender, its applicable Lending
Office) is located or in which that Person (and/or, in the case of a Lender, its
applicable Lending Office) is deemed to be doing business on all or part of the
net income, profits or gains (whether worldwide, or only insofar as such income,
profits or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its
applicable Lending Office).
"TERM LOANS" means the Tranche A Term Loans and the Tranche B Term
Loans, collectively.
"THIRD PARTY" means any Person other than Borrower or any of its
Subsidiaries.
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the purpose of
repaying any Refunded Swing Line Loans or reimbursing the applicable Issuing
Lender for any amount drawn under any Letter of Credit but not yet so applied)
PLUS (ii) the aggregate principal amount of all outstanding Swing Line Loans
PLUS (iii) the Letter of Credit Usage.
"TRANCHE A LENDER" means a Lender that has Tranche A Term Loan
Exposure.
"TRANCHE A TERM LOAN COMMITMENT" means the commitment of a Lender to
make a Tranche A Term Loan to Borrower pursuant to subsection 2.1A(i), and
"TRANCHE A TERM LOAN COMMITMENTS" means such commitments of all Lenders in the
aggregate.
"TRANCHE A TERM LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Tranche A Term Loans,
that Lender's Tranche A Term Loan Commitment and (ii) after the funding of the
Tranche A Term Loans, the outstanding principal amount of the Tranche A Term
Loan of that Lender.
"TRANCHE A TERM LOANS" means the Loans made as Tranche A Term Loans by
Lenders to Borrower pursuant to subsection 2.1A(i).
"TRANCHE A TERM NOTES" means any promissory notes of Borrower issued
pursuant to subsection 2.1E to evidence the Tranche A Term Loans of any Lenders,
substantially in the form of EXHIBIT IV annexed hereto, as any such note may be
amended, supplemented or otherwise modified from time to time.
"TRANCHE B TERM LOAN COMMITMENT" means the commitment of a Lender to
make a Tranche B Term Loan to Borrower pursuant to subsection 2.1A(ii), and
"TRANCHE B TERM LOAN COMMITMENTS" means such commitments of all Lenders in the
aggregate.
"TRANCHE B TERM LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination (i) prior to the funding of the Tranche B Term Loans,
that Lender's
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Tranche B Term Loan Commitment and (ii) after the funding of the Tranche B Term
Loans, the outstanding principal amount of the Tranche B Term Loan of that
Lender.
"TRANCHE B TERM LOANS" means the Loans made as Tranche B Term Loans by
Lenders to Borrower pursuant to subsection 2.1A(ii).
"TRANCHE B TERM NOTES" means any promissory notes of Borrower issued
pursuant to subsection 2.1E to evidence the Tranche B Term Loans of any Lenders,
substantially in the form of EXHIBIT V annexed hereto, as any such note may be
amended, supplemented or otherwise modified from time to time.
"TRANSACTION COSTS" means the fees, costs and expenses payable by
Borrower in connection with the transactions contemplated by the Loan Documents,
the Related Agreements on or before the Closing Date.
"TYPE" means, as applied to any Loan, whether such Loan is a Tranche A
Term Loan, a Tranche B Term Loan, a Revolving Loan or a Swing Line Loan.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"UNFUNDED PENSION LIABILITY" means, with respect to any Pension Plan,
the amount of unfunded benefit liabilities of such Pension Plan as defined in
Section 4001(a)(18) of ERISA.
"UNREINVESTED ASSET SALE PROCEEDS" means that portion, if any, of any
Net Asset Sale Proceeds that shall not have been reinvested by Borrower and its
Subsidiaries in the business of Borrower and its Subsidiaries within (i) two
years after the receipt by Borrower or any of its Subsidiaries of such Net Asset
Sale Proceeds, in the case of an Asset Sale consisting of the issuance of
capital stock by any of Borrower's Subsidiaries to a Third Party or (ii) one
year after the receipt by Borrower or any of its Subsidiaries of such Net Asset
Sale Proceeds, in the case of any other Asset Sale.
"UNRESTRICTED SUBSIDIARY" means any corporate Subsidiary of Borrower
(determined without giving effect to the provisos set forth in the definition of
"Subsidiary") that is formed or acquired after the Closing Date and that is
designated by Borrower as an "Unrestricted Subsidiary" as provided in the
definition of "Subsidiary".
"VOTING STOCK" means, with respect to any Person, Securities of such
Person having ordinary voting power (without regard to the occurrence of any
contingency) to vote in the election of directors of such Person.
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1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER
AGREEMENT.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. All computations made for purposes of
determining any Applicable Leverage Ratio or any amount of Consolidated Excess
Cash Flow or for purposes of determining compliance with any of the provisions
of Section 7, including any related computations of amounts represented by terms
defined in subsection 1.1, shall utilize accounting principles and policies in
effect at the time of preparation of, and consistent with those used to prepare,
the historical financial statements of Borrower and its Subsidiaries described
in subsection 5.3. Financial statements and other information required to be
delivered by Borrower to Lenders pursuant to clauses (i), (ii) and (ix) of
subsection 6.1 shall be prepared in accordance with GAAP as in effect at the
time of such preparation; PROVIDED that if any of the computations described in
the immediately preceding sentence shall at any time utilize accounting
principles and policies different from those utilized in preparing the financial
statements referred to in this sentence, such financial statements shall be
delivered together with reconciliation worksheets showing in reasonable detail
the differences that would result in such computations if the accounting
principles and policies utilized in preparing such financial statements were
utilized in making such computations.
1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION.
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not be
construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference thereto,
but rather shall be deemed to refer to all other items or matters that fall
within the broadest possible scope of such general statement, term or matter.
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 COMMITMENTS; MAKING OF LOANS; THE REGISTER; NOTES.
A. COMMITMENTS. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Borrower herein set
forth, each Lender
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hereby severally agrees to make the Loans described in subsections 2.1A(i),
2.1A(ii) and 2.1A(iii) and Swing Line Lender hereby agrees to make the Loans
described in subsection 2.1A(iv).
(i) TRANCHE A TERM LOANS. Each Lender severally agrees to lend to
Borrower on the Closing Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche A Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each Lender's
Tranche A Term Loan Commitment is set forth opposite its name on SCHEDULE
2.1 annexed hereto and the aggregate amount of the Tranche A Term Loan
Commitments is $100,000,000. Each Lender's Tranche A Term Loan Commitment
shall expire immediately and without further action on June 30, 1998 if the
Tranche A Term Loans are not made on or before that date. Borrower may
make only one borrowing under the Tranche A Term Loan Commitments. Amounts
borrowed under this subsection 2.1A(i) and subsequently repaid or prepaid
may not be reborrowed.
(ii) TRANCHE B TERM LOANS. Each Lender severally agrees to lend to
Borrower on the Closing Date an amount not exceeding its Pro Rata Share of
the aggregate amount of the Tranche B Term Loan Commitments to be used for
the purposes identified in subsection 2.5A. The amount of each Lender's
Tranche B Term Loan Commitment is set forth opposite its name on SCHEDULE
2.1 annexed hereto and the aggregate amount of the Tranche B Term Loan
Commitments is $225,000,000. Each Lender's Tranche B Term Loan Commitment
shall expire immediately and without further action on June 30, 1998 if the
Tranche B Term Loans are not made on or before that date. Borrower may
make only one borrowing under the Tranche B Term Loan Commitments. Amounts
borrowed under this subsection 2.1A(ii) and subsequently repaid or prepaid
may not be reborrowed.
(iii) REVOLVING LOANS. Each Lender severally agrees, subject to
the limitations set forth below with respect to the maximum amount of
Revolving Loans permitted to be outstanding from time to time, to lend to
Borrower from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date an aggregate
amount not exceeding its Pro Rata Share of the aggregate amount of the
Revolving Loan Commitments to be used for the purposes identified in
subsection 2.5B. The original amount of each Lender's Revolving Loan
Commitment is set forth opposite its name on SCHEDULE 2.1 annexed hereto
and the aggregate original amount of the Revolving Loan Commitments is
$40,000,000; PROVIDED that the Revolving Loan Commitments of Lenders shall
be adjusted to give effect to any assignments of the Revolving Loan
Commitments pursuant to subsection 10.1B; and PROVIDED, FURTHER that the
amount of the Revolving Loan Commitments shall be reduced from time to time
by the amount of any reductions thereto made pursuant to subsection
2.4B(ii). Each Lender's Revolving Loan Commitment shall expire on the
Revolving Loan Commitment Termination Date and all Revolving Loans and all
other amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that date.
Amounts borrowed under this
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subsection 2.1A(iii) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
Anything contained in this Agreement to the contrary notwithstanding,
the Revolving Loans and the Revolving Loan Commitments shall be subject to
the limitation that in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments then in
effect.
(iv) SWING LINE LOANS. Swing Line Lender hereby agrees, subject to
the limitations set forth below with respect to the maximum amount of Swing
Line Loans permitted to be outstanding from time to time, to make a portion
of the Revolving Loan Commitments available to Borrower from time to time
during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date by making Swing Line Loans to Borrower in an
aggregate amount not exceeding the amount of the Swing Line Loan Commitment
to be used for the purposes identified in subsection 2.5B, notwithstanding
the fact that such Swing Line Loans, when aggregated with Swing Line
Lender's outstanding Revolving Loans and Swing Line Lender's Pro Rata Share
of the Letter of Credit Usage then in effect, may exceed Swing Line
Lender's Revolving Loan Commitment. The original amount of the Swing Line
Loan Commitment is $5,000,000; PROVIDED that any reduction of the Revolving
Loan Commitments made pursuant to subsection 2.4B(ii) which reduces the
aggregate Revolving Loan Commitments to an amount less than the then
current amount of the Swing Line Loan Commitment shall result in an
automatic corresponding reduction of the Swing Line Loan Commitment to the
amount of the Revolving Loan Commitments, as so reduced, without any
further action on the part of Borrower, Administrative Agent or Swing Line
Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Swing Line Loans and all other amounts
owed hereunder with respect to the Swing Line Loans shall be paid in full
no later than that date. Amounts borrowed under this subsection 2.1A(iv)
may be repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
Anything contained in this Agreement to the contrary notwithstanding,
the Swing Line Loans and the Swing Line Loan Commitment shall be subject to
the limitation that in no event shall the Total Utilization of Revolving
Loan Commitments at any time exceed the Revolving Loan Commitments then in
effect.
With respect to any Swing Line Loans which have not been voluntarily
prepaid by Borrower pursuant to subsection 2.4B(i), Swing Line Lender may,
at any time in its sole and absolute discretion, deliver to Administrative
Agent (with a copy to Borrower), no later than 11:00 A.M. (Boston,
Massachusetts time) on the first Business Day in advance of the proposed
Funding Date, a notice (which shall be deemed to be a Notice of Borrowing
given by Borrower) requesting Lenders to make Revolving Loans that are Base
Rate Loans on such Funding Date in an amount equal to the amount of such
Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date
such notice is
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given which Swing Line Lender requests Lenders to prepay. Anything
contained in this Agreement to the contrary notwithstanding, (i) the
proceeds of such Revolving Loans made by Lenders other than Swing Line
Lender shall be immediately delivered by Administrative Agent to Swing Line
Lender (and not to Borrower) and applied to repay a corresponding portion
of the Refunded Swing Line Loans and (ii) on the day such Revolving Loans
are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line
Loans shall be deemed to be paid with the proceeds of a Revolving Loan made
by Swing Line Lender, and such portion of the Swing Line Loans deemed to be
so paid shall no longer be outstanding as Swing Line Loans and shall no
longer be due under the Swing Line Note, if any, of Swing Line Lender but
shall instead constitute part of Swing Line Lender's outstanding Revolving
Loans and shall be due under the Revolving Note, if any, of Swing Line
Lender. If any portion of any such amount paid (or deemed to be paid) to
Swing Line Lender should be recovered by or on behalf of Borrower from
Swing Line Lender in bankruptcy, by assignment for the benefit of creditors
or otherwise, the loss of the amount so recovered shall be ratably shared
among all Lenders in the manner contemplated by subsection 10.5.
If for any reason (a) Revolving Loans are not made upon the request of
Swing Line Lender as provided in the immediately preceding paragraph in an
amount sufficient to repay any amounts owed to Swing Line Lender in respect
of any outstanding Swing Line Loans or (b) the Revolving Loan Commitments
are terminated at a time when any Swing Line Loans are outstanding, each
Lender shall be deemed to, and hereby agrees to, have purchased a
participation in such outstanding Swing Line Loans in an amount equal to
its Pro Rata Share (calculated, in the case of the foregoing clause (b),
immediately prior to such termination of the Revolving Loan Commitments) of
the unpaid amount of such Swing Line Loans together with accrued interest
thereon. Upon one Business Day's notice from Swing Line Lender, each
Lender shall deliver to Swing Line Lender an amount equal to its respective
participation in same day funds at the Funding and Payment Office. In
order to further evidence such participation (and without prejudice to the
effectiveness of the participation provisions set forth above), each Lender
agrees to enter into a separate participation agreement at the request of
Swing Line Lender in form and substance reasonably satisfactory to Swing
Line Lender. In the event any Lender fails to make available to Swing Line
Lender the amount of such Lender's participation as provided in this
paragraph, Swing Line Lender shall be entitled to recover such amount on
demand from such Lender together with interest thereon at the rate
customarily used by Swing Line Lender for the correction of errors among
banks for three Business Days and thereafter at the Base Rate. In the
event Swing Line Lender receives a payment of any amount in which other
Lenders have purchased participations as provided in this paragraph, Swing
Line Lender shall promptly distribute to each such other Lender its Pro
Rata Share of such payment.
Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans pursuant to the second preceding paragraph and
each Lender's obligation to
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purchase a participation in any unpaid Swing Line Loans pursuant to the
immediately preceding paragraph shall be absolute and unconditional and
shall not be affected by any circumstance, including (a) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against Swing Line Lender, Borrower or any other Person for any reason
whatsoever; (b) the occurrence or continuation of an Event of Default or a
Potential Event of Default; (c) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or
prospects of Borrower or any of its Subsidiaries; (d) any breach of this
Agreement or any other Loan Document by any party thereto; or (e) any other
circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing; PROVIDED that such obligations of each Lender are subject
to the condition that (X) Swing Line Lender believed in good faith that all
conditions under Section 4 to the making of the applicable Refunded Swing
Line Loans or other unpaid Swing Line Loans, as the case may be, were
satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line
Loans were made or (Y) the satisfaction of any such condition not satisfied
had been waived in accordance with subsection 10.6 prior to or at the time
such Refunded Swing Line Loans or other unpaid Swing Line Loans were made.
B. BORROWING MECHANICS. Tranche A Term Loans or Tranche B Term Loans
made on any Funding Date as Base Rate Loans or as LIBOR Loans with a particular
Interest Period shall be in an aggregate minimum amount of $2,500,000 and
integral multiples of $250,000 in excess of that amount. Revolving Loans (other
than Revolving Loans made pursuant to a request by Swing Line Lender pursuant to
subsection 2.1A(iv) for the purpose of repaying any Refunded Swing Line Loans or
Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing
any Issuing Lender for the amount of a drawing under a Letter of Credit issued
by it) made on any Funding Date shall be in an aggregate minimum amount of
$1,000,000 and integral multiples of $100,000 in excess of that amount. Swing
Line Loans made on any Funding Date shall be in an aggregate minimum amount of
$250,000 and integral multiples of $100,000 in excess of that amount. Whenever
Borrower desires that Lenders make Term Loans or Revolving Loans to Borrower it
shall deliver to Administrative Agent a Notice of Borrowing no later than 11:00
A.M. (Boston, Massachusetts time) at least three Business Days in advance of the
proposed Funding Date (in the case of a LIBOR Loan) or at least one Business Day
in advance of the proposed Funding Date (in the case of a Base Rate Loan).
Whenever Borrower desires that Swing Line Lender make a Swing Line Loan, it
shall deliver to Administrative Agent a Notice of Borrowing no later than 1:00
P.M. (Boston, Massachusetts time) on the proposed Funding Date. The Notice of
Borrowing shall specify (i) the proposed Funding Date (which shall be a Business
Day), (ii) the amount and Type of Loans requested, (iii) in the case of Swing
Line Loans and any Loans made on the Closing Date, that such Loans shall be Base
Rate Loans, (iv) in the case of Revolving Loans not made on the Closing Date,
whether such Loans shall be Base Rate Loans or LIBOR Loans, and (v) in the case
of any Loans requested to be made as LIBOR Loans, the initial Interest Period
requested therefor. Term Loans and Revolving Loans may be continued as or
converted into Base Rate Loans and LIBOR Loans in the manner provided in
subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing,
Borrower may give Administrative Agent telephonic notice by the required time of
any proposed borrowing under
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this subsection 2.1B; PROVIDED that such notice shall be promptly confirmed in
writing by delivery of a Notice of Borrowing to Administrative Agent on or
before the applicable Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Borrower shall have effected Loans hereunder.
Borrower shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Borrower is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Borrower of the proceeds
of any Loans shall constitute a re-certification by Borrower, as of the
applicable Funding Date, as to matters to which Borrower is required to certify
in the applicable Notice of Borrowing.
C. DISBURSEMENT OF FUNDS. All Term Loans and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, being understood that no Lender shall be responsible
for any default by any other Lender in that other Lender's obligation to make a
Loan requested hereunder nor shall the Commitment of any Lender to make the
particular Type of Loan requested be increased or decreased as a result of a
default by any other Lender in that other Lender's obligation to make a Loan
requested hereunder. Promptly after receipt by Administrative Agent of a Notice
of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof),
Administrative Agent shall notify each Lender or Swing Line Lender, as the case
may be, of the proposed borrowing. Each Lender shall make the amount of its
Loan available to Administrative Agent not later than 1:00 P.M. (Boston,
Massachusetts time) on the applicable Funding Date, and Swing Line Lender shall
make the amount of its Swing Line Loan available to Administrative Agent not
later than 2:00 P.M. (Boston, Massachusetts time) on the applicable Funding
Date, in each case in same day funds, at the Funding and Payment Office for such
Loans. Except as provided in subsection 2.1A(iv) or subsection 3.3B with
respect to Revolving Loans used to repay Refunded Swing Line Loans or to
reimburse any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it, upon satisfaction or waiver of the conditions precedent
specified in subsections 4.1 (in the case of Loans made on the Closing Date) and
4.2 (in the case of all Loans), Administrative Agent shall make the proceeds of
such Loans available to Borrower on the applicable Funding Date by causing an
amount of same day funds equal to the proceeds of all such Loans received by
Administrative Agent from Lenders or Swing Line Lender, as the case may be, to
be credited to the account of Borrower at the Funding and Payment Office for
such Loans.
Unless Administrative Agent shall have been notified by any Lender prior to
the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent
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the amount of such Lender's Loan requested on such Funding Date, Administrative
Agent may assume that such Lender has made such amount available to
Administrative Agent on such Funding Date and Administrative Agent may, in its
sole discretion, but shall not be obligated to, make available to Borrower a
corresponding amount on such Funding Date. If such corresponding amount is not
in fact made available to Administrative Agent by such Lender, Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from such Funding Date until
the date such amount is paid to Administrative Agent at the customary rate set
by Administrative Agent for the correction of errors among banks for three
Business Days and thereafter at the Base Rate. If such Lender does not pay such
corresponding amount forthwith upon Administrative Agent's demand therefor,
Administrative Agent shall promptly notify Borrower, and Borrower shall
immediately pay such corresponding amount to Administrative Agent together with
interest thereon for each day from such Funding Date until the date such amount
is paid to Administrative Agent, at the rate payable under this Agreement for
Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that Borrower may have against any Lender as a result of any default
by such Lender hereunder.
D. THE REGISTER.
(i) Administrative Agent shall maintain, at its address referred to
in subsection 10.7, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans (whether or not
separately evidenced by one or more Notes) of each Lender from time to time
(the "REGISTER"). The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(ii) Administrative Agent shall record in the Register the Tranche A
Term Loan Commitment, Tranche B Term Loan Commitment and Revolving Loan
Commitment and the Tranche A Term Loans, Tranche B Term Loan and Revolving
Loans from time to time of each Lender, the Swing Line Loan Commitment and
the Swing Line Loans from time to time of Swing Line Lender and each
repayment or prepayment in respect of the principal amount of the Tranche A
Term Loans, Tranche B Term Loan, or Revolving Loans of each Lender or the
Swing Line Loans of Swing Line Lender. Any such recordation shall be
conclusive and binding on Borrower and each Lender, absent clearly
demonstrable error; PROVIDED that failure to make any such recordation, or
any error in such recordation, shall not affect any Lender's Commitments or
Borrower's Obligations in respect of any applicable Loans.
(iii) Each Lender shall record on its internal records (including
any Notes held by such Lender) the amount of the Tranche B Term Loan and
the Tranche A Term Loan and Revolving Loan made by it and each payment in
respect thereof. Any such recordation shall be conclusive and binding on
Borrower, absent clearly demonstrable error; PROVIDED that failure to make
any such recordation, or any error in such recordation,
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shall not affect any Lender's Commitments or Borrower's Obligations in
respect of any applicable Loans; and PROVIDED, FURTHER that in the event of
any inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern.
(iv) Borrower, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of
the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall
be effective, in each case unless and until an Assignment Agreement
effecting the assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
10.1B(ii). Any assignment or transfer of all or part of a Loan evidenced
by a Note shall be registered on the Register only upon surrender for
cancellation, accompanied by a duly executed Assignment Agreement, of the
Note evidencing such Loan. Prior to such recordation, all amounts owed
with respect to the applicable Commitment or Loan shall be owed to the
Lender listed in the Register as the owner thereof, and any request,
authority or consent of any Person who, at the time of making such request
or giving such authority or consent, is listed in the Register as a Lender
shall be conclusive and binding on any subsequent holder, assignee or
transferee of the corresponding Commitments or Loans.
(v) Borrower hereby designates Fleet to serve as its agent solely for
purposes of maintaining the Register as provided in this subsection 2.1D,
and Borrower hereby agrees that, to the extent Fleet serves in such
capacity, Fleet and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes under subsection
10.3.
E. OPTIONAL NOTES. Upon the request of any Lender made through the
Administrative Agent at any time, solely to facilitate the pledge or assignment
of such Lender's applicable Loans pursuant to subsection 10.1D), Borrower shall
execute and deliver to such Lender (and/or, if applicable and if so specified in
such notice, to any Person who is an assignee of such Lender pursuant to
subsection 10.1), promptly after Borrower's receipt of such notice, a Note or
Notes to evidence such Lender's Tranche A Term Loans, Tranche B Term Loan,
Revolving Loans or Swing Line Loans, as the case may be, substantially in the
form of EXHIBIT IV, EXHIBIT V, EXHIBIT VI, or EXHIBIT VII annexed hereto,
respectively, with appropriate insertions.
2.2 INTEREST ON THE LOANS.
A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made to maturity (whether by acceleration
or otherwise) at a rate determined by reference to the Base Rate or LIBOR.
Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear
interest on the unpaid principal amount thereof from the date made through
maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base
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Rate. The applicable basis for determining the rate of interest with respect to
any Term Loan or any Revolving Loan shall be selected by Borrower initially at
the time a Notice of Borrowing is given with respect to such Loan pursuant to
subsection 2.1B, and the basis for determining the interest rate with respect to
any Term Loan or any Revolving Loan may be changed from time to time pursuant to
subsection 2.2D. Subject to the last proviso to the first paragraph of
subsection 2.2D, if on any day a Term Loan or Revolving Loan is outstanding with
respect to which notice has not been delivered to Administrative Agent in
accordance with the terms of this Agreement specifying the applicable basis for
determining the rate of interest, then for that day that Loan shall bear
interest determined by reference to the Base Rate.
(i) Subject to the provisions of subsections 2.2E and 2.7, the
Tranche A Term Loans and the Revolving Loans shall bear interest through
maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate PLUS
the Applicable Tranche A Base Rate Margin; or
(b) if a LIBOR Loan, then at the sum of LIBOR PLUS the
Applicable Tranche A LIBOR Margin.
(ii) Subject to the provisions of subsections 2.2E and 2.7, the
Tranche B Term Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate PLUS
the Applicable Tranche B Base Rate Margin; or
(b) if a LIBOR Loan, then at the sum of LIBOR PLUS the
Applicable Tranche B LIBOR Margin.
(iii) Subject to the provisions of subsections 2.2E and 2.7, the
Swing Line Loans shall bear interest through maturity at the sum of the
Base Rate PLUS the Applicable Tranche A Base Rate Margin MINUS the
Applicable Commitment Fee Percentage.
B. INTEREST PERIODS. In connection with each LIBOR Loan, Borrower may,
pursuant to the applicable Notice of Borrowing or Notice of Conversion/
Continuation, as the case may be, select an interest period (each an "INTEREST
PERIOD") to be applicable to such Loan, which Interest Period shall be, at
Borrower's option, either a one, two, three or six month period or if deposits
in the interbank Eurodollar market are generally available for such period to
all Lenders making the applicable Loans (as determined by such Lenders in good
faith based on prevailing market conditions), a nine or twelve month period;
PROVIDED that:
(i) the initial Interest Period for any LIBOR Loan shall commence on
the Funding Date in respect of such Loan, in the case of a Loan initially
made as a LIBOR Loan, or on the date specified in the applicable Notice of
Conversion/Continuation, in the case of a Loan converted to a LIBOR Loan;
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(ii) in the case of immediately successive Interest Periods applicable
to a LIBOR Loan continued as such pursuant to a Notice of Conversion/
Continuation, each successive Interest Period shall commence on the day on which
the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; PROVIDED that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clauses (v) and (vi) of this subsection 2.2B, end on the last
Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Tranche A
Term Loans shall extend beyond the seventh anniversary of the Closing Date,
no Interest Period with respect to any portion of the Tranche B Term Loans
shall extend beyond the eighth anniversary of the Closing Date, and no
Interest Period with respect to any portion of the Revolving Loans shall
extend beyond the Revolving Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Tranche A
Term Loans or Tranche B Term Loans shall extend beyond a date on which
Borrower is required to make a scheduled payment of principal of the
Tranche A Term Loans or Tranche B Term Loans, as the case may be, unless
the sum of (a) the aggregate principal amount of Tranche A Term Loans or
Tranche B Term Loans, as the case may be, that are Base Rate Loans plus (b)
the aggregate principal amount of Tranche A Term Loans or Tranche B Term
Loans, as the case may be, that are LIBOR Loans with Interest Periods
expiring on or before such date equals or exceeds the principal amount
required to be paid on the Tranche A Term Loans or Tranche B Term Loans, as
the case may be, on such date;
(vii) there shall be no more than 20 Interest Periods outstanding
at any time; and
(viii) in the event Borrower fails to specify an Interest Period
for any LIBOR Loan in the applicable Notice of Borrowing or Notice of
Conversion/Continuation, Borrower shall be deemed to have selected an
Interest Period of one month.
C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at
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maturity (including final maturity); PROVIDED that in the event any Swing Line
Loans or any Revolving Loans that are Base Rate Loans are prepaid pursuant to
subsection 2.4B, interest accrued on such Swing Line Loans or Revolving Loans
through the date of such prepayment shall be payable on the next succeeding
Interest Payment Date applicable to Base Rate Loans (or, if earlier, at final
maturity).
D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection
2.6, (i) Borrower shall have the option to convert at any time all or any part
of its outstanding Tranche A Term Loans, Tranche B Term Loans or Revolving Loans
equal to $2,500,000 and integral multiples of $250,000 in excess of that amount
from Loans bearing interest at a rate determined by reference to one basis to
Loans bearing interest at a rate determined by reference to an alternative basis
and (ii) upon the expiration of any Interest Period applicable to a LIBOR Loan,
Borrower shall have the option to continue as a LIBOR Loan all or any portion of
such Loan equal to $2,500,000 and integral multiples of $250,000 in excess of
that amount; PROVIDED, HOWEVER, that if, upon the expiration of any Interest
Period applicable to any LIBOR Loan, Borrower shall have failed to give a Notice
of Conversion/Continuation with respect to such LIBOR Loan in accordance with
this subsection 2.2D, Borrower shall be deemed to have given a timely Notice of
Conversion/Continuation electing to continue such LIBOR Loan as a LIBOR Loan
with an Interest Period of one month.
Borrower shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 11:00 A.M. (Boston, Massachusetts time) at
least one Business Day in advance of the proposed conversion date (in the case
of a conversion to a Base Rate Loan) and at least three Business Days in advance
of the proposed conversion/continuation date (in the case of a conversion to, or
a continuation of, a LIBOR Loan). A Notice of Conversion/Continuation shall
specify (i) the proposed conversion/continuation date (which shall be a Business
Day), (ii) the amount and Type of the Loan to be converted/continued, (iii) the
nature of the proposed conversion/continuation, (iv) in the case of a conversion
to, or a continuation of, a LIBOR Loan, the requested Interest Period, and (v)
in the case of a conversion to, or a continuation of, a LIBOR Loan, that no
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation,
Borrower may give Administrative Agent telephonic notice by the required time of
any proposed conversion/continuation under this subsection 2.2D; PROVIDED that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date. Upon receipt of written or telephonic notice of
any proposed conversion/continuation under this subsection 2.2D, Administrative
Agent shall promptly transmit such notice by telefacsimile or telephone to each
Lender.
Neither Administrative Agent nor any Lender shall incur any liability
to Borrower in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Borrower or
for otherwise acting in good faith under this subsection 2.2D, and upon
conversion or continuation of the applicable basis for determining the interest
rate with respect to
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any Loans in accordance with this Agreement pursuant to any such telephonic
notice Borrower shall have effected a conversion or continuation, as the case
may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6F, a
Notice of Conversion/Continuation for conversion to, or continuation of, a LIBOR
Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after
the related Interest Rate Determination Date, and Borrower shall be bound to
effect a conversion or continuation in accordance therewith.
E. POST-MATURITY INTEREST. Any principal payments on the Loans not paid
when due and, to the extent permitted by applicable law, any interest payments
on the Loans or any fees or other amounts owed hereunder not paid when due, in
each case whether at stated maturity, by notice of prepayment, by acceleration
or otherwise, shall thereafter bear interest (including post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws)
payable on demand at a rate which is 2% per annum in excess of the interest rate
otherwise payable under this Agreement for Base Rate Loans of the applicable
Type (any such fees and other amounts being deemed for such purposes to bear
interest on the same basis as Revolving Loans). Payment or acceptance of the
increased rates of interest provided for in this subsection 2.2E is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of
Administrative Agent or any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed (i)
in the case of Base Rate Loans bearing interest at a rate determined by
reference to the Prime Rate, on the basis of a 365-day or 366-day year, as the
case may be, and (ii) in the case of LIBOR Loans and Base Rate Loans bearing
interest at a rate determined by reference to the Federal Funds Effective Rate,
on the basis of a 360-day year, in each case for the actual number of days
elapsed in the period during which it accrues. In computing interest on any
Loan, the date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a LIBOR Loan, the date of conversion of such LIBOR Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a LIBOR Loan, the date of
conversion of such Base Rate Loan to such LIBOR Loan, as the case may be, shall
be excluded; PROVIDED that if a Loan is repaid on the same day on which it is
made, one day's interest shall be paid on that Loan.
2.3 FEES.
A. COMMITMENT FEES. Borrower agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the period from and including the Closing Date to and
excluding the Revolving Loan Commitment Termination Date equal to the average of
the daily excess of the Revolving Loan Commitments over the aggregate principal
amount of outstanding Revolving Loans (but not any outstanding Swing Line Loans
or the Letter of Credit Usage) MULTIPLIED BY the Applicable
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Commitment Fee Percentage, such commitment fees to be calculated on the basis of
a 365-day or 366-day year, as the case may be, and the actual number of days
elapsed and to be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year, commencing on the first such date to occur
after the Closing Date, and on the Revolving Loan Commitment Termination Date.
B. OTHER FEES. Borrower agrees to pay to Administrative Agent,
Syndication Agent, Documentation Agent, Arranger, and Lenders, as applicable,
such other fees in the amounts and at the times separately agreed upon between
Borrower and Administrative Agent, Syndication Agent, Documentation Agent and
Arranger, as the case may be.
2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS;
GENERAL PROVISIONS REGARDING PAYMENTS; APPLICATION OF PROCEEDS OF
COLLATERAL AND PAYMENTS UNDER THE GUARANTIES.
A. SCHEDULED PAYMENTS OF TERM LOANS.
(i) SCHEDULED PAYMENTS OF TRANCHE A TERM LOANS. Borrower shall make
principal payments on the Tranche A Term Loans made to Borrower in
installments on the second anniversary of the Closing Date and on each
subsequent anniversary of the Closing Date until the Tranche A Term Loans
are paid in full, each such installment to be in an amount equal to the
corresponding percentages set forth below of the original principal amount
of the Tranche A Term Loans made to Borrower:
Annual Percentage of Original
Principal Amount of
Anniversary of Closing Date Tranche A Term Loans
--------------------------- --------------------
Second 7%
Third 11%
Fourth 14%
Fifth 17%
Sixth 23%
Seventh 28%
-----
TOTAL 100%
; PROVIDED that the scheduled installments of principal of the Tranche A
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche A Term Loans in
accordance with subsection 2.4B(iv); and PROVIDED, FURTHER that the Tranche
A Term Loans and all other amounts owed hereunder with respect to the
Tranche A Term Loans shall be paid in full no later than the seventh
anniversary of the Closing Date, and the final installment payable by
Borrower in respect of the Tranche A Term Loans on such date shall be in an
amount, if such amount is
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different from that specified above, sufficient to repay all amounts owing
by Borrower under this Agreement with respect to the Tranche A Term Loans.
(ii) SCHEDULED PAYMENTS OF TRANCHE B TERM LOANS. Borrower shall make
principal payments on the Tranche B Term Loans made to Borrower in
installments on the second anniversary of the Closing Date and on each
subsequent anniversary of the Closing Date until the Tranche B Term Loans
are paid in full, each such installment to be in an amount equal to the
corresponding percentages set forth below of the original principal amount
of the Tranche B Term Loans made to Borrower:
Annual Percentage of Original
Principal Amount of
Anniversary of Closing Date Tranche B Term Loans
--------------------------- --------------------
Second 1%
Third 1%
Fourth 1%
Fifth 1%
Sixth 1%
Seventh 1%
Eighth 94%
-----
TOTAL 100%
; PROVIDED that the scheduled installments of principal of the Tranche B
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Tranche B Term Loans in
accordance with subsection 2.4B(iv); and PROVIDED, FURTHER that the Tranche
B Term Loans and all other amounts owed hereunder with respect to the
Tranche B Term Loans shall be paid in full no later than the eighth
anniversary of the Closing Date, and the final installment payable by
Borrower in respect of the Tranche B Term Loans on such date shall be in an
amount, if such amount is different from that specified above, sufficient
to repay all amounts owing by Borrower under this Agreement with respect to
the Tranche B Term Loans.
B. PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS.
(i) VOLUNTARY PREPAYMENTS. Borrower may, upon written or telephonic
notice to Administrative Agent at or prior to 1:00 P.M. (Boston,
Massachusetts time) on the date of prepayment, which notice, if telephonic,
shall be promptly confirmed in writing, at any time and from time to time
prepay any Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $250,000 and integral multiples of $100,000 in
excess of that amount. Borrower may, upon not less than one Business Day's
prior written or telephonic notice, in the case of Base Rate Loans, and
three Business Days' prior written or telephonic notice, in the case of
LIBOR Loans, in each case given to Administrative Agent by 12:00 Noon
(Boston, Massachusetts time) on the date required
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and, if given by telephone, promptly confirmed in writing to Administrative
Agent (which original written or telephonic notice Administrative Agent
will promptly transmit by telefacsimile or telephone to each Lender), at
any time and from time to time prepay any of Borrower's Tranche A Term
Loans, Tranche B Term Loans or Revolving Loans on any Business Day in whole
or in part in an aggregate minimum amount of $2,500,000 and integral
multiples of $250,000 in excess of that amount. Notice of prepayment
having been given as aforesaid, the principal amount of the Loans specified
in such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied as
specified in subsection 2.4B(iv).
(ii) VOLUNTARY REDUCTIONS OF REVOLVING LOAN COMMITMENTS. Borrower
may, upon not less than three Business Days' prior written or telephonic
notice confirmed in writing to Administrative Agent (which original written
or telephonic notice Administrative Agent will promptly transmit by
telefacsimile or telephone to each Lender), at any time and from time to
time terminate in whole or permanently reduce in part, without premium or
penalty, the Revolving Loan Commitments in an amount up to the amount by
which the Revolving Loan Commitments exceed the Total Utilization of
Revolving Loan Commitments at the time of such proposed termination or
reduction; PROVIDED that any such partial reduction of the Revolving Loan
Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $500,000 in excess of that amount. Borrower's notice
to Administrative Agent shall designate the date (which shall be a Business
Day) of such termination or reduction and the amount of any partial
reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in Borrower's notice
and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share.
(iii) MANDATORY PREPAYMENTS. Subject to the provisions of
subsections 2.4B(iv)(d), the Loans shall be prepaid in the amounts and
under the circumstances set forth below, all such prepayments to be applied
as set forth below or as more specifically provided in subsection 2.4B(iv):
(a) PREPAYMENTS FROM NET ASSET SALE PROCEEDS. No later than the
fifth Business Day following the date on which any Net Asset Sale
Proceeds become Unreinvested Asset Sale Proceeds, Borrower shall
prepay its outstanding Term Loans in an aggregate amount equal to such
Unreinvested Asset Sale Proceeds; PROVIDED that Borrower may in its
sole discretion elect, pursuant to a written notice given by Borrower
to Administrative Agent describing such election, to postpone any
mandatory prepayments otherwise required to be made by Borrower
pursuant to this subsection 2.4B(iii)(a) (any such prepayment, until
the time actually made, being "POSTPONED PREPAYMENTS") until such time
as the aggregate amount of Postponed Prepayments equals $5,000,000.
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(b) PREPAYMENTS FROM CONSOLIDATED EXCESS CASH FLOW. In the
event that (i) the Consolidated Leverage Ratio shall be equal to or
greater than 4.00:1.00 as of the last day of any Fiscal Year
(commencing with Fiscal Year 1999) and (ii) there shall be
Consolidated Excess Cash Flow for such Fiscal Year, Borrower shall, no
later than the date on which Borrower is required to deliver audited
financial statements with respect to such Fiscal Year pursuant to
subsection 6.1(ii), prepay its outstanding Term Loans in an aggregate
amount equal to 50% of such Consolidated Excess Cash Flow (the
remaining 50% of such Consolidated Excess Cash Flow being "RETAINED
EXCESS CASH FLOW").
(c) PREPAYMENTS DUE TO REDUCTIONS OR RESTRICTIONS OF REVOLVING
LOAN COMMITMENTS. Borrower shall from time to time prepay FIRST the
Swing Line Loans and SECOND the Revolving Loans to the extent
necessary so that the Total Utilization of Revolving Loan Commitments
shall not at any time exceed the Revolving Loan Commitments then in
effect.
(iv) APPLICATION OF PREPAYMENTS.
(a) APPLICATION OF VOLUNTARY PREPAYMENTS BY TYPE OF LOANS AND
ORDER OF MATURITY. Any voluntary prepayments pursuant to subsection
2.4B(i) shall be applied as specified by Borrower in the applicable
notice of prepayment; PROVIDED that in the event Borrower fails to
specify the Loans of Borrower to which any such prepayment shall be
applied, such prepayment shall be applied FIRST to repay outstanding
Swing Line Loans to the full extent thereof, SECOND to repay
outstanding Revolving Loans to the full extent thereof, and THIRD to
repay outstanding Term Loans to the full extent thereof. Any
voluntary prepayment of Borrower's Term Loans pursuant to subsection
2.4B(i) shall be applied to prepay the Tranche A Term Loans and the
Tranche B Term Loans in the manner specified by Borrower and to reduce
the scheduled installments of principal of the Tranche A Term Loans
and the Tranche B Term Loans set forth in subsections 2.4A(i), or
2.4A(ii), as the case may be, in such order as Borrower shall direct.
(b) APPLICATION OF MANDATORY PREPAYMENTS OF TERM LOANS TO
TRANCHE A TERM LOANS, TRANCHE B TERM LOANS AND THE SCHEDULED
INSTALLMENTS OF PRINCIPAL THEREOF. Any mandatory prepayments of
Borrower's Term Loans pursuant to subsection 2.4B(iii) shall be
applied to prepay the Tranche A Term Loans and the Tranche B Term
Loans on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof). Any mandatory prepayment of
the Tranche A Term Loans or the Tranche B Term Loans shall be applied
to scheduled installments of principal of such Tranche A Term Loans or
the Tranche B Term Loans, as the case may be, set forth in subsection
2.4A(i) or 2.4A(ii), respectively, that are unpaid at the time of such
prepayment in the forward order of maturity.
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(c) WAIVER OF CERTAIN MANDATORY PREPAYMENTS. Anything contained
herein to the contrary notwithstanding, so long as any Tranche A Term
Loans are outstanding, in the event Borrower is required to make any
mandatory prepayment (a "WAIVABLE MANDATORY PREPAYMENT") of the
Tranche B Term Loans, pursuant to subsection 2.4B(iii), (V) Borrower
may, by written or telephonic notice (promptly confirmed in writing)
given to Administrative Agent not less than three Business Days prior
to the date (the "REQUIRED PREPAYMENT DATE") on which Borrower is
required to make such Waivable Mandatory Prepayment, elect to offer
each Lender holding an outstanding Tranche B Term Loan the option to
refuse such Lender's Pro Rata Share of such Waivable Mandatory
Prepayment, (W) in the event Borrower gives such notice to
Administrative Agent, Administrative Agent will promptly notify each
such Lender of the amount of such Lender's Pro Rata Share of such
Waivable Mandatory Prepayment and such Lender's option to refuse such
amount, (X) each such Lender may exercise such option by giving
written notice to Borrower and Administrative Agent of its election to
do so on or before the first Business Day (the "CUTOFF DATE") prior to
the Required Prepayment Date, (Y) on the Required Prepayment Date,
Borrower shall pay to Administrative Agent an amount equal to the sum
of (1) that portion of the Waivable Mandatory Prepayment payable to
those Lenders that have elected not to exercise such option (it being
understood that any Lender which does not notify Borrower and
Administrative Agent of its election to exercise such option on or
before the Cutoff Date shall be deemed to have elected, as of the
Cutoff Date, not to exercise such option), which amount shall be
applied to prepay the Tranche B Term Loans of such Lenders in
accordance with subsection 2.4B(iv)(b) PLUS (2) 50% of that portion
(the "WAIVED PORTION") of the Waivable Mandatory Prepayment otherwise
payable to those Lenders that have elected to exercise such option,
which amount shall be applied to prepay the Tranche A Term Loans in
the same manner as voluntary prepayments of the Tranche A Term Loans
are applied pursuant to subsection 2.4B(iv)(a), and (Z) Borrower shall
be entitled to retain the remaining 50% of the Waived Portion (such
amount being a "RETAINED PREPAYMENT") to be used for general corporate
purposes.
(d) APPLICATION OF PREPAYMENTS TO BASE RATE LOANS AND LIBOR
LOANS; OPTION TO DEFER CERTAIN MANDATORY PREPAYMENTS OF LIBOR LOANS.
Considering Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans being prepaid separately, any prepayment thereof shall be
applied first to Base Rate Loans to the full extent thereof before
application to LIBOR Loans, in each case in a manner which minimizes
the amount of any payments required to be made by Borrower pursuant to
subsection 2.6D; PROVIDED that, anything contained in this Agreement
to the contrary notwithstanding, in the event that (1) the application
of any mandatory prepayment pursuant to subsection 2.4B(iii) in
accordance with the foregoing provisions of this subsection 2.4B(iv)
would result in the prepayment of all or any portion of a LIBOR Loan
prior to the end of the Interest Period applicable thereto, (2) the
remaining term of such Interest Period is less than three
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months, and (3) no Potential Event of Default or Event of Default
shall have occurred and be continuing, Borrower shall have the option,
by giving written notice (or telephonic notice promptly confirmed in
writing) to Administrative Agent of its election to do so on or before
the first Business Day prior to the date on which such prepayment
would otherwise be required to be made, to defer the making of such
prepayment until the last day of such Interest Period or such earlier
date as Borrower may specify in such notice.
C. GENERAL PROVISIONS REGARDING PAYMENTS.
(i) MANNER AND TIME OF PAYMENT. All payments by Borrower of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in same day funds, in each case without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 3:00 P.M. (Boston, Massachusetts time)
on the date due at the applicable Funding and Payment Office for the
account of Lenders; funds received by Administrative Agent after that time
on such due date shall be deemed to have been paid by Borrower on the next
succeeding Business Day.
(ii) APPLICATION OF PAYMENTS TO PRINCIPAL AND INTEREST. Except as
provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) APPORTIONMENT OF PAYMENTS. Aggregate principal and interest
payments in respect of Term Loans and Revolving Loans shall be apportioned
among all outstanding Loans to which such payments relate, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative
Agent shall promptly distribute to each Lender, at its applicable Lending
Office or at such other address as such Lender may request, its Pro Rata
Share of all such payments received by Administrative Agent and the
commitment fees of such Lender when received by Administrative Agent
pursuant to subsection 2.3. Notwithstanding the foregoing provisions of
this subsection 2.4C(iii), if, pursuant to the provisions of subsection
2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro
Rata Share of any LIBOR Loans, Administrative Agent shall give effect
thereto in apportioning payments received thereafter.
(iv) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
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D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER THE
GUARANTIES.
(i) APPLICATION OF PROCEEDS OF COLLATERAL. All proceeds received by
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral under any Collateral
Document may, in the discretion of Administrative Agent, be held by
Administrative Agent as Collateral for, and/or (then or at any time
thereafter) applied in full or in part by Administrative Agent against, the
applicable Secured Obligations (as defined in such Collateral Document) in
the following order of priority:
(a) To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Administrative Agent and its agents and counsel, and all other
expenses, liabilities and advances made or incurred by Administrative
Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to indemnification under such
Collateral Document and all advances made by Administrative Agent
thereunder for the account of the applicable Loan Party, and to the
payment of all costs and expenses paid or incurred by Administrative
Agent in connection with the exercise of any right or remedy under
such Collateral Document, all in accordance with the terms of this
Agreement and such Collateral Document;
(b) thereafter, to the extent of any excess such proceeds, to
the payment of all other such Secured Obligations for the ratable
benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such proceeds, to
the payment to or upon the order of such Loan Party or to whomsoever
may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
(ii) APPLICATION OF PAYMENTS UNDER THE GUARANTIES. All payments
received by Administrative Agent under the Guaranties shall be applied
promptly from time to time by Administrative Agent in the following order
of priority:
(a) To the payment of the costs and expenses of any collection
or other realization under the Guaranties, including reasonable
compensation to Administrative Agent and its agents and counsel, and
all expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, all in accordance with
the terms of this Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such payments, to
the payment of all other Guarantied Obligations (as defined in such
Guaranty) for the ratable benefit of the holders thereof; and
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(c) thereafter, to the extent of any excess such payments, to
the payment to the applicable Guarantor or to whomsoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.
2.5 USE OF PROCEEDS.
A. TERM LOANS. The proceeds of the Term Loans, together with a portion
of the proceeds of the initial Revolving Loans (the "RECAPITALIZATION REVOLVING
LOANS") and the proceeds of the debt and equity capitalization of Borrower
described in subsection 4.1C(ii), were or shall be applied by Borrower to fund
the Recapitalization Financing Requirements.
B. REVOLVING LOANS; SWING LINE LOANS. The proceeds of the
Recapitalization Revolving Loans shall be applied by Borrower as provided in
subsection 2.5A. The proceeds of any other Revolving Loans and any Swing Line
Loans shall be applied by Borrower for general corporate purposes.
2.6 SPECIAL PROVISIONS GOVERNING LIBOR LOANS.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to LIBOR Loans as to the
matters covered:
A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable
after 10:00 A.M. (Boston, Massachusetts time), on each Interest Rate
Determination Date, Administrative Agent shall determine (which determination
shall, absent clearly demonstrable error, be final, conclusive and binding upon
all parties) the interest rate that shall apply to LIBOR Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to Borrower and each Lender.
B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that
Administrative Agent shall have reasonably determined (which determination
shall, absent clearly demonstrable error, be final and conclusive and binding
upon all parties hereto), on any Interest Rate Determination Date with respect
to any LIBOR Loans, that by reason of circumstances affecting the London
interbank market for Dollars adequate and fair means do not exist for
ascertaining the interest rate applicable to such Loans on the basis provided
for in the definition of LIBOR, Administrative Agent shall on such date give
notice (by telefacsimile or by telephone confirmed in writing) to Borrower and
each Lender of such determination, whereupon (i) no Loans may be made as, or
converted to, LIBOR Loans until such time as Administrative Agent notifies
Borrower and Lenders that the circumstances giving rise to such notice no longer
exist (which notice Administrative Agent shall give at such time as such
circumstances no longer exist), and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to the Loans in respect
of which such determination was made shall be deemed to be rescinded by
Borrower.
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C. ILLEGALITY OR IMPRACTICABILITY OF LIBOR LOANS. In the event that on
any date any Lender shall have reasonably determined (which determination shall
be made only after consultation with Borrower and Administrative Agent, it being
understood that any such determination so made shall, absent clearly
demonstrable error, be final and conclusive and binding upon all parties hereto)
that the making, maintaining or continuation of its LIBOR Loans (i) has become
unlawful as a result of compliance by such Lender in good faith with any law,
treaty, governmental rule, regulation, guideline or order (or would conflict
with any such treaty, governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be
unlawful) or (ii) has become impracticable as a result of contingencies
occurring after the date of this Agreement which materially and adversely affect
the London interbank market then, and in any such event, such Lender shall be an
"AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by
telephone confirmed in writing) to Borrower and Administrative Agent of such
determination (which notice Administrative Agent shall promptly transmit to each
other Lender). Thereafter (a) the obligation of the Affected Lender to make
Loans as, or to convert Loans to, LIBOR Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a LIBOR Loan then being
requested by Borrower pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or convert
such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's
obligation to maintain its outstanding LIBOR Loans (the "AFFECTED LOANS") shall
be terminated at the earlier to occur of the expiration of the Interest Period
then in effect with respect to the Affected Loans or when required by law, and
(d) any Affected Loans shall automatically convert into Base Rate Loans on the
date of such termination. Notwithstanding the foregoing, to the extent a
determination by an Affected Lender as described above relates to a LIBOR Loan
then being requested by Borrower pursuant to a Notice of Borrowing or a Notice
of Conversion/Continuation, Borrower shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to convert
Loans to, LIBOR Loans in accordance with the terms of this Agreement.
D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS.
Borrower shall compensate each Lender, upon written request by that Lender
(which request shall set forth in reasonable detail the basis for requesting
such amounts), for all reasonable losses, costs and expenses sustained by that
Lender (including losses, costs and expenses actually sustained by that Lender
in connection with the liquidation or re-employment of deposits or other funds
acquired by it to make or carry the subject LIBOR Loans but excluding any loss
of anticipated profits): (i) if for any reason (other than a default by that
Lender or Administrative Agent) a borrowing of any LIBOR Loan by Borrower does
not occur on a date specified therefor in a Notice of Borrowing or a telephonic
request for borrowing, or a conversion to or
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continuation of any LIBOR Loan by Borrower does not occur on a date specified
therefor in a Notice of Conversion/Continuation or a telephonic request for
conversion or continuation, (ii) if any prepayment (including any prepayment
pursuant to subsection 2.4B(i)) or other principal payment or any conversion of
any of Borrower's LIBOR Loans occurs on a date prior to the last day of an
Interest Period applicable to that Loan or (iii) if any prepayment of any of
Borrower's LIBOR Loans is not made on any date specified in a notice of
prepayment given by Borrower.
E. BOOKING OF LIBOR LOANS. Any Lender may make, carry or transfer LIBOR
Loans at, to, or for the account of any of its branch offices or the office of
an Affiliate of that Lender.
F. LIBOR LOANS AFTER DEFAULT. If, after the occurrence of and during the
continuation of a Potential Event of Default or an Event of Default,
Administrative Agent or Requisite Lenders have determined in its or their sole
discretion not to permit the making or continuation of any Loans as, or the
conversion of any Loans to, LIBOR Loans and Administrative Agent has so notified
Borrower in writing (i) Borrower may not elect to have any Loans be made as or
converted to LIBOR Loans or elect to have any outstanding LIBOR Loans continued
as such after the expiration of the Interest Periods then in effect for such
LIBOR Loans, (ii) subject to the provisions of subsection 2.6D, any Notice of
Borrowing or Notice of Conversion/Continuation given by Borrower with respect to
a requested borrowing or conversion/continuation in respect of LIBOR Loans that
has not yet occurred shall be deemed to be rescinded by Borrower.
2.7 INCREASED COSTS; CAPITAL ADEQUACY.
A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall reasonably determine (which
determination shall, absent clearly demonstrable error, be final and conclusive
and binding upon all parties hereto) that the introduction or adoption (after
the date hereof) of any law, treaty or governmental rule, regulation or order,
or that any change (after the date hereof) in any law, treaty or governmental
rule, regulation or order or in the interpretation, administration or
application thereof, or that any determination (after the date hereof) by a
court or governmental authority, or that compliance by such Lender with any
guideline, request or directive issued or made (after the date hereof) by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law), in any such case:
(i) subjects such Lender (or its applicable Lending Office) to any
additional Tax (excluding (x) any Tax on the overall net income of such
Lender, (y) any Tax imposed on any Lender as a result of a present or
former connection between the jurisdiction imposing such Taxes and such
Lender (except a present connection arising solely from such Lender having
executed, delivered or performed its obligations or received a payment
under, or enforced any Loan Documents) and (z) any Tax with respect
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to which the provisions of subsection 2.7B are applicable) with respect to
this Agreement or any of its obligations hereunder or any payments to such
Lender (or its applicable Lending Office) of principal, interest, fees or
any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Lender (or its applicable Lending Office)
or its obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable Lending Office) with
respect thereto; then, in any such case, Borrower shall pay to such Lender,
promptly after receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
reasonable discretion shall determine) as may be necessary to compensate such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Lender shall deliver to Borrower (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis for calculating the additional amounts owed to such Lender under this
subsection 2.7A, which statement shall be conclusive and binding upon all
parties hereto absent clearly demonstrable error.
B. WITHHOLDING OF TAXES.
(i) PAYMENTS TO BE FREE AND CLEAR. All sums payable by Borrower
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding for or on account of, any Tax imposed, levied,
collected, withheld or assessed by or within the United States of America
or any political subdivision in or of the United States of America or any
other jurisdiction from or to which a payment is made by or on behalf of
Borrower or by any federation or organization of which the United States of
America or any such jurisdiction is a member at the time of payment,
excluding (x) any Tax on the overall net income of such Lender and (y) any
Tax imposed on any Agent or any Lender as a result of a present or former
connection between the jurisdiction imposing such Taxes and such Lender
(except a present connection arising solely from such Agent or such Lender
having executed, delivered or performed its obligations or received a
payment under, or enforced any Loan Documents) (any such non-excluded Tax,
a "NON-EXCLUDED TAX").
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(ii) GROSSING-UP OF PAYMENTS. If Borrower or any other Person is
required by law to make any deduction or withholding on account of any such
Non-Excluded Tax from any sum paid or payable by Borrower to Administrative
Agent or any Lender under any of the Loan Documents:
(a) Borrower shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Borrower
becomes aware of it;
(b) Borrower shall pay any such Non-Excluded Tax before the date
on which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on Borrower) for its own account or (if
that liability is imposed on Administrative Agent or such Lender, as
the case may be) on behalf of and in the name of Administrative Agent
or such Lender;
(c) the sum payable by Borrower in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Administrative Agent or such
Lender, as the case may be, receives on the due date a net sum equal
to what it would have received had no such deduction, withholding or
payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Non-Excluded Tax which it is
required by clause (b) above to pay, Borrower shall deliver to
Administrative Agent evidence satisfactory to the other affected
parties of such deduction, withholding or payment and of the
remittance thereof to the relevant taxing or other authority;
PROVIDED that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change in any
applicable law, treaty or governmental rule, regulation or order, or any
change in the interpretation, administration or application thereof, after
the date hereof (in the case of each Lender listed on the signature pages
hereof) or after the date of the Assignment Agreement pursuant to which
such Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to
such Lender.
(iii) INDEMNIFICATION. Borrower agrees to indemnify and hold
harmless each Lender and each Agent for the full amount of Non-Excluded
Taxes that are payable by such Lender or such Agent and any penalties,
interest, additions to tax, expenses or other similar liabilities arising
therefrom or with respect thereto, whether or not such Non-
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Excluded Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 45 days after the date such Lender or
such Agent makes written demand therefor.
(iv) EVIDENCE OF EXEMPTION FROM U.S. WITHHOLDING TAX.
(a) Each Lender that is not a United States person as defined in
Section 770(a) of the Code (for purposes of this subsection 2.7B(iv),
a "NON-US LENDER") shall deliver to Administrative Agent for
transmission to Borrower, on or prior to the Closing Date (in the case
of each Lender listed on the signature pages hereof) or on or prior to
the date of the Assignment Agreement pursuant to which it becomes a
Lender (in the case of each other Lender), and at such other times as
may be necessary in the determination of Borrower or Administrative
Agent (each in the reasonable exercise of its discretion), (1) two
original copies of Internal Revenue Service Form 1001 or 4224 (or any
successor forms), properly completed and duly executed by such Lender,
together with any other certificate or statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder
to establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to any
payments to such Lender of principal, interest, fees or other amounts
payable under any of the Loan Documents or (2) if such Lender is not a
"bank" or other Person described in Section 881(c)(3) of the Internal
Revenue Code and cannot deliver either Internal Revenue Service Form
1001 or 4224 pursuant to clause (1) above, a Certificate re Non-Bank
Status together with two original copies of Internal Revenue Service
Form W-8 (or any successor form), properly completed and duly executed
by such Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the regulations
issued thereunder to establish that such Lender is not subject to
deduction or withholding of United States federal income tax with
respect to any payments to such Lender of interest payable under any
of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iv)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that such
Lender shall promptly (1) deliver to Administrative Agent for
transmission to Borrower two new original copies of Internal Revenue
Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two
original copies of Internal Revenue Service Form W-8, as the case may
be, properly completed and duly executed by such Lender, together with
any other certificate or statement of exemption required in order to
confirm or establish that such Lender is not subject to deduction or
withholding of United States federal income tax with respect to
payments to such
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Lender of interest payable under any of the Loan Documents or (2)
notify Administrative Agent and Borrower of its inability to deliver
any such forms, certificates or other evidence.
(c) Borrower shall not be required to pay any additional amount
to any Non-US Lender under clause (c) of subsection 2.7B(ii) or to
indemnify any Non-US Lender subsection 2.7B(iii) if such Lender shall
have failed to satisfy the requirements of clause (a) or (b)(1) of
this subsection 2.7B(iv); PROVIDED that if such Lender shall have
satisfied the requirements of subsection 2.7B(iv)(a) on the Closing
Date (in the case of each Lender listed on the signature pages hereof)
or on the date of the Assignment Agreement pursuant to which it became
a Lender (in the case of each other Lender), nothing in this
subsection 2.7B(iv)(c) shall relieve Borrower of its obligation to pay
any additional amounts pursuant to clause (c) of subsection 2.7B(ii)
or to indemnify any Lender pursuant to subsection 2.7B(iii) in the
event that, as a result of any change in any applicable law, treaty or
governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is
no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such Lender
is not subject to withholding as described in subsection 2.7B(iv)(a).
C. REFUND AND CONTEST. If Borrower determines in good faith that a
reasonable basis exists for contesting any Non-Excluded Tax for which
indemnification has been demanded hereunder, the relevant Lender (to the extent
such Lender reasonably determines in good faith that it will not suffer any
adverse effect as a result thereof) or any Agent, as applicable, shall cooperate
with Borrower in challenging the imposition of such Non-Excluded Tax at
Borrower's expense if so requested by Borrower in writing. If any Lender or any
Agent, as applicable receives a refund of a Non-Excluded Tax for which a payment
has been made by Borrower pursuant to this Agreement, which refund in the good
faith judgment of such Lender or such Agent, as the case may be, is attributable
to Borrower, then such Lender or such Agent, as the case may be, shall reimburse
Borrower for such amount as such Lender or such Agent, as the case may be,
determines to be the proportion of the refund as will leave it, after such
reimbursement, in no better or worse position than it would have been in if the
payment had not been required. Neither Lenders nor Agents shall be obliged to
disclose information regarding its tax affairs or computations to Borrower in
connection with this subsection 2.7C or any other provision of subsection 2.7B.
D. CAPITAL ADEQUACY ADJUSTMENT. If any Lender shall have determined that
the introduction or adoption (after the date hereof) of any law, rule or
regulation (or any provision thereof) regarding capital adequacy, or that any
change (after the date hereof) therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or that
compliance by any Lender (or its applicable Lending Office) with any guideline,
request or directive regarding capital adequacy (whether or not having the force
of law) introduced or adopted (after
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the Closing Date) by any such governmental authority, central bank or comparable
agency, in any such case has or would have the effect of reducing the rate of
return on the capital of such Lender or any corporation controlling such Lender
as a consequence of such Lender's Loans or Commitments or Letters of Credit or
participations therein or other obligations hereunder with respect to the Loans
or the Letters of Credit to a level below that which such Lender or such
controlling corporation could have achieved but for such introduction, adoption,
change or compliance (taking into consideration the policies of such Lender or
such controlling corporation with regard to capital adequacy), then from time to
time, promptly after receipt by Borrower from such Lender of the statement
referred to in the next sentence, Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such controlling
corporation for such reduction. Such Lender shall deliver to Borrower (with a
copy to Administrative Agent) a written statement setting forth in reasonable
detail the basis of the calculation of such additional amounts, which statement
shall be conclusive and binding upon all parties hereto absent clearly
demonstrable error.
2.8 NOTICE OF CERTAIN COSTS; OBLIGATION OF LENDERS AND ISSUING LENDERS TO
MITIGATE.
A. Notwithstanding anything in this Agreement to the contrary, to
the extent subsection 2.6, 2.7 or 3.6 requires any Lender or Issuing Lender to
give notice to Borrower of an event or a condition that would entitle such
Lender or Issuing Lender to receive payments under subsection 2.6, 2.7 or 3.6,
as the case may be, in the event such notice is given by such Lender or Issuing
Lender more than 180 days after such Lender or Issuing Lender has knowledge of
the occurrence or existence of such event or circumstance, such Lender or
Issuing Lender shall not be entitled to receive any such payments under
subsection 2.6, 2.7 or 3.6, as the case may be, in respect of the period ending
on the Business Day immediately preceding the date on which such notice is given
to Borrower.
B. Each Lender and Issuing Lender agrees that, if an event occurs or
a condition arises that would cause such Lender to become an Affected Lender or
that would entitle such Lender or Issuing Lender to receive payments under
subsection 2.7 or subsection 3.6, it will, if so requested by Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
(i) make, issue, fund or maintain the Commitments of such Lender or the affected
Loans or Letters of Credit (or participations therein) of such Lender or Issuing
Lender through another lending or letter of credit office of such Lender or
Issuing Lender or (ii) take such other measures as such Lender or Issuing Lender
may deem reasonable in good faith, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if the making, issuing, funding or maintaining of such
Commitments or Loans or Letters of Credit (or participations therein) through
such other lending or letter of credit office or in accordance with such other
measures, as the case may be, would not otherwise materially adversely affect
such Commitments or Loans or Letters of Credit (or participations therein) or
cause such Lender or Issuing Lender to suffer any economic, legal or regulatory
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disadvantage; PROVIDED that nothing in this subsection 2.8 shall affect or
postpone any of the Obligations of Borrower or the rights of any Lender provided
in subsection 2.6C, 2.7 or 3.6.
2.9 DEFAULTING LENDERS.
Anything contained herein to the contrary notwithstanding, in the
event that any Lender (a "DEFAULTING LENDER") defaults (a "FUNDING DEFAULT") in
its obligation to fund any Revolving Loan (a "DEFAULTED REVOLVING LOAN") in
accordance with subsection 2.1 as a result of the appointment of a receiver or
conservator with respect to such Lender at the direction or request of any
regulatory agency or authority, then (i) during any Default Period (as defined
below) with respect to such Defaulting Lender, such Defaulting Lender shall be
deemed not to be a "Lender" for purposes of voting on any matters (including the
granting of any consents or waivers) with respect to any of the Loan Documents,
(ii) to the extent permitted by applicable law, until such time as the Default
Excess (as defined below) with respect to such Defaulting Lender shall have been
reduced to zero, (a) any voluntary prepayment of the Revolving Loans pursuant to
subsection 2.4B(i) shall, if Borrower so directs at the time of making such
voluntary prepayment, be applied to the Revolving Loans of other Lenders as if
such Defaulting Lender had no Revolving Loans outstanding and the Revolving Loan
Exposure of such Defaulting Lender were zero, and (b) any mandatory prepayment
of the Revolving Loans pursuant to subsection 2.4B(iii) shall, if Borrower so
directs at the time of making such mandatory prepayment, be applied to the
Revolving Loans of other Lenders (but not to the Revolving Loans of such
Defaulting Lender) as if such Defaulting Lender had funded all Defaulted
Revolving Loans of such Defaulting Lender, it being understood and agreed that
Borrower shall be entitled to retain any portion of any mandatory prepayment of
the Revolving Loans that is not paid to such Defaulting Lender solely as a
result of the operation of the provisions of this clause (b), (iii) such
Defaulting Lender's Revolving Loan Commitment and outstanding Revolving Loans
and such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage shall
be excluded for purposes of calculating the commitment fee payable to Lenders
pursuant to subsection 2.3A in respect of any day during any Default Period with
respect to such Defaulting Lender, and such Defaulting Lender shall not be
entitled to receive any commitment fee pursuant to subsection 2.3A with respect
to such Defaulting Lender's Revolving Loan Commitment in respect of any Default
Period with respect to such Defaulting Lender, and (iv) the Total Utilization of
Revolving Loan Commitments as at any date of determination shall be calculated
as if such Defaulting Lender had funded all Defaulted Revolving Loans of such
Defaulting Lender.
For purposes of this Agreement, (I) "DEFAULT PERIOD" means, with
respect to any Defaulting Lender, the period commencing on the date of the
applicable Funding Default and ending on the earliest of the following dates:
(A) the date on which all Revolving Loan Commitments are cancelled or terminated
and/or the Obligations are declared or become immediately due and payable, (B)
the date on which (1) the Default Excess with respect to such Defaulting Lender
shall have been reduced to zero (whether by the funding by such Defaulting
Lender of any Defaulted Revolving Loans of such Defaulting Lender or by the
non-pro rata application of any voluntary or mandatory prepayments of the
Revolving Loans in accordance
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with the terms of this subsection 2.9 or by a combination thereof) and (2) such
Defaulting Lender shall have delivered to Borrower and Administrative Agent a
written reaffirmation of its intention to honor its obligations under this
Agreement with respect to its Revolving Loan Commitment, and (C) the date on
which Borrower, Administrative Agent and Requisite Lenders waive all Funding
Defaults of such Defaulting Lender in writing, and (II) "DEFAULT EXCESS" means,
with respect to any Defaulting Lender, the excess, if any, of such Defaulting
Lender's Pro Rata Share of the aggregate outstanding principal amount of
Revolving Loans of all Lenders (calculated as if all Defaulting Lenders (other
than such Defaulting Lender) had funded all of their respective Defaulted
Revolving Loans) over the aggregate outstanding principal amount of Revolving
Loans of such Defaulting Lender.
No Commitment of any Lender shall be increased or otherwise affected,
and, except as otherwise expressly provided in this subsection 2.9, performance
by Borrower of its obligations under this Agreement and the other Loan Documents
shall not be excused or otherwise modified, as a result of any Funding Default
or the operation of this subsection 2.9. The rights and remedies against a
Defaulting Lender under this subsection 2.9 are in addition to other rights and
remedies which Borrower may have against such Defaulting Lender with respect to
any Funding Default and which Administrative Agent or any Lender may have
against such Defaulting Lender with respect to any Funding Default.
2.10 REMOVAL OR REPLACEMENT OF A LENDER.
A. Anything contained in this Agreement to the contrary
notwithstanding, in the event that:
(i) (a) any Lender (an "INCREASED-COST LENDER") shall give notice to
Borrower that such Lender is an Affected Lender or that such Lender is
entitled to receive payments under subsection 2.7 or subsection 3.6, (b)
the circumstances which have caused such Lender to be an Affected Lender or
which entitle such Lender to receive such payments shall remain in effect,
and (c) such Lender shall fail to withdraw such notice within five Business
Days after Borrower's request for such withdrawal; or
(ii) (a) any Lender shall become a Defaulting Lender, (b) the Default
Period for such Defaulting Lender shall remain in effect, and (c) such
Defaulting Lender shall fail to cure the default as a result of which it
has become a Defaulting Lender within five Business Days after Borrower's
request that it cure such default; or
(iii) (a) in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions of
this Agreement as contemplated by clauses (i) through (iv) of the first
proviso to subsection 10.6A, the consent of Requisite Lenders shall have
been obtained but the consent of one or more of such other Lenders (each a
"NON-CONSENTING LENDER") whose consent is required shall not have been
obtained, and (b) the failure to obtain Non-Consenting Lenders' consents
does not result solely from the exercise of Non-Consenting Lenders' rights
(and the withholding of
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any required consents by Non-Consenting Lenders) pursuant to the second
proviso to subsection 10.6A;
then, and in each such case, Borrower shall have the right, at its option, to
remove or replace the applicable Increased-Cost Lender, Defaulting Lender or
Non-Consenting Lender (the "TERMINATED LENDER") to the extent permitted by
subsection 2.10B.
B. Borrower may, by giving written notice to Administrative Agent and any
Terminated Lender of its election to do so:
(i) elect to (a) terminate the Revolving Loan Commitment, if any, of
such Terminated Lender upon receipt by such Terminated Lender of such
notice and (b) prepay on the date of such termination any outstanding Loans
made by such Terminated Lender, together with accrued and unpaid interest
thereon and any other amounts payable to such Terminated Lender hereunder
pursuant to subsection 2.6, subsection 2.7 or subsection 3.6 or otherwise;
PROVIDED that, in the event such Terminated Lender has any Loans
outstanding at the time of such termination, the written consent of
Administrative Agent and Requisite Lenders (which consent shall not be
unreasonably withheld or delayed) shall be required in order for Borrower
to make the election set forth in this clause (i); or
(ii) elect to cause such Terminated Lender (and such Terminated Lender
hereby irrevocably agrees) to assign its outstanding Loans and its
Revolving Loan Commitment, if any, in full to one or more Eligible
Assignees (each a "REPLACEMENT LENDER") in accordance with the provisions
of subsection 10.1B; PROVIDED that (a) on the date of such assignment,
Borrower shall pay any amounts payable to such Terminated Lender pursuant
to subsection 2.6, subsection 2.7 or subsection 3.6 or otherwise as if it
were a prepayment and (b) in the event such Terminated Lender is a
Non-Consenting Lender, each Replacement Lender shall consent, at the time
of such assignment, to each matter in respect of which such Terminated
Lender was a Non-Consenting Lender;
PROVIDED that (X) Borrower may not make either of the elections set forth in
clauses (i) or (ii) above with respect to any Non-Consenting Lender unless
Borrower also makes one of such elections with respect to each other Terminated
Lender which is a Non-Consenting Lender and (Y) Borrower may not make either of
such elections with respect to any Terminated Lender that is an Issuing Lender
unless, prior to the effectiveness of such election, Borrower shall have caused
each outstanding Letter of Credit issued by such Issuing Lender to be cancelled
or backstopped by a successor Issuing Lender.
C. Upon the prepayment of all amounts owing to any Terminated Lender and
the termination of such Terminated Lender's Revolving Loan Commitment, if any,
pursuant to clause (i) of subsection 2.10B, (i) SCHEDULE 2.1 shall be deemed
modified to reflect any corresponding changes in the Revolving Loan Commitments
and (ii) such Terminated Lender shall no longer constitute a "Lender" for
purposes of this Agreement; PROVIDED that any rights of such Terminated Lender
to indemnification under this Agreement (including under
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subsections 2.6D, 2.7, 3.6, 10.2 and 10.3) shall survive as to such Terminated
Lender reasonably satisfactory to such Terminated Lender.
SECTION 3. LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS
THEREIN.
A. LETTERS OF CREDIT. In addition to Borrower requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(iii) and that Swing Line Lender
make Swing Line Loans pursuant to subsection 2.1A(iv), Borrower may request, in
accordance with the provisions of this subsection 3.1, from time to time during
the period from the Closing Date to but excluding the Revolving Loan Commitment
Termination Date, that one or more Issuing Lenders issue Letters of Credit for
the account of Borrower for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to the
terms and conditions of this Agreement and in reliance upon the representations
and warranties of Borrower herein set forth, any one or more Lenders may, but
(except as provided in subsection 3.1B(ii)) shall not be obligated to, issue
such Letters of Credit in accordance with the provisions of this subsection 3.1;
PROVIDED that Borrower shall not request that any Lender issue (and no Lender
shall issue):
(i) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Revolving Loan Commitments would exceed the
Revolving Loan Commitments then in effect;
(ii) any Standby Letter of Credit having an expiration date later than
the earlier of (a) five Business Days prior to the Revolving Loan
Commitment Termination Date and (b) the date which is one year from the
date of issuance of such Standby Letter of Credit; PROVIDED that the
immediately preceding clause (b) shall not prevent any Issuing Lender from
agreeing that a Standby Letter of Credit will automatically be extended for
one or more successive periods not to exceed one year each unless such
Issuing Lender elects not to extend for any such additional period; and
PROVIDED, FURTHER that such Issuing Lender shall elect not to extend such
Standby Letter of Credit if it has been notified by Administrative Agent
that an Event of Default has occurred and is continuing (and has not been
waived in accordance with subsection 10.6) at the time such Issuing Lender
must elect whether or not to allow such extension;
(iii) any Commercial Letter of Credit having an expiration date
(a) later than the earlier of (X) the date which is 30 days prior to the
Revolving Loan Commitment Termination Date and (Y) the date which is 180
days from the date of issuance of such Commercial Letter of Credit or (b)
that is otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion;
(iv) any Letter of Credit that does not provide for sight payment; or
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(v) any Letter of Credit that is denominated in a currency other than
Dollars.
B. MECHANICS OF ISSUANCE.
(i) NOTICE OF REQUEST FOR ISSUANCE. Whenever Borrower desires the
issuance of a Letter of Credit, it shall deliver to Administrative Agent a
Notice of Request for Issuance of Letter of Credit substantially in the
form of EXHIBIT III annexed hereto no later than 12:00 Noon (Boston,
Massachusetts time) at least three Business Days (in the case of Standby
Letters of Credit) or five Business Days (in the case of Commercial Letters
of Credit), or in each case such shorter period as may be agreed to by
Issuing Lender in any particular instance, in advance of the proposed date
of issuance or, in the case where the Issuing Lender is the Administrative
Agent, as otherwise agreed to by such Issuing Lender and Borrower. The
Notice of Request for Issuance of Letter of Credit shall specify (a) the
proposed date of issuance (which shall be a Business Day), (b) whether the
Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter
of Credit, (c) the face amount of the Letter of Credit, (d) the expiration
date of the Letter of Credit, (e) the name and address of the beneficiary,
and (f) either the verbatim text of the proposed Letter of Credit or the
proposed terms and conditions thereof, including a precise description of
any documents to be presented by the beneficiary which, if presented by the
beneficiary in substantial compliance with the terms and conditions of the
Letter of Credit on or prior to the expiration date of the Letter of
Credit, would require Issuing Lender to make payment under the Letter of
Credit; PROVIDED that Issuing Lender, in its reasonable discretion, may
require changes in the text of the proposed Letter of Credit or any such
documents; and PROVIDED, FURTHER that no Letter of Credit shall require
payment against a conforming draft to be made thereunder on the same
Business Day (under the laws of the jurisdiction in which the office of
Issuing Lender to which such draft is required to be presented is located)
that such draft is presented if such presentation is made after 11:00 A.M.
(in the time zone of such office of Issuing Lender) on such Business Day.
Borrower shall notify the applicable Issuing Lender (and
Administrative Agent, if Administrative Agent is not such Issuing Lender)
prior to the issuance of any Letter of Credit in the event that any of the
matters to which Borrower is required to certify in the applicable Notice
of Request for Issuance of Letter of Credit is no longer true and correct
as of the proposed date of issuance of such Letter of Credit, and upon the
issuance of any Letter of Credit Borrower shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to which
Borrower is required to certify in the applicable Notice of Request for
Issuance of Letter of Credit.
(ii) DETERMINATION OF ISSUING LENDER. Upon receipt by Administrative
Agent of a Notice of Request for Issuance of Letter of Credit pursuant to
subsection 3.1B(i) requesting the issuance of a Letter of Credit, in the
event Administrative Agent elects to issue such Letter of Credit,
Administrative Agent shall promptly so notify Borrower, and Administrative
Agent shall be the Issuing Lender with respect thereto. In the event that
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Administrative Agent, in its sole discretion, elects not to issue such
Letter of Credit, Administrative Agent shall promptly so notify Borrower,
whereupon Borrower may request any other Lender to issue such Letter of
Credit by delivering to such Lender a copy of the applicable Notice of
Request for Issuance of Letter of Credit. Any Lender so requested to issue
such Letter of Credit shall promptly notify Borrower and Administrative
Agent whether or not, in its sole discretion, it has elected to issue such
Letter of Credit, and any such Lender which so elects to issue such Letter
of Credit shall be the Issuing Lender with respect thereto. In the event
that all other Lenders shall have declined to issue such Letter of Credit,
notwithstanding the prior election of Administrative Agent not to issue
such Letter of Credit, Administrative Agent shall be obligated to issue
such Letter of Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the Letter of Credit Usage with respect to
such Letter of Credit and with respect to all other Letters of Credit
issued by Administrative Agent, when aggregated with Administrative Agent's
outstanding Revolving Loans and Swing Line Loans, may exceed Administrative
Agent's Revolving Loan Commitment then in effect.
Borrower shall notify the applicable Issuing Lender (and
Administrative Agent, if Administrative Agent is not such Issuing Lender)
prior to the issuance of any Letter of Credit in the event that any of the
matters to which Borrower is required to certify in the applicable Notice
of Request for Issuance of Letter of Credit is no longer true and correct
as of the proposed date of issuance of such Letter of Credit, and upon the
issuance of any Letter of Credit Borrower shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to which
Borrower is required to certify in the applicable Notice of Request for
Issuance of Letter of Credit.
(iii) ISSUANCE OF LETTER OF CREDIT. Upon satisfaction or waiver
(in accordance with subsection 10.6) of the conditions set forth in
subsection 4.3, the Issuing Lender shall issue the requested Letter of
Credit in accordance with the Issuing Lender's standard operating
procedures.
(iv) NOTIFICATION TO LENDERS REGARDING STANDBY LETTERS OF CREDIT.
Upon the issuance of any Standby Letter of Credit the applicable Issuing
Lender shall promptly notify Administrative Agent and each other Lender of
such issuance, which notice shall be accompanied by a copy of such Standby
Letter of Credit. Promptly after receipt of such notice (or, if
Administrative Agent is the Issuing Lender, together with such notice),
Administrative Agent shall notify each Lender of the amount of such
Lender's respective participation in such Standby Letter of Credit,
determined in accordance with subsection 3.1C. In addition, on the first
Business Day of each calendar month each Issuing Lender shall deliver to
Administrative Agent and each Lender a report setting forth the maximum
aggregate amount which is at or any time thereafter may become available
for drawing under all Standby Letters of Credit issued by such Issuing
Lender then outstanding, and identifying each Standby Letter of Credit
issued by such Issuing Lender and the maximum amount that may become
available thereunder.
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(v) REPORTS TO ADMINISTRATIVE AGENT AND LENDERS REGARDING COMMERCIAL
LETTERS OF CREDIT. Each Issuing Lender (other than Administrative Agent)
with respect to any Commercial Letter of Credit shall deliver to
Administrative Agent, by telefacsimile transmission on the first Business
Day of each week, a report setting forth the daily aggregate amount
available for drawing during the immediately preceding week under all
outstanding Commercial Letters of Credit issued by such Issuing Lender.
Within 15 days after the end of each calendar month ending after the
Closing Date, so long as any Commercial Letter of Credit shall have been
outstanding during such calendar month, Administrative Agent shall deliver
to each Lender a report setting forth for such calendar month the daily
aggregate amount available to be drawn under all Commercial Letters of
Credit that were outstanding during such calendar month.
C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately
upon the issuance of each Letter of Credit, each Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from the Issuing Lender a
participation in such Letter of Credit and any drawings honored thereunder in an
amount equal to such Lender's Pro Rata Share of the maximum amount which is or
at any time may become available to be drawn thereunder.
3.2 LETTER OF CREDIT FEES.
Borrower agrees to pay the following amounts with respect to Letters
of Credit issued hereunder:
(i) with respect to each Letter of Credit, (a) a fronting fee,
payable directly to the applicable Issuing Lender for its own account,
equal to 0.125% per annum MULTIPLIED BY the daily amount available to be
drawn under such Letter of Credit and (b) a letter of credit fee, payable
to Administrative Agent for the account of Lenders, equal to the Applicable
Tranche A LIBOR Margin MINUS 0.125% per annum MINUS the Applicable
Commitment Fee Percentage MULTIPLIED BY the daily amount available to be
drawn under such Letter of Credit, each such fronting fee or letter of
credit fee to be payable in arrears on and to (but excluding) each March
31, June 30, September 30 and December 31 of each year and on the Revolving
Loan Commitment Termination Date, in each case computed on the basis of a
365-day or 366-day year, as the case may be, for the actual number of days
elapsed; and
(ii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clause (i) above), customary
documentary and processing charges payable directly to the applicable
Issuing Lender for its own account in accordance with such Issuing Lender's
standard schedule for such charges in effect at the time of such issuance,
amendment, transfer or payment, as the case may be.
For purposes of calculating any fees payable under clause (i) of this subsection
3.2 the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of
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business on any date of determination. Promptly upon receipt by Administrative
Agent of any amount described in clause (i)(b) of this subsection 3.2,
Administrative Agent shall distribute to each Lender its Pro Rata Share of such
amount.
3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT.
A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to examine the
documents delivered under such Letter of Credit with reasonable care so as to
ascertain whether they appear on their face to be in substantial compliance with
the terms and conditions of such Letter of Credit.
B. REIMBURSEMENT BY BORROWER OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In
the event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall immediately notify Borrower and
Administrative Agent, and Borrower shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds
equal to the amount of such honored drawing; PROVIDED that, anything contained
in this Agreement to the contrary notwithstanding, (i) unless Borrower shall
have notified Administrative Agent and such Issuing Lender prior to 11:00 A.M.
(Boston, Massachusetts time) on the date such drawing is honored that Borrower
intends to reimburse such Issuing Lender for the amount of such honored drawing
with funds other than the proceeds of Revolving Loans, Borrower shall be deemed
to have given a timely Notice of Borrowing to Administrative Agent requesting
Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement
Date in an amount in Dollars equal to the amount of such honored drawing and
(ii) subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Lenders shall, on the Reimbursement Date, make Revolving Loans that are
Base Rate Loans in the amount of such honored drawing, the proceeds of which
shall be applied directly by Administrative Agent to reimburse such Issuing
Lender for the amount of such honored drawing; and PROVIDED, FURTHER that if for
any reason proceeds of Revolving Loans are not received by such Issuing Lender
on the Reimbursement Date in an amount equal to the amount of such honored
drawing, Borrower shall reimburse such Issuing Lender, on demand, in an amount
in same day funds equal to the excess of the amount of such honored drawing over
the aggregate amount of such Revolving Loans, if any, which are so received.
Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its
obligation to make Revolving Loans on the terms and conditions set forth in this
Agreement, and Borrower shall retain any and all rights it may have against any
Lender resulting from the failure of such Lender to make such Revolving Loans
under this subsection 3.3B.
C. PAYMENT BY LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER LETTERS OF
CREDIT.
(i) PAYMENT BY LENDERS. In the event that Borrower shall fail for
any reason to reimburse any Issuing Lender as provided in subsection 3.3B
in an amount equal to the
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amount of any drawing honored by such Issuing Lender under a Letter of
Credit issued by it, such Issuing Lender shall promptly notify each other
Lender of the unreimbursed amount of such honored drawing and of such other
Lender's respective participation therein based on such Lender's Pro Rata
Share. Each Lender shall make available to such Issuing Lender an amount
equal to its respective participation, in Dollars and in same day funds, at
the office of such Issuing Lender specified in such notice, not later than
12:00 Noon (Boston, Massachusetts time) on the first Business Day (under
the laws of the jurisdiction in which such office of such Issuing Lender is
located) after the date notified by such Issuing Lender. Anything
contained herein to the contrary notwithstanding, each Lender's obligation
to make available to such Issuing Lender on such Business Day the amount of
such Lender's participation pursuant to the immediately preceding sentence
shall be absolute and unconditional and shall not be affected by any
circumstance, including (a) any set-off, counterclaim, recoupment, defense
or other right which such Lender may have against such Issuing Lender,
Borrower or any other Person for any reason whatsoever; (b) the occurrence
or continuation of an Event of Default or a Potential Event of Default; (c)
any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Borrower or any of its
Subsidiaries; (d) any breach of this Agreement or any other Loan Document
by any party thereto; or (e) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; PROVIDED that
nothing in this subsection 3.3C shall be deemed to prejudice the right of
any Lender to recover from any Issuing Lender any amounts made available by
such Lender to such Issuing Lender pursuant to this subsection 3.3C in the
event that it is determined by the final judgment of a court of competent
jurisdiction that the payment with respect to a Letter of Credit by such
Issuing Lender in respect of which payment was made by such Lender
constituted gross negligence or willful misconduct on the part of such
Issuing Lender. In the event that any Lender fails to make available to
such Issuing Lender on such Business Day the amount of such Lender's
participation in such Letter of Credit as provided in this subsection 3.3C,
such Issuing Lender shall be entitled to recover such amount on demand from
such Lender together with interest thereon at the Federal Funds Effective
Rate for three Business Days and thereafter at the Base Rate.
(ii) DISTRIBUTION TO LENDERS OF REIMBURSEMENTS RECEIVED FROM BORROWER.
In the event any Issuing Lender shall have been reimbursed by other Lenders
pursuant to subsection 3.3C(i) for all or any portion of any drawing
honored by such Issuing Lender under a Letter of Credit issued by it, such
Issuing Lender shall distribute to each other Lender which has paid all
amounts payable by it under subsection 3.3C(i) with respect to such honored
drawing such other Lender's Pro Rata Share of all payments subsequently
received by such Issuing Lender from Borrower in reimbursement of such
honored drawing when such payments are received. Any such distribution
shall be made to a Lender at its primary address set forth below its name
on the appropriate signature page hereof or at such other address as such
Lender may request.
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D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT.
(i) PAYMENT OF INTEREST BY BORROWER. Borrower agrees to pay to each
Issuing Lender, with respect to drawings honored under any Letters of
Credit issued by it, interest on the amount paid by such Issuing Lender in
respect of each such honored drawing from the date such drawing is honored
to but excluding the date such amount is reimbursed by Borrower (including
any such reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B) at a rate equal to (a) for the period from the date such
drawing is honored to but excluding the Reimbursement Date, the rate then
in effect under this Agreement with respect to Revolving Loans that are
Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess
of the rate of interest otherwise payable under this Agreement with respect
to Revolving Loans that are Base Rate Loans. Interest payable pursuant to
this subsection 3.3D(i) shall be computed in the manner specified in
subsection 2.2F for the computation of interest on Base Rate Loans and
shall be payable on demand or, if no demand is made, on the date on which
the related drawing under a Letter of Credit is reimbursed in full.
(ii) DISTRIBUTION OF INTEREST PAYMENTS BY ISSUING LENDER. Promptly
upon receipt by any Issuing Lender of any payment of interest pursuant to
subsection 3.3D(i) with respect to a drawing honored under a Letter of
Credit issued by it, (a) such Issuing Lender shall distribute to each other
Lender, out of the interest received by such Issuing Lender in respect of
the period from the date such drawing is honored to but excluding the date
on which such Issuing Lender is reimbursed for the amount of such drawing
(including any such reimbursement out of the proceeds of Revolving Loans
pursuant to subsection 3.3B), the amount that such other Lender would have
been entitled to receive in respect of the letter of credit fee that would
have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored under such Letter
of Credit, and (b) in the event such Issuing Lender shall have been
reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any
portion of such honored drawing, such Issuing Lender shall distribute to
each other Lender which has paid all amounts payable by it under subsection
3.3C(i) with respect to such honored drawing such other Lender's Pro Rata
Share of any interest received by such Issuing Lender in respect of that
portion of such honored drawing so reimbursed by other Lenders for the
period from the date on which such Issuing Lender was so reimbursed by
other Lenders to but excluding the date on which such portion of such
honored drawing is reimbursed by Borrower. Any such distribution shall be
made to a Lender at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request.
3.4 OBLIGATIONS ABSOLUTE.
The obligation of Borrower to reimburse each Issuing Lender for
drawings honored under the Letters of Credit issued by it and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i)
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shall be unconditional and irrevocable and shall be paid strictly in accordance
with the terms of this Agreement under all circumstances including any of the
following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right which
Borrower or any Lender may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against Borrower, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Borrower or one
of its Subsidiaries and the beneficiary for which any Letter of Credit was
procured);
(iii) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a draft or other document which does not
substantially comply with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
PROVIDED, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question.
3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES.
A. INDEMNIFICATION. In addition to amounts payable as provided in
subsection 3.6, Borrower hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or
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indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender,
other than as a result of (a) the gross negligence or willful misconduct of such
Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"GOVERNMENTAL ACTS").
B. NATURE OF ISSUING LENDERS' DUTIES. As between Borrower and any
Issuing Lender, Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation
of the foregoing, such Issuing Lender shall not be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for and
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including any Governmental Acts, and none of the
above shall affect or impair, or prevent the vesting of, any of such Issuing
Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Borrower.
Notwithstanding anything to the contrary contained in this subsection
3.5, Borrower shall retain any and all rights it may have against any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender.
3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
Subject to the provisions of subsection 2.7B (which shall be
controlling with respect to the matters covered thereby), in the event that any
Issuing Lender or Lender shall
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reasonably determine (which determination shall, absent clearly demonstrable
error, be final and conclusive and binding upon all parties hereto) that the
introduction or adoption (after the Closing Date) of any law, treaty or
governmental rule, regulation or order, or that any change (after the Closing
Date) therein or in the interpretation, administration or application thereof,
or that any determination (after the Closing Date) by a court or governmental
authority, or that compliance by any Issuing Lender or Lender with any
guideline, request or directive issued or made (after the Closing Date) by any
central bank or other governmental or quasi-governmental authority (whether or
not having the force of law), in any such case:
(i) subjects such Issuing Lender or Lender (or its applicable lending
or letter of credit office) to any additional Tax (excluding (x) any Tax on
the overall net income of such Issuing Lender or Lender, (y) any Tax
imposed on any Issuing Lender or Lender as a result of a present or former
connection between the jurisdiction imposing such Taxes and such Issuing
Lender or Lender (except a present connection arising solely from such
Lender having executed, delivered or performed its obligations or received
a payment under, or enforced any Loan Documents and (z) any Tax with
respect to which the provisions of subsection 2.7B are applicable) with
respect to the issuing or maintaining of any Letters of Credit or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 3, whether directly or by such being imposed
on or suffered by any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement in respect
of any Letters of Credit issued by any Issuing Lender or participations
therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter of credit office) regarding this Section 3 or
any Letter of Credit or any participation therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Borrower shall pay to such Issuing Lender or Lender,
promptly after receipt of the statement referred to in the next sentence, such
additional amount or amounts as may be necessary to compensate such Issuing
Lender or Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Such Issuing Lender or Lender shall deliver to Borrower
(with a copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Issuing Lender or Lender under this subsection 3.6, which statement shall be
conclusive and binding upon all parties hereto absent clearly demonstrable
error.
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SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.
4.1 CONDITIONS TO INITIAL LOANS.
The obligations of Lenders to make the initial Term Loans and any
Revolving Loans and Swing Line Loans to be made on the Closing Date and the
issuance of any Letters of Credit to be issued on the Closing Date are, in
addition to the conditions precedent specified in subsection 4.2 (in the case of
any such Loans) or 4.3 (in the case of any such Letters of Credit), subject to
prior or concurrent satisfaction of the following conditions:
A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Borrower shall,
and shall cause each other Loan Party to, deliver to Lenders (or to Agents for
Lenders with sufficient originally executed copies, where appropriate, for each
Lender and its counsel) the following with respect to Borrower or such Loan
Party, as the case may be, each, unless otherwise noted, dated the Closing Date:
(i) Certified copies of the Certificate or Articles of Incorporation
of such Person, together with a good standing certificate from the
Secretary of State of, in the case of Borrower, each of the States of
Pennsylvania and Maryland and, in the case of Newsub, the State of
Delaware, each dated a recent date prior to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the Closing
Date by such Person's corporate secretary or an assistant secretary;
(iii) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of the
Loan Documents and Related Agreements to which it is a party, certified as
of the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of the officers of such
Person executing the Loan Documents to which it is a party; and
(v) Executed originals of the Loan Documents to which such Person is
a party.
B. NO MATERIAL ADVERSE EFFECT. No material adverse change has occurred
since December 31, 1997 with respect to the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower and its
Subsidiaries, taken as a whole.
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C. PROCEEDS OF DEBT AND EQUITY CAPITALIZATION OF BEAR AND BORROWER.
(i) EQUITY CAPITALIZATION OF BEAR. On or before the Closing Date,
Affiliates of KKR shall have made an aggregate cash investment in Bear in
an amount equal to the Bear Equity Amount.
(ii) ISSUANCE OF SENIOR SUBORDINATED DEBT BY BORROWER. On or before
the Closing Date, Borrower shall receive not less than $165,000,000 in
gross proceeds from the issuance and sale of the Senior Subordinated Debt.
(iii) INVESTMENT BY EXISTING SHAREHOLDERS. On or before the
Closing Date, Existing Shareholders shall have retained Shares equal in
value to approximately $229,000,000.
(iv) INVESTMENT BY BEAR. On or before the Closing Date, Bear shall
have acquired approximately 80% of the Shares from the Existing
Shareholders for cash in an amount equal to $184,000,000.
D. RELATED AGREEMENTS.
(i) FORM OF SENIOR SUBORDINATED DEBT INDENTURE. The Senior
Subordinated Debt Documents shall be in the form of the drafts dated April
19, 1998, with such changes thereto, if any, that have been approved by
Syndication Agent or that would otherwise have been permitted to be made
pursuant to subsection 7.9 if the Senior Subordinated Debt were issued and
outstanding at the time of any such change.
(ii) RELATED AGREEMENTS IN FULL FORCE AND EFFECT. Agents shall have
received a fully executed or conformed copy of each Related Agreement
(including the Recapitalization Agreement and the Senior Subordinated Debt
Indenture and any documents executed in connection therewith), and each
Related Agreement shall be in full force and effect and no provision
thereof shall have been modified or waived in any respect materially
adverse to the interests of either Agent or the Lenders, in each case
without the consent of Syndication Agent.
E. MATTERS RELATING TO EXISTING INDEBTEDNESS OF BORROWER AND ITS
SUBSIDIARIES.
(i) TERMINATION OF EXISTING CREDIT AGREEMENT AND RELATED LIENS;
EXISTING LETTERS OF CREDIT. On the Closing Date, Borrower and its
Subsidiaries shall have (a) repaid in full all Indebtedness outstanding
under the Existing Credit Agreement, (b) terminated any commitments to lend
or make other extensions of credit thereunder, (c) delivered to Agents all
documents or instruments necessary to release all Liens securing
Indebtedness or other obligations of Borrower and its Subsidiaries
thereunder, and (d) made arrangements satisfactory to Syndication Agent
with respect to the
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cancellation of any letters of credit outstanding thereunder or the
issuance of Letters of Credit to support the obligations of Borrower and
its Subsidiaries with respect thereto.
(ii) EXISTING INDEBTEDNESS TO REMAIN OUTSTANDING. Agents shall have
received an Officer's Certificate of Borrower stating that, after giving
effect to the transactions described in this subsection 4.1E, Borrower and
its Subsidiaries do not have any Indebtedness or unfunded credit
facilities, other than Indebtedness and unfunded credit facilities under
the Loan Documents and the Senior Subordinated Debt Documents and
Indebtedness listed on SCHEDULE 7.1.
F. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF
WAITING PERIODS, ETC. Borrower shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are
necessary or advisable in connection with the Recapitalization, the other
transactions contemplated by the Loan Documents and the Related Agreements, and
the continued operation of the business conducted by Borrower and its
Subsidiaries in substantially the same manner as conducted prior to the
consummation of the Recapitalization, and each of the foregoing shall be in full
force and effect, in each case other than those the failure to obtain or
maintain which, either individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. All applicable waiting periods
shall have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose adverse conditions
on the Recapitalization or the financing thereof.
G. CONSUMMATION OF RECAPITALIZATION.
(i) The Recapitalization Agreement shall not have been amended and
the fulfillment of any conditions set forth therein shall not have been
waived, in each case unless such amendment or waiver is not adverse in any
material respect to the interests of Lenders;
(ii) the Recapitalization shall have become effective in accordance
with the terms of the Recapitalization Agreement; and
(iii) the maximum aggregate amount (excluding Letters of Credit)
of Revolving Loans drawn on the Closing Date shall not exceed $7,500,000.
H. SECURITY INTERESTS IN PLEDGED COLLATERAL. Agents shall each have
received evidence satisfactory to them that Borrower shall have taken or caused
to be taken all such actions, executed and delivered or caused to be executed
and delivered all such agreements, documents and instruments, and made or cause
to be made all such registrations, filings and recordings (other than the filing
or recording of items described in clause (c) below) that may be necessary or,
in the opinion of Administrative Agent, desirable in order to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and (upon such filing
and recording)
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perfected First Priority security interest in the entire Pledged Collateral.
Such actions shall include the following:
(a) SCHEDULES TO PLEDGE AGREEMENT. Delivery to Administrative
Agent of accurate and complete schedules to the Pledge Agreements.
(b) STOCK CERTIFICATES. Delivery to Administrative Agent of
certificates to the extent applicable (which certificates shall be
accompanied by irrevocable undated stock powers or power of
assignment, duly endorsed in blank and otherwise satisfactory in form
and substance to Administrative Agent) representing all capital stock
(or equivalent equity interest) included in the Pledged Collateral;
and
(c) UCC FINANCING STATEMENTS. Delivery to Administrative Agent
of a UCC financing statement duly executed by Borrower with respect to
certain Collateral under the Pledge Agreement, for filing in the
jurisdiction where Borrower maintains its "chief executive office" (as
that term is defined in the UCC as in effect in the State of New
York).
I. FINANCIAL STATEMENTS; PRO FORMA BALANCE SHEET. On or before the
Closing Date, Lenders shall have received from Borrower (i) audited financial
statements of Borrower and its Subsidiaries for Fiscal Years 1995, 1996 and
1997, consisting of balance sheets and the related consolidated statements of
income, stockholders' equity and cash flows for such Fiscal Years, and (ii) a
pro forma consolidated balance sheet of Borrower and its Subsidiaries as of the
date of the most recently audited balance sheet of Borrower and its
Subsidiaries, prepared in accordance with GAAP and reflecting the consummation
of the Recapitalization, the related financings and the other transactions
contemplated by the Loan Documents and the Related Agreements, which pro forma
financial statements shall be in form and substance reasonably satisfactory to
Lenders.
J. SOLVENCY ASSURANCES. On the Closing Date, Agents and Lenders shall
have received a letter from Valuation Research Corporation, dated the Closing
Date and addressed to Agents and Lenders, in form and substance satisfactory to
Syndication Agent and with appropriate attachments, demonstrating that, after
giving effect to the consummation of the Recapitalization, the related
financings and the other transactions contemplated by the Loan Documents and the
Related Agreements, Borrower will be solvent.
K. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their respective
counsel shall have received originally executed copies of one or more favorable
written opinions of (i) Skadden, Arps, Slate, Meagher & Flom L.L.P., special New
York counsel for Borrower, dated as of the Closing Date and setting forth
substantially the matters in the opinions designated in EXHIBIT X-A annexed
hereto, (ii) Simpson Thacher & Bartlett, special New York counsel for Loan
Parties, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in EXHIBIT X-B annexed hereto, and (iii)
Ballard Spahr Andrews & Ingersoll,
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special Maryland counsel for Borrower, dated as of the Closing Date and setting
forth substantially the matters in the opinions designated in EXHIBIT X-C
annexed hereto, and Borrower hereby requests such counsel for Loan Parties to
deliver such opinions.
L. OPINIONS OF COUNSEL DELIVERED UNDER RELATED AGREEMENTS. Agents and
their counsel shall have received copies of each of the opinions of counsel
delivered to the parties under the Related Agreements, together with a letter
from each such counsel (if available) authorizing Lenders to rely upon such
opinion to the same extent as though it were addressed to Lenders.
M. FEES. Borrower shall have paid to Administrative Agent, for
distribution (as appropriate) to Administrative Agent, Syndication Agent,
Arranger and Lenders, the fees payable on the Closing Date referred to in
subsection 2.3.
N. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Borrower
shall have delivered to Agents an Officer's Certificate, dated as of the Closing
Date and substantially in the form of EXHIBIT VIII annexed hereto, to the effect
that the representations and warranties in Section 5 hereof are true, correct
and complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date (or, to the extent such
representations and warranties specifically relate to an earlier date, that such
representations and warranties were true, correct and complete in all material
respects on and as of such earlier date).
4.2 CONDITIONS TO ALL LOANS.
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent shall have received on or before that
Funding Date, in accordance with the provisions of subsection 2.1B, an executed
Notice of Borrowing, in each case signed by a Responsible Officer of Borrower
who is included in the incumbency and specimen certificate delivered pursuant to
subsection 4.1A(iv) or by any other Responsible Officer of Borrower designated
in an updated incumbency and specimen certificate delivered to Administrative
Agent by Borrower.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true and correct in all material respects on
and as of that Funding Date to the same extent as though made on and as of
that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct in all material respects on
and as of such earlier date; and
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(ii) No event shall have occurred and be continuing or would result
from the consummation of the borrowing contemplated by such Notice of
Borrowing that would constitute an Event of Default or a Potential Event of
Default.
4.3 CONDITIONS TO LETTERS OF CREDIT.
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Request for Issuance of
Letter of Credit or a request for such Letter of Credit in such other form, to
the extent permitted in such subsection and in such form as agreed to
thereunder, in each case signed by a Responsible Officer of Borrower who is
included in the incumbency and specimen certificate delivered pursuant to
subsection 4.1A(iv) or by any other Responsible Officer of Borrower designated
in an updated incumbency and specimen certificate delivered to Administrative
Agent by Borrower, together with all other information specified in subsection
3.1B(i).
B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make
the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce
other Lenders to purchase participations therein, Borrower represents and
warrants to each Lender, on the date of this Agreement, on the Closing Date,
each Funding Date and on the date of issuance of each Letter of Credit, that the
following statements are true, correct and complete:
5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND
SUBSIDIARIES.
A. ORGANIZATION AND POWERS. Borrower and each Material Subsidiary is a
corporation or other business entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or formation
as specified in SCHEDULE 5.1 annexed hereto and has all requisite corporate or
other power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted. Each Loan Party has
all requisite corporate or other power and authority to enter into the Loan
Documents and Related Agreements to which it is a party and to carry out the
transactions contemplated thereby.
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B. QUALIFICATION AND GOOD STANDING. Borrower and each Material
Subsidiary is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, except to the extent that the failure to be so
qualified or in good standing could reasonably be expected to have a Material
Adverse Effect.
C. SUBSIDIARIES. All of the Subsidiaries and Unrestricted Subsidiaries
of Borrower as of the Closing Date are identified in SCHEDULE 5.1 annexed hereto
and each Material Subsidiary as of the Closing Date has been so designated on
said SCHEDULE 5.1.
5.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and performance
of the Loan Documents and the Related Agreements have been duly authorized by
all necessary corporate or other action on the part of each Loan Party that is a
party thereto.
B. NO CONFLICT. The execution, delivery and performance by Loan Parties
of the Loan Documents to which they are parties and the consummation of the
transactions contemplated by the Loan Documents and the Related Agreements do
not and will not (i) violate any provision of any material law or any material
governmental rule or regulation applicable to Borrower or any of its Material
Subsidiaries or any other Loan Party, the Certificate or Articles of
Incorporation or Bylaws (or equivalent constitutional documents) of Borrower or
any of its Subsidiaries, or any material order, judgment or decree of any court
or other agency of government binding on Borrower or any of its Material
Subsidiaries or any other Loan Party, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrower or any of its Material Subsidiaries or any
other Loan Party, or (iii) result in or require the creation or imposition of
any Lien under any such Contractual Obligation upon any of the properties or
assets of Borrower or any of its Subsidiaries or any other Loan Party (other
than any Liens created under any of the Loan Documents in favor of
Administrative Agent on behalf of Lenders).
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents and the
Related Agreements do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body except (i) any thereof that have
been obtained and are in full force and effect and (ii) as of the Closing Date
with respect to the consummation of the Recapitalization, any thereof which the
failure to obtain or make could not reasonably be expected to have a Material
Adverse Effect.
D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed
and delivered by each Loan Party that is a party thereto and is the legally
valid and binding obligation of such Loan Party, enforceable against such Loan
Party in accordance with its respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
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relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
5.3 FINANCIAL CONDITION.
Borrower has heretofore delivered to Lenders, at Lenders' request, the
audited consolidated balance sheets of Borrower and its Subsidiaries as at
December 31, 1995, December 31, 1996 and December 31, 1997 and the related
consolidated statements of income, stockholders' equity and cash flows of
Borrower and its Subsidiaries for the Fiscal Years then ended. All such
statements were prepared in conformity with GAAP except as otherwise noted
therein and fairly present, in all material respects, the financial position (on
a consolidated basis) of the entities described in such financial statements as
at the respective dates thereof and the results of operations and cash flows (on
a consolidated basis) of the entities described therein for each of the periods
then ended.
5.4 NO MATERIAL ADVERSE EFFECT.
Since December 31, 1997, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect.
5.5 TITLE TO PROPERTIES; LIENS.
Borrower and each of its Subsidiaries have good title to, or leasehold
interests in, all properties that are necessary for the conduct of their
respective businesses as now conducted and as proposed to be conducted, free and
clear of all Liens (other than any Liens permitted by this Agreement), except
where the failure to have such good title or leasehold interests could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.6 LITIGATION; ADVERSE FACTS.
Except as set forth in SCHEDULE 5.6 annexed hereto, there are no
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of Borrower or any of its Subsidiaries) at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign (including any Environmental Claims) that are pending or, to
the knowledge of Borrower, threatened against or affecting Borrower or any of
its Subsidiaries that, individually or in the aggregate (taking into
consideration, among other things, the ability of Borrower and its Subsidiaries
to obtain indemnification in respect thereof from Persons that are willing and
able to honor any existing indemnification obligations with respect thereto),
(i) could reasonably be expected to result in a Material Adverse Effect, or (ii)
on or prior to the Closing Date, is reasonably likely to impair or impose
material adverse conditions on the consummation of the transactions contemplated
hereunder or in connection herewith (including the Recapitalization) and is
reasonably likely to have a material adverse effect on the rights and
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remedies of, or impose any material liability on, either Agent or the Lenders
under this Agreement and the Loan Documents, taken as a whole.
5.7 PAYMENT OF TAXES.
Each of Borrower, each of its Subsidiaries and each other corporation
(each a "CONSOLIDATED CORPORATION") with whom Borrower or any of its
Subsidiaries joins in the filing of a consolidated or combined return has filed
all Federal income tax returns and other material tax returns and reports,
domestic and foreign, required to be filed by it, and has paid all material
taxes, assessments, fees and other governmental charges levied or imposed upon
it or its respective properties, income or assets to the extent the same have
become due and payable, except those which are not yet delinquent or which are
being contested in good faith. Each of Borrower, each of its Subsidiaries and
each Consolidated Corporation has paid, or has provided adequate reserves (in
the good faith judgment of the management of Borrower) in accordance with GAAP
(or, in the case of a Foreign Subsidiary, appropriate reserves under generally
accepted accounting principles in the applicable jurisdiction), for the payment
of, all such material taxes, assessments, fees and charges relating to all prior
taxable years and the current taxable year of Borrower, each of its Subsidiaries
and each Consolidated Corporation. To the best knowledge of Borrower, there is
no proposed tax assessment against Borrower, any of its Subsidiaries or any
Consolidated Corporation that could reasonably be expected to have a Material
Adverse Effect.
5.8 GOVERNMENTAL REGULATION.
Neither the making of any extension of credit hereunder, nor the use
of any of the proceeds thereof, will violate the provisions of Regulation T, U
or X of the Board of Governors of the Federal Reserve System. Borrower is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
5.9 EMPLOYEE BENEFIT PLANS.
A. Borrower, each of its Subsidiaries and each ERISA Affiliate is in
compliance with all applicable provisions of ERISA, the Internal Revenue Code
and other applicable federal, state or foreign law with respect to each Plan,
and has performed all of its obligations under each Plan, except to the extent
that failure to comply, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. Borrower, each of its
Subsidiaries and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Internal Revenue Code, except to the extent
that a failure to do so could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code has been made with respect to any Plan.
B. There are no pending or, to the best knowledge of Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any
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Pension Plan which, individually or in the aggregate, have resulted or could
reasonably be expected to result in a Material Adverse Effect.
C. (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability in an amount
which, individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), could reasonably be expected to have a Material
Adverse Effect if such Pension Plan or Pension Plans were then terminated,
unless such Pension Plan is not reasonably likely to be terminated; and (iii)
neither Borrower nor any of its Subsidiaries nor any ERISA Affiliate has engaged
in a transaction that could be subject to Section 4069 or 4212(c) of ERISA that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
5.10 ENVIRONMENTAL PROTECTION.
Borrower and each of its Subsidiaries is in compliance with all
applicable Environmental Laws in respect of the conduct of its business and the
ownership of its property, except such noncompliance as could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Without limiting the effect of the preceding sentence:
(a) neither Borrower nor any of its Subsidiaries has received a
complaint, order, citation, notice or other written communication with
respect to the existence or alleged existence of a violation of, or
liability arising under, any Environmental Law, the outcome of which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect; and
(b) to the best of Borrower's knowledge, after due inquiry,
there are no environmental, health or safety conditions existing or
reasonably expected to exist at any real property owned, operated, leased
or used by Borrower or any of its existing or former Subsidiaries or any of
their respective predecessors, including off-site treatment or disposal
facilities used by Borrower or its existing or former Subsidiaries for
wastes treatment or disposal, which could reasonably be expected to require
any construction or other capital costs or clean-up obligations to be
incurred prior to the final scheduled maturity of the Tranche B Term Loans
in order to assure compliance with any Environmental Law, including
provisions regarding clean-up, to the extent that any of such conditions,
construction or other capital costs or clean-up obligations, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
5.11 DISCLOSURE.
All factual information (taken as a whole) furnished by or on behalf
of Borrower or any of its Subsidiaries to any Agent or any Lender in writing on
or before the Closing Date (including any such information contained in the
Confidential Information Memorandum or in any Loan Document or Related Agreement
or in any other document, certificate or written
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statement furnished to Lenders by or on behalf of Borrower or any of its
Subsidiaries) for use in connection with the transactions contemplated by this
Agreement is true and correct in all material respects and does not omit to
state a material fact necessary in order to make the statements contained herein
and therein, taken as a whole, not misleading at such time in light of the
circumstances in which the same were made, it being understood that, for
purposes of this subsection 5.11, such factual information does not include
projections and pro forma financial information. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
SECTION 6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6 and shall further cause each of its Unrestricted
Subsidiaries that is a Consolidated Corporation to perform the covenants in
subsection 6.3.
6.1 FINANCIAL STATEMENTS AND OTHER REPORTS.
Borrower will deliver to Agents and Lenders:
(i) QUARTERLY FINANCIALS: promptly when available but in any event
no later than 60 days after the end of the first three Fiscal Quarters of
each Fiscal Year, the consolidated balance sheet of Borrower and its
Subsidiaries as at the end of each Fiscal Quarter and the related
consolidated statements of income, stockholders' equity and cash flows of
Borrower and its Subsidiaries for such Fiscal Quarter and for the period
from the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year, all in reasonable detail and certified by a Responsible Officer of
Borrower that they fairly present, in all material respects, the financial
condition of Borrower, its Subsidiaries and its Unrestricted Subsidiaries
or Borrower and its Subsidiaries, as the case may be, as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal
year-end adjustments;
(ii) YEAR-END FINANCIALS: promptly when available but in any event no
later than 120 days after the end of each Fiscal Year, the consolidated
balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal
Year and the related consolidated statements of income, stockholders'
equity and cash flows of Borrower and
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its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year,
all in reasonable detail and certified by a Responsible Officer of Borrower
that they fairly present, in all material respects, the financial condition
of Borrower and its Subsidiaries as at the end of such Fiscal Year and the
results of their operations and their cash flows for such Fiscal Year, and
a report thereon of a firm of independent certified public accountants of
recognized national standing selected by Borrower, which report shall be
unqualified as to the scope of audit or as to the going concern status of
Borrower, its Subsidiaries and its Unrestricted Subsidiaries or Borrower
and its Subsidiaries, as the case may be (in either case taken as a whole),
and shall state that such consolidated financial statements fairly present,
in all material respects, the consolidated financial condition of Borrower,
its Subsidiaries and its Unrestricted Subsidiaries or Borrower and its
Subsidiaries, as the case may be, as at the end of such Fiscal Year and the
results of their operations and their cash flows for such Fiscal Year in
conformity with GAAP applied on a basis consistent with prior years (except
as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards;
(iii) OFFICER'S AND COMPLIANCE CERTIFICATES: together with each
delivery of financial statements of Borrower and its Subsidiaries pursuant
to subdivisions (i) and (ii) above, (a) an Officer's Certificate of
Borrower stating that the signers do not have knowledge of the existence,
as at the date of such Officer's Certificate, of any condition or event
that constitutes an Event of Default or Potential Event of Default, or, if
any such condition or event exists, specifying the nature and period of
existence thereof and what action Borrower has taken, is taking and
proposes to take with respect thereto; (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the covenants set forth in subsection
7.6 and with any specific dollar amounts specified in respect of any
restrictions contained in any other provisions of Section 7; (c) in the
event the identity of any of the Subsidiaries or Unrestricted Subsidiaries
of Borrower has changed since the Closing Date (or, if applicable, since
the date of the most recent Officer's Certificate delivered to Lenders in
accordance with this clause (c)), an Officer's Certificate setting forth
such change; (d) the amount of any Pro Forma Adjustment not previously set
forth in any Pro Forma Adjustment Certificate or any change in the amount
of a Pro Forma Adjustment set forth in any Pro Forma Adjustment Certificate
previously provided and, in either case, in reasonable detail, the
calculations and basis therefor, and (e) at the time of the delivery of the
financial statements pursuant to subdivision (ii) above, the Available
Amount as at the end of the Fiscal Year to which such statements relate;
(iv) ACCOUNTANTS' CERTIFICATION: together with each delivery of
consolidated financial statements of Borrower and its Subsidiaries pursuant
to subdivision (ii) above, a written statement by the independent certified
public accountants giving the report thereon stating whether, in connection
with their audit examination, any condition or event that constitutes an
Event of Default or Potential Event of Default under
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subsection 7.6 has come to their attention and, if such a condition or
event has come to their attention, specifying the nature thereof;
(v) SEC FILINGS: promptly after the transmission thereof by Borrower
or any of its Subsidiaries to the SEC, copies of any filings on Form 10-K,
10-Q, or 8-K and any effective registration statements (and, upon the
effectiveness thereof, any material amendments thereto) filed with the SEC
(but not any exhibits to any such registration statement or amendment
(except as provided below) or any registration statement on Form S-8), and
copies of all financial statements, proxy statements, notices and reports
that Borrower or any of its Subsidiaries actually sends to the holders of
any publicly-issued debt Securities of Borrower or any of its Subsidiaries
(including the Subordinated Indebtedness) in their capacity as such holders
(in each case to the extent not theretofore delivered to Lenders pursuant
to this Agreement and in each case including, to the extent requested by
either Agent, any schedules and exhibits thereto), in each case as so
transmitted to the SEC;
(vi) EVENTS OF DEFAULT, ETC.: promptly upon any Responsible Officer
of Borrower obtaining actual knowledge of (a) any condition or event that
constitutes an Event of Default or Potential Event of Default or (b) any
acceleration, redemption or purchase demands or notices provided by the
trustee for, or any event of default under, any Subordinated Indebtedness,
a notice specifying the nature and period of existence of such condition or
event or specifying the notice given by such trustee or the nature of such
event of default, and what action Borrower has taken, is taking and
proposes to take with respect thereto;
(vii) LITIGATION OR OTHER PROCEEDINGS: promptly upon any
Responsible Officer of Borrower obtaining actual knowledge of (X) the
institution of any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against
or affecting Borrower or any of its Subsidiaries or any property of
Borrower or any of its Subsidiaries (collectively, "PROCEEDINGS") not
previously disclosed in writing by Borrower to Lenders or (Y) any material
development in any Proceeding that, in any such case, could reasonably be
expected to give rise to a Material Adverse Effect, written notice thereof
together with such other information as may be reasonably available to
Borrower to enable Lenders and their counsel to evaluate such matters;
(viii) ERISA EVENTS: promptly upon any Responsible Officer of
Borrower obtaining knowledge of the occurrence or forthcoming occurrence of
any ERISA Event, a written notice specifying the nature thereof and what
action Borrower, any of its Subsidiaries or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto;
and, promptly upon receipt thereof, copies of any notice received by
Borrower, any of its Subsidiaries or any of their respective ERISA
Affiliates from the Internal Revenue Service, the Department of Labor or
the PBGC or from a Multiemployer Plan sponsor concerning any ERISA Event;
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(ix) FINANCIAL PLANS: as soon as practicable and in any event no
later than 60 days after the beginning of each Fiscal Year, consolidated
operating and related budgets for Borrower and its Subsidiaries for each
Fiscal Quarter of such Fiscal Year (the "FINANCIAL PLAN" for such Fiscal
Year), in reasonable detail as customarily prepared by management of
Borrower for its internal use and setting forth an explanation of the
principal assumptions on which such budgets are based;
(x) ENVIRONMENTAL AUDITS AND REPORTS: as soon as practicable
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Borrower or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Real Estate (as
defined in subsection 6.1(xi)(1)) which, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect or with
respect to any Environmental Claims which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect;
(xi) NOTICE OF CERTAIN ENVIRONMENTAL MATTERS: promptly upon any
Responsible Officer of Borrower obtaining knowledge of any one or more of
the following environmental matters the existence of which, either
individually or when aggregated with all other such matters, would
reasonably be expected to result in a Material Adverse Effect, a written
notice specifying in reasonable detail the nature thereof and what action
Borrower and its Subsidiaries have taken, are taking or propose to take
with respect thereto:
(1) any pending or threatened Environmental Claim against
Borrower or any of its Subsidiaries or any land, buildings and improvements
owned or leased by Borrower or any of its Subsidiaries (but excluding all
operating fixtures and equipment, whether or not incorporated into
improvements) (collectively, "REAL ESTATE");
(2) any condition or occurrence that (x) results in
noncompliance by Borrower or any of its Subsidiaries with any applicable
Environmental Law or (y) could reasonably be anticipated to form the basis
of an Environmental Claim against Borrower or any of its Subsidiaries or
any Real Estate;
(3) any condition or occurrence on any Real Estate that could
reasonably be anticipated to cause such Real Estate to be subject to any
restrictions on the ownership, occupancy, use or transferability of such
Real Estate under any Environmental Law; or
(4) the taking of any removal or remedial action in response to
the actual or alleged presence of any Hazardous Material on any Real
Estate;
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(xii) PRO FORMA ADJUSTMENT CERTIFICATE: not later than the
consummation of any Acquisition by Borrower or any of its Subsidiaries for
which there shall be a Pro Forma Adjustment, an Officer's Certificate of
Borrower setting forth the amount of such Pro Forma Adjustment and, in
reasonable detail, the calculations and basis therefor; and
(xiii) OTHER INFORMATION: with reasonable promptness, such other
information and data with respect to Borrower or any of its Subsidiaries as
from time to time may be reasonably requested by any Agent on its own
behalf or on behalf of Requisite Lenders.
6.2 CORPORATE EXISTENCE, ETC.
Except as permitted under subsection 7.7, Borrower will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect (i) its corporate existence (except, in the case of a Subsidiary of
Borrower) only, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect) and (ii) all rights and franchises
material to its business (except, in any case, to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect).
6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
Borrower will, and will cause each of its Subsidiaries and each
Consolidated Corporation that is an Unrestricted Subsidiary to, pay all material
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any material penalty accrues thereon, and all lawful material
claims (including claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have become or could reasonably
be expected to become a material Lien upon any of the properties or assets of
Borrower or any of its Subsidiaries or any Consolidated Corporation; PROVIDED
that no such charge or claim need be paid if it is being contested in good faith
and by proper proceedings, so long as it has maintained adequate reserves (in
the good faith judgment of Borrower or such Subsidiary or such Consolidated
Corporation) with respect thereto in accordance with GAAP.
6.4 MAINTENANCE OF PROPERTIES; INSURANCE.
A. MAINTENANCE OF PROPERTIES. Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all material properties
used or useful in the business of Borrower and its Subsidiaries (including all
Intellectual Property) and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof, in each case except to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.
B. INSURANCE. Borrower will, and will cause each of its Material
Subsidiaries to, at all times maintain in full force and effect, with insurance
companies which Borrower
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believes (in the good faith judgment of Borrower's management) are financially
sound and responsible at the time the relevant coverage is placed or renewed,
insurance in at least such amounts and against at least such risks (and with
such risk retentions) as are usually insured against in the same general area by
companies engaged in the same or a similar business. Borrower shall furnish to
Lenders, upon written request from either Agent, information presented in
reasonable detail as to the insurance so carried.
6.5 INSPECTION RIGHTS.
Borrower shall, and shall cause each of its Material Subsidiaries to,
permit any authorized representatives designated by any Agent or Requisite
Lenders to visit and inspect any of the properties of Borrower or of any of its
Material Subsidiaries, to inspect, copy and make abstracts from its and their
financial and accounting records, and to discuss its and their affairs, finances
and accounts with its and their officers and independent public accountants
(provided that Borrower may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable notice and at such reasonable times
during normal business hours and as often as may reasonably be requested.
6.6 COMPLIANCE WITH LAWS, ETC.
Borrower shall comply, and shall cause each of its Subsidiaries to
comply, in all material respects, with the requirements of all applicable laws,
rules, regulations and orders (including all Environmental Laws) of any
governmental authority having jurisdiction over it, except such as may be
contested in good faith or as to which a bona fide dispute may exist and except
to the extent that noncompliance therewith could not reasonably be expected to
cause, individually or in the aggregate, a Material Adverse Effect.
6.7 EXECUTION OF SUBSIDIARY GUARANTY BY FUTURE DOMESTIC SUBSIDIARIES; PLEDGE OF
STOCK OF FUTURE DIRECT SUBSIDIARIES; RATABLE CREDIT SUPPORT.
A. In the event that any Person (other than a Restricted Acquisition
Subsidiary or a Subsidiary that has incurred Indebtedness permitted under
subsection 7.1(x)(b)) becomes a Domestic Subsidiary after the date hereof,
Borrower will promptly notify each Agent of that fact and cause such Domestic
Subsidiary to execute and deliver to Administrative Agent a counterpart of the
Subsidiary Guaranty. In the event that any Person (other than a Restricted
Acquisition Subsidiary or, subject to subsection 6.7B, a Subsidiary the capital
stock (or other equivalent equity interest) of which is certificated and is
pledged pursuant to subsection 7.2(vi)(b)) becomes a direct Domestic Subsidiary
or a direct Material Foreign Subsidiary after the Closing Date, Borrower will
promptly notify each Agent of that fact and cause the capital stock (or other
equivalent equity interest) owned by Borrower of such direct Domestic Subsidiary
or such direct Material Foreign Subsidiary (or, if Borrower owns 65% or more of
any such direct Material Foreign Subsidiary, 65% of the capital stock (or other
equivalent equity interest) of such direct Material Foreign Subsidiary) to be
pledged under the Pledge Agreement (or, if the capital stock (or other
equivalent equity interest) of any such direct
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Domestic Subsidiary is uncertificated, confirmation and evidence satisfactory to
the Administrative Agent in accordance with Articles 8 and 9 of the Uniform
Commercial Code as in effect in the State of New York or any similar law which
may be applicable) and, in the case of any such direct Material Foreign
Subsidiary, also under any pledge agreements or instruments that the
Administrative Agent deems necessary or advisable, or that the Administrative
Agent may reasonably request, pursuant to the terms of the Master Pledge
Agreement to effectuate such pledge in the jurisdiction in which such Material
Foreign Subsidiary is organized.
B. In the event that any Subsidiary of Borrower has guaranteed any
Indebtedness incurred pursuant to subsection 7.1(x) in an aggregate principal
amount exceeding $75,000,000, or has granted any security interests as
collateral therefor, such Subsidiary shall (i) guaranty the Obligations
hereunder and under the other Loan Documents on a PARI PASSU basis with its
guaranty of any portion of such Indebtedness exceeding $75,000,000 and shall
grant Liens on such assets securing the Obligations on an equal and ratable
basis with the security for such Indebtedness pursuant to documentation
reasonably satisfactory to Agents and Requisite Lenders and (ii) execute and
deliver to Administrative Agent all such documents and instruments as may be
necessary or, in the opinion of Administrative Agent, desirable, in order to
more fully evidence, perfect or protect such security interest.
6.8 TRANSACTIONS WITH AFFILIATES.
Borrower shall, and shall cause each of its Subsidiaries to, conduct
all transactions with any of its Affiliates (other than Borrower or any of its
Subsidiaries) upon terms that are substantially as favorable to Borrower or such
Subsidiary as it would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of Borrower or such Subsidiary; PROVIDED that the
foregoing restrictions shall not apply to (a) the payment of customary annual
fees to KKR and its Affiliates for management, consulting and financial services
rendered to Borrower and its Subsidiaries, and customary investment banking fees
paid to KKR and its Affiliates for services rendered to Borrower and its
Subsidiaries in connection with divestitures, acquisitions, financings and other
transactions, (b) reasonable and customary fees paid to members of the Board of
Directors of Borrower and its Subsidiaries and (c) transactions otherwise
expressly permitted hereunder between Borrower or any of its Subsidiaries and
any such Affiliate.
6.9 CONDUCT OF BUSINESS.
From and after the Closing Date, Borrower shall, and shall cause its
Subsidiaries (taken as a whole) to, engage primarily in (i) the lines of
business carried on by Borrower and its Subsidiaries on the Closing Date, (ii)
other businesses or activities that are reasonably similar thereto or that
constitute a reasonable extension, development or expansion thereof or that are
ancillary or reasonably related thereto.
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6.10 FISCAL YEAR.
Borrower shall maintain its Fiscal Year-end at December 31 of each
year; PROVIDED that Borrower may, upon prior written notice to Agents, change
such Fiscal Year-end to any other date reasonably acceptable to Agents, in which
case Borrower and Agents shall, and are hereby authorized by Lenders to, make
any adjustments to this Agreement that are necessary in order to reflect any
corresponding changes in financial reporting.
6.11 CONVEYANCE OF ASSETS.
Borrower shall convey a substantial majority of its assets (other than
any Pledged Shares (or other equivalent equity interest) to Newsub on or prior
to the date which is 120 days subsequent to the Closing Date.
SECTION 7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7.
7.1 INDEBTEDNESS.
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Borrower may become and remain liable with respect to the
Obligations;
(ii) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations permitted under subsection 7.4 and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Guarantee Obligations so extinguished;
(iii) Borrower and its Subsidiaries may become and remain liable
with respect to Indebtedness in respect of Capital Leases in an aggregate
amount not to exceed at any time $25,000,000;
(iv) Borrower may become and remain liable with respect to
Indebtedness to any of its Subsidiaries, and any Subsidiary of Borrower may
become and remain liable with respect to Indebtedness to Borrower or any
other Subsidiary of Borrower;
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(v) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in SCHEDULE 7.1 annexed hereto;
(vi) (a) Borrower may become and remain liable with respect to
Indebtedness evidenced by the Senior Subordinated Debt in an aggregate
principal amount not to exceed $165,000,000 and any Refinancing Sub Debt
and (b) its Subsidiaries may become liable under the Senior Subordinated
Debt Guaranty, if any, in respect of such Indebtedness;
(vii) Borrower and its Subsidiaries may become and remain liable
with respect to Indebtedness (a) incurred within 270 days of the
acquisition, construction or improvement of fixed or capital assets to
finance the acquisition, construction or improvement of such fixed or
capital assets or (b) otherwise incurred in respect of Capital Expenditures
permitted under subsection 7.8;
(viii) Borrower and its Subsidiaries may become and remain liable with
respect to Indebtedness under Hedge Agreements;
(ix) Any Person that becomes a Restricted Acquisition Subsidiary (a)
may remain liable with respect to (X) Indebtedness of such Person existing
at the time of consummation of the Acquisition pursuant to which such
Person becomes a Subsidiary of Borrower or (Y) Indebtedness secured by
assets acquired by such Person in an Acquisition at the time of
consummation of such Acquisition; PROVIDED that such Indebtedness was not
incurred in contemplation of the Acquisition referred to in clause (X) or
the acquisition of such assets referred to in clause (Y), as the case may
be, and (b) may become and remain liable with respect to Indebtedness
incurred to finance the Acquisition pursuant to which such Person becomes a
Subsidiary of Borrower;
(x) Borrower and its Subsidiaries (a) may remain liable with respect
to (X) in the case of a Subsidiary, Indebtedness of such Subsidiary
existing at the time of consummation of an Acquisition pursuant to which
such Person becomes a Subsidiary of Borrower or (Y) Indebtedness secured by
assets acquired by such Person in an Acquisition at the time of
consummation of such Acquisition; PROVIDED that such Indebtedness was not
incurred in contemplation of the Acquisition referred to in clause (X) or
the acquisition of such assets referred to in clause (Y), as the case may
be, and (b) may become and remain liable with respect to Indebtedness
incurred to finance an Acquisition consummated by such Person, including an
Acquisition pursuant to which such Person becomes a Subsidiary of Borrower;
PROVIDED that the aggregate outstanding principal amount of all
Indebtedness permitted pursuant to this subsection 7.1(x) shall at no time
exceed $75,000,000;
(xi) Borrower and its Subsidiaries may extend the maturity of, and may
become and remain liable with respect to Indebtedness incurred to
refinance, any Indebtedness permitted under clauses (ii) through (iv), and
(vii) through (x) above; PROVIDED that (a) the
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principal amount of any such Indebtedness is not increased above the
principal amount thereof outstanding immediately prior to such extension or
refinancing, (b) the direct and contingent obligors with respect to such
Indebtedness are not changed as a result of such extension or refinancing,
except as otherwise permitted hereunder, and (c) a Potential Event of
Default would not occur solely as a result of such extension or
refinancing; and
(xii) Borrower and its Subsidiaries may become and remain liable
with respect to other Indebtedness in an aggregate principal amount not to
exceed $100,000,000 at any time outstanding.
7.2 LIENS AND RELATED MATTERS.
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or permit to exist any Lien on or
with respect to any property or asset of any kind (including any document or
instrument in respect of goods or accounts receivable) of Borrower or any of its
Subsidiaries, whether now owned or hereafter acquired, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents;
(iii) Liens existing on the Closing Date securing Indebtedness
described on SCHEDULE 7.2 annexed hereto in an aggregate principal amount
not to exceed $5,000,000;
(iv) Liens placed on property, plant or equipment used in the ordinary
course of business of Borrower or any of its Subsidiaries to secure
Indebtedness incurred to pay all or a portion of the purchase price
thereof; PROVIDED that (a) the Lien encumbering such property, plant or
equipment does not encumber any other asset of Borrower or any of its
Subsidiaries and (b) the Indebtedness secured thereby is permitted under
subsection 7.1(vii);
(v) (a) Liens encumbering assets of a Restricted Acquisition
Subsidiary that are granted to secure Indebtedness permitted under
subsection 7.1(ix) at the time such Indebtedness is assumed by such
Restricted Acquisition Subsidiary; PROVIDED that such Liens are not granted
in contemplation of the Acquisition pursuant to which such Person becomes a
Subsidiary of Borrower, and (b) Liens encumbering the capital stock of a
Restricted Acquisition Subsidiary that are granted to secure Indebtedness
permitted under subsection 7.1(ix)(b);
(vi) (a) Liens encumbering assets of a Subsidiary of Borrower that are
granted to secure Indebtedness permitted under subsection 7.1(x) at the
time such Indebtedness is originally incurred and (b) Liens encumbering the
capital stock of a Subsidiary of Borrower that are granted to secure
Indebtedness permitted under subsection 7.1(x)(b);
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PROVIDED that the aggregate outstanding principal amount of Indebtedness
secured by all Liens permitted pursuant to this subsection 7.2(vi) shall at
no time exceed $75,000,000, except to the extent that such Subsidiary has
granted a Lien on the assets securing any portion of such Indebtedness in
excess of $75,000,000 on an equal and ratable basis to Administrative Agent
on behalf of Lenders to secure the Obligations; and
(vii) Other Liens securing Indebtedness in an aggregate amount not
to exceed $25,000,000 at any time outstanding.
7.3 INVESTMENTS; JOINT VENTURES.
Except as provided in subsections 7.7(i), (ii) or (v), Borrower shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly,
make or own any Investment in any Person, including any Joint Venture, except:
(i) Borrower and its Subsidiaries may make and own Investments in
Cash Equivalents;
(ii) Borrower and its Subsidiaries may make loans and advances to
officers, directors and employees of Borrower or any of its Subsidiaries
(a) to finance the purchase of capital stock of Borrower and (b) in an
aggregate principal amount not to exceed $5,000,000 at any time outstanding
for additional purposes not contemplated by the foregoing clause (a);
(iii) Borrower and its Subsidiaries may make and own Investments
consisting of any non-cash proceeds received by Borrower or any of its
Subsidiaries in connection with any Asset Sale permitted under subsection
7.7(v);
(iv) Borrower and its Subsidiaries may continue to own the Investments
owned by them and described in SCHEDULE 7.3 annexed hereto and Borrower and
its Subsidiaries may make and own Investments purchased with the proceeds
of the sale of any Investments permitted under this subsection 7.3(iv); and
(v) Borrower and its Subsidiaries may make and own Investments
(collectively, "UNRESTRICTED INVESTMENTS") in addition to those permitted
under clauses (i) through (iv) above, including Investments in Restricted
Acquisition Subsidiaries and in Unrestricted Subsidiaries, as follows: (a)
Unrestricted Investments in an aggregate amount not to exceed at any time
(1) $25,000,000 for all such Unrestricted Investments in Unrestricted
Subsidiaries or (2) $50,000,000 for all such Unrestricted Investments
(including all such Unrestricted Investments in Restricted Acquisition
Subsidiaries ) and (b) Unrestricted Investments in addition to the
Unrestricted Investments permitted under the preceding clause (a), PROVIDED
that after giving effect to any such additional Unrestricted Investment
pursuant to this clause (b) the Available Amount Usage shall not exceed the
Available Amount.
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7.4 GUARANTEE OBLIGATIONS.
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Guarantee Obligation, except:
(i) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations in respect of the Guaranties;
(ii) Borrower may become liable with respect to Guarantee Obligations
in respect of Letters of Credit;
(iii) Borrower and its Subsidiaries may become and remain liable
with respect to Guarantee Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets;
(iv) Borrower and its Subsidiaries (i) may become liable in respect of
Letters of Credit and (ii) may become and remain liable with respect to
Guarantee Obligations in respect of customary indemnification and purchase
price adjustment obligations incurred in connection with Asset Sales or
other sales of assets;
(v) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations under guarantees in the ordinary course of
business of the obligations of suppliers, customers, franchisees and
licensees of Borrower and its Subsidiaries;
(vi) Borrower and its Subsidiaries may become and remain liable with
respect to Guarantee Obligations in respect of any Indebtedness of Borrower
or any of its Subsidiaries (other than Restricted Acquisition Subsidiaries)
permitted by subsection 7.1; PROVIDED that (a) neither Borrower nor any of
its Subsidiaries may become or remain liable with respect to Guarantee
Obligations in respect of any Indebtedness permitted under subsection
7.1(x)(b) unless such Person becomes a Subsidiary of Borrower pursuant to
the Acquisition financed with the proceeds of such Indebtedness or acquires
a direct Subsidiary pursuant to such Acquisition;
(vii) Borrower and its Subsidiaries, as applicable, may remain
liable with respect to Guarantee Obligations described in SCHEDULE 7.4
annexed hereto; and
(viii) Borrower and its Subsidiaries may become and remain liable
with respect to other Guarantee Obligations; PROVIDED that the maximum
aggregate liability, contingent or otherwise, of Borrower and its
Subsidiaries in respect of all such Guarantee Obligations shall at no time
exceed $15,000,000.
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7.5 RESTRICTED JUNIOR PAYMENTS.
Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; PROVIDED that so long as no Event of Default or
Potential Event of Default has occurred and is continuing or would be caused
thereby, Borrower may:
(i) repurchase shares of its capital stock or of any corporate parent
(together with options or warrants in respect of any thereof) held by
present and former officers, directors and employees of Borrower so long as
such repurchase is pursuant to, and in accordance with the terms of,
management and/or employee stock plans, stock subscription agreements or
shareholder agreements;
(ii) repurchase, redeem, defease or otherwise prepay or retire Senior
Subordinated Debt or Refinancing Sub Debt; PROVIDED that after giving
effect thereto the Available Amount Usage shall not exceed the Available
Amount;
(iii) purchase, redeem or otherwise acquire shares of common stock
of Borrower or warrants or options to acquire any such shares with proceeds
received by Borrower from substantially concurrent equity contributions or
issuances of new shares of its common stock;
(iv) redeem or exchange, in whole or in part, any capital stock of
Borrower for shares of another class of capital stock of Borrower or rights
to acquire shares of such other class of capital stock; PROVIDED that such
other class of capital stock contains terms and provisions (taken as a
whole, and taking into account the relative amounts of the shares of each
class of capital stock involved in such redemption or exchange) that are at
least as advantageous to Lenders as those contained in the capital stock
redeemed or exchanged therefor; and
(v) make other Restricted Junior Payments; PROVIDED that on the date
(the "DECLARATION DATE") of declaration of any dividend in respect of
Borrower's outstanding capital stock pursuant to the terms of this clause
(v) or the making of any other Restricted Junior Payment pursuant to the
terms of this clause (v), (X) the Consolidated Leverage Ratio as of the
last day of the Fiscal Quarter most recently ended shall be less than
4.00:1.00 and (Y) the aggregate amount of any such Restricted Junior
Payment, when added to the aggregate amount of all Restricted Junior
Payments previously declared or (without duplication) paid by Borrower
pursuant to this clause (v) during the period commencing on the Closing
Date and ending on the Declaration Date, does not exceed 50% of cumulative
Consolidated Net Income of Borrower and its Subsidiaries for the period
commencing on the Closing Date and ending on the last day of the Fiscal
Quarter most recently ended.
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7.6 FINANCIAL COVENANTS.
A. MINIMUM INTEREST COVERAGE RATIO. Borrower shall not permit the ratio
of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest Expense for
the four-Fiscal Quarter period ending on the last day of any Fiscal Quarter set
forth below to be less than the correlative ratio indicated:
MINIMUM INTEREST
YEAR FISCAL QUARTER COVERAGE RATIO
---- --------------- ----------------
1999 First 1.50:1.00
Second 1.50:1.00
Third 1.50:1.00
Fourth 1.50:1.00
2000 First 1.50:1.00
Second 1.50:1.00
Third 1.75:1.00
Fourth 1.75:1.00
2001 First 1.75:1.00
Second 1.75:1.00
Third 1.75:1.00
Fourth 1.75:1.00
2002 First 1.75:1.00
Second 1.75:1.00
Thereafter 2.00:1.00
B. MAXIMUM LEVERAGE RATIO. Borrower shall not permit the Consolidated
Leverage Ratio as of the last day of any Fiscal Quarter set forth below to
exceed the correlative ratio indicated:
MINIMUM INTEREST
YEAR FISCAL QUARTER COVERAGE RATIO
---- --------------- ----------------
1999 First 6.65:1.00
Second 6.50:1.00
Third 6.40:1.00
Fourth 6.25:1.00
2000 First 6.00:1.00
Second 6.00:1.00
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Third 6.00:1.00
Fourth 5.75:1.00
2001 First 5.50:1.00
Second 5.50:1.00
Third 5.50:1.00
Fourth 4.75:1.00
2002 First 4.75:1.00
Second 4.75:1.00
Third 4.75:1.00
Fourth 4.25:1.00
2003 First 4.25:1.00
Second 4.25:1.00
Thereafter 4.00:1.00
7.7 RESTRICTION ON CERTAIN FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into any transaction of merger or consolidation, or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any part of its business,
property or assets, whether now owned or hereafter acquired, or make any
Acquisition, except:
(i) any Subsidiary of Borrower may be merged with or into
Borrower or any other Subsidiary of Borrower, and any Subsidiary of
Borrower may be liquidated, wound up or dissolved, or all or any part of
its business, property or assets (including capital stock of any Subsidiary
of Borrower) may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to Borrower or
any other Subsidiary of Borrower; PROVIDED that in the case of any such
merger involving Borrower, Borrower shall be the continuing or surviving
corporation;
(ii) Borrower and its Subsidiaries may make Acquisitions (by
merger or otherwise) so long as, prior to the consummation of any such
Acquisition, Borrower shall have delivered to Agents (a) financial
statements for Borrower and its Subsidiaries for the four Fiscal-Quarter
period most recently ended (the "PRO FORMA TEST PERIOD"), prepared on a pro
forma basis as if such Acquisition had been consummated on the first day of
the Pro Forma Test Period and giving effect to Borrower's good faith
estimate of any anticipated cost savings or increases as a result of the
consummation thereof, and (b) a pro forma Compliance Certificate
demonstrating that, on the basis of such pro forma financial statements,
Borrower would have been in compliance with all financial covenants set
forth in subsection 7.6 on the last day of the Pro Forma Test Period;
PROVIDED that, for
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Acquisitions consummated prior to the last day of the fourth Fiscal Quarter
of 1999, the requirements of subsection 7.6 in effect for the four
Fiscal-Quarter period ending on such date shall be deemed to be in effect
for the Pro Forma Test Period;
(iii) Borrower and its Subsidiaries may dispose of obsolete, worn
out or surplus property in the ordinary course of business and sell or
discount without recourse accounts receivable arising in the ordinary
course of business in connection with the compromise or collection thereof;
(iv) Borrower and its Subsidiaries may sell or otherwise dispose
of other assets in transactions that do not constitute Asset Sales;
(v) Borrower and its Subsidiaries may make Asset Sales of assets
having a fair value not in excess of $150,000,000 during the term of this
Agreement; PROVIDED that (w) the consideration received in each such Asset
Sale shall be in an amount at least equal to the fair value of the assets
being sold; (x) any non-cash consideration received by Borrower in respect
of any such Asset Sale in the form of Indebtedness of any Person in an
amount in excess of $5,000,000 shall be evidenced by a promissory note
which shall be pledged by Borrower to Administrative Agent pursuant to the
Master Pledge Agreement as security for the Obligations; and (y) the
proceeds of such Asset Sales shall be applied as required by subsection
2.4B(iii)(a); and
(vi) Investments permitted under subsection 7.3.
7.8 CONSOLIDATED CAPITAL EXPENDITURES.
Borrower shall not, and shall not permit its Subsidiaries to, make
or incur Consolidated Capital Expenditures in any Fiscal Year (the "CURRENT
FISCAL YEAR") in an aggregate amount in excess of an amount (the "MAXIMUM
CAPITAL EXPENDITURES AMOUNT" for the Current Fiscal Year) equal to (x) 10% of
Consolidated Gross Sales Revenues for the immediately preceding Fiscal Year PLUS
(y) the Consolidated Gross Sales Revenues Adjustment for the Current Fiscal
Year; PROVIDED that the Maximum Capital Expenditures Amount for any Fiscal Year
shall be increased by an amount equal to the excess, if any, of the Maximum
Capital Expenditures Amount for the previous Fiscal Year (prior to adjustment in
accordance with this proviso) over the actual amount of Consolidated Capital
Expenditures for such previous Fiscal Year.
7.9 AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS.
Borrower shall not, and shall not permit any of its Subsidiaries
to, amend or otherwise change any of the terms of any Subordinated Indebtedness
in a manner that would be adverse to Lenders in any material respect.
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SECTION 8. EVENTS OF DEFAULT
If any of the following conditions or events ("EVENTS OF DEFAULT")
shall occur:
8.1 FAILURE TO MAKE PAYMENTS WHEN DUE.
Failure by Borrower to pay:
(i) any installment of principal of any Loan when due from
Borrower, whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise;
(ii) failure by Borrower to pay when due any amount payable to an
Issuing Lender in reimbursement of any drawing under a Letter of Credit; or
(iii) failure by Borrower to pay any interest on any Loan or any
fee or any other amount due from Borrower under this Agreement, in each
case within five days after the date due; or
8.2 DEFAULT IN OTHER AGREEMENTS.
(i) Failure of Borrower or any of its Subsidiaries to pay when due
any principal of or interest on or any other amount payable in respect of one or
more items of Indebtedness (other than Indebtedness referred to in subsection
8.1) or Guarantee Obligations with an aggregate principal amount of $20,000,000
or more beyond the end of any grace or notice period provided therefor; or (ii)
breach or default by Borrower or any of its Subsidiaries with respect to any
other material term of (a) one or more items of Indebtedness or Guarantee
Obligations in the aggregate principal amount referred to in clause (i) above or
(b) any loan agreement, mortgage, indenture or other agreement relating to such
item(s) of Indebtedness or Guarantee Obligation(s), if such breach or default
continues after any applicable grace or notice period provided therefor and the
effect of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to
become or be declared due and payable prior to its stated maturity or the stated
maturity of any underlying obligation, as the case may be; or
8.3 BREACH OF CERTAIN COVENANTS.
Failure of Borrower to perform or comply with any term or condition
contained in subsection 6.1(vi)(a), Section 6.11 or Section 7; or
8.4 BREACH OF WARRANTY.
Any representation, warranty, certification or other statement made
by Borrower or any of its Subsidiaries in any Loan Document or in any statement
or certificate at any time given by Borrower or any of its Subsidiaries in
writing pursuant hereto or thereto or in
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connection herewith or therewith shall be false in any material respect on the
date as of which made; or
8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS.
Any Loan Party shall default in the performance of or compliance
with any term contained in this Agreement or any of the other Loan Documents,
other than any such term referred to in any other subsection of this Section 8,
and such default shall not have been remedied or waived within 30 days after
receipt by Borrower and such Loan Party of notice from either Agent or any
Lender of such default; or
8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Borrower or any of its Material
Subsidiaries in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect,
which decree or order is not stayed; or any other similar relief shall be
granted under any applicable federal, state or foreign law; or (ii) an
involuntary case shall be commenced against Borrower or any of its Material
Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency, dissolution, liquidation or similar law now or hereafter in effect;
or a decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over Borrower or any of its Material Subsidiaries,
or over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of Borrower or any of its Material Subsidiaries for
all or a substantial part of its property; or a warrant of attachment, execution
or similar process shall have been issued against any substantial part of the
property of Borrower or any of its Material Subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or
8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) Borrower or any of its Material Subsidiaries shall have an
order for relief entered with respect to it or commence a voluntary case under
the Bankruptcy Code or under any other applicable bankruptcy, insolvency,
dissolution, liquidation or similar law (whether federal, state or foreign) now
or hereafter in effect, or shall consent to the entry of an order for relief in
an involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, or shall consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property; or Borrower or any of its Material Subsidiaries shall make
any assignment for the benefit of creditors; or (ii) Borrower or any of its
Material Subsidiaries shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due; or the Board of Directors
of Borrower or any of its Material Subsidiaries (or any committee thereof) shall
adopt any resolution or otherwise authorize any action to approve any of the
actions referred to in clause (i) above or this clause (ii); or
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8.8 JUDGMENTS AND ATTACHMENTS.
Any money judgments, writs or warrants of attachment or similar
processes involving in the aggregate at any time an amount in excess of
$20,000,000 (to the extent such amount is not adequately covered by insurance as
to which the insurance company has not disputed coverage in writing) shall be
entered or filed against Borrower or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days; or
8.9 ERISA.
An ERISA Event shall occur with respect to a Pension Plan or
Multiemployer Plan; or
8.10 CHANGE OF CONTROL.
A Change of Control shall occur; or
8.11 MATERIAL INVALIDITY OF GUARANTIES; MATERIAL FAILURE OF SECURITY;
REPUDIATION OF OBLIGATIONS.
At any time after the execution and delivery thereof, (i) any
material provision of the Subsidiary Guaranty or any guaranty entered into by a
Subsidiary of Borrower pursuant to subsection 6.7B for any reason, other than
the satisfaction in full of all Obligations, shall cease to be in full force and
effect (other than in accordance with its terms) or shall be declared to be null
and void, in either case, as to any material portion of Subsidiary Guarantors
and other Subsidiaries guaranteeing the Obligations, with respect to the
Subsidiary Guaranty and any guaranty entered into pursuant to subsection 6.7B,
(ii) any Collateral Document shall cease to create a valid security interest in
the collateral purported to be covered thereby or shall cease to be in full
force and effect (other than by reason of a release of Collateral thereunder in
accordance with the terms hereof or thereof, the satisfaction in full of the
Obligations or any other termination of such Collateral Document in accordance
with the terms hereof or thereof), in each case to the extent the same affects a
material portion of the Collateral and in each case for any reason other than
any act or omission of either Agent or any Lender, or (iii) any Loan Party shall
deny in writing its obligations under any Loan Document to which it is a party:
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit), and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower, and the obligation of each Lender to
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make any Loan, the obligation of Administrative Agent to issue any Letter of
Credit and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate, and (ii) upon the occurrence and during the continuation of
any other Event of Default, Administrative Agent shall, upon the written request
or with the written consent of Requisite Lenders, by written notice to Borrower,
declare all or any portion of the amounts described in clauses (a) through (c)
above to be, and the same shall forthwith become, immediately due and payable,
and the obligation of each Lender to make any Loan, the obligation of
Administrative Agent to issue any Letter of Credit and the right of any Lender
to issue any Letter of Credit hereunder shall thereupon terminate; PROVIDED that
the foregoing shall not affect in any way the obligations of Lenders under
subsection 3.3C(i) or the obligations of Lenders to purchase participations in
any unpaid Swing Line Loans as provided in subsection 2.1A(iv).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be paid to Administrative Agent, for the benefit of
Lenders, and held by Administrative Agent, for the benefit of Lenders, as
collateral security for the Obligations of Borrower in respect of all
outstanding Letters of Credit, and Borrower hereby (X) grants to Administrative
Agent, for the benefit of Lenders, a security interest in all such amounts,
together with any interest accrued thereon and any Investments of such amounts,
as security for the Obligations, (Y) agrees to execute and deliver to
Administrative Agent all such documents and instruments as may be necessary or,
in the opinion of Administrative Agent, desirable in order to more fully
evidence, perfect or protect such security interest, and (Z) agrees that, upon
the honoring by any Issuing Bank of any drawing under a Letter of Credit issued
by it, Administrative Agent is authorized and directed to apply any amounts held
as collateral security in accordance with the terms of this paragraph to
reimburse such Issuing Lender for the amount of such drawing.
Notwithstanding anything contained in the second preceding
paragraph, if at any time within 60 days after an acceleration of the Loans
pursuant to clause (ii) of such paragraph Borrower shall pay all arrears of
interest and all payments on account of principal which shall have become due
otherwise than as a result of such acceleration (with interest on principal and,
to the extent permitted by law, on overdue interest, at the rates specified in
this Agreement) and all Events of Default and Potential Events of Default (other
than non-payment of the principal of and accrued interest on the Loans, in each
case which is due and payable solely by virtue of acceleration) shall be
remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by
written notice to Borrower, may at their option rescind and annul such
acceleration and its consequences; but such action shall not affect any
subsequent Event of Default or Potential Event of Default or impair any right
consequent thereon. The provisions of this paragraph are intended merely to
bind Lenders to a decision which may be made at the election of Requisite
Lenders and are not intended, directly or indirectly, to benefit Borrower, and
such provisions shall not at any time be construed so as to grant Borrower the
right to require Lenders to rescind or annul any acceleration hereunder or to
preclude Agents or Lenders from exercising any of the rights or remedies
available to them under any of the Loan Documents, even if the conditions set
forth in this paragraph are met.
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SECTION 9. AGENTS
9.1 APPOINTMENT OF AGENTS.
Fleet is hereby appointed Administrative Agent hereunder and under
the other Loan Documents and each Lender hereby authorizes Administrative Agent
to act as its administrative agent in accordance with the terms of this
Agreement and the other Loan Documents. DLJ is hereby appointed Syndication
Agent hereunder and under the other Loan Documents and each Lender hereby
authorizes Syndication Agent to act as its syndication agent in accordance with
the terms of this Agreement and the other Loan Documents. Each Agent agrees to
act upon the express conditions contained in this Agreement and the other Loan
Documents, as applicable. The provisions of this Section 9 are solely for the
benefit of Agents and Lenders and Borrower shall not have any rights as a third
party beneficiary of any of the provisions thereof. In performing their
functions and duties under this Agreement, Agents shall act solely as agents of
Lenders and do not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for Borrower or any of its
Subsidiaries. Documentation Agent shall not have any liability to any Person
under this Agreement except in its capacity as a Lender or, if applicable, an
Issuing Lender.
9.2 POWERS AND DUTIES; GENERAL IMMUNITY.
A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. Neither Agent shall have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon either Agent any obligations in respect of this Agreement or any of
the other Loan Documents except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Neither Agent shall be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
other Loan Document or for any representations, warranties, recitals or
statements made herein or therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by either Agent to Lenders or by or on
behalf of Borrower to either Agent or any Lender in connection with the Loan
Documents and the transactions contemplated thereby or for the financial
condition or business affairs of Borrower or any other Person liable for the
payment of any Obligations, nor shall either Agent be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements
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contained in any of the Loan Documents or to assure that the Collateral exists
or is owned by the Borrower or another Loan Party or is cared for, protected or
insured or that the Liens granted to the Administrative Agent herein or in any
other Loan Document or pursuant hereto or thereto have been properly or
sufficiently or lawfully created, perfected, protected, enforced, realized upon
or are entitled to any particular priority or as to the use of the proceeds of
the Loans or the use of the Letters of Credit or as to the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding, Administrative
Agent shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Letter of Credit Usage or the component amounts
thereof.
C. EXCULPATORY PROVISIONS. Neither Administrative Agent nor
Syndication Agent nor any of their respective officers, directors, employees or
agents shall be liable to Lenders for any action taken or omitted by such Agent
under or in connection with any of the Loan Documents except to the extent
solely caused by such Agent's gross negligence or willful misconduct. Each
Agent shall be entitled to refrain from any act or the taking of any action
(including the failure to take an action) in connection with this Agreement or
any of the other Loan Documents or from the exercise of any power, discretion or
authority vested in it hereunder or thereunder unless and until such Agent shall
have received instructions in respect thereof from Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6) and, upon receipt of such instructions from Requisite Lenders (or such
other Lenders, as the case may be), such Agent shall be entitled to act or
(where so instructed) refrain from acting, or to exercise such power, discretion
or authority, in accordance with such instructions. Without prejudice to the
generality of the foregoing, (i) each Agent shall be entitled to rely, and shall
be fully protected in relying, upon any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and shall be entitled to rely and shall be protected
in relying on opinions and judgments of attorneys (who may be attorneys for
Borrower and its Subsidiaries), accountants, experts and other professional
advisors selected by it; and (ii) no Lender shall have any right of action
whatsoever against either Agent as a result of such Agent acting or (where so
instructed) refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6).
D. AGENTS ENTITLED TO ACT AS LENDERS. The agency hereby created shall
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, either Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans and the Letters of
Credit, such Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not performing the duties and
functions delegated to it hereunder, and the term "Lender" or "Lenders" or any
similar term shall, unless the context clearly otherwise indicates, include each
Agent in its individual capacity. Each Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Borrower or any of its Affiliates as
if it were not performing the duties specified herein, and may accept fees and
other
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consideration from Borrower for services in connection with this Agreement and
otherwise without having to account for the same to Lenders.
9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Borrower and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Borrower and its Subsidiaries. Neither
Agent shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter, and neither Agent shall have any responsibility
with respect to the accuracy of or the completeness of any information provided
to Lenders.
9.4 RIGHT TO INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally agrees
to indemnify Administrative Agent, Documentation Agent and Syndication Agent to
the extent that such Person shall not have been reimbursed by Borrower, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including counsel fees and
disbursements) or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against such Person in exercising its
powers, rights and remedies or performing its duties hereunder or under the
other Loan Documents or otherwise in its capacity as Administrative Agent,
Documentation Agent or Syndication Agent, respectively, in any way relating to
or arising out of this Agreement or the other Loan Documents; PROVIDED that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the gross negligence or willful misconduct of the
indemnified Person. If any indemnity furnished to Administrative Agent,
Documentation Agent or Syndication Agent for any purpose shall, in the opinion
of such Person, be insufficient or become impaired, such Person may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
9.5 SUCCESSOR AGENTS AND SWING LINE LENDER.
A. SUCCESSOR AGENTS. Syndication Agent may resign as such upon
one Business Day's notice to Borrower and the Administrative Agent.
Administrative Agent may resign at any time by giving 30 days' prior written
notice thereof to all Lenders and Borrower, and Administrative Agent may be
removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Borrower and Administrative Agent and signed
by Requisite Lenders. Upon any such notice of resignation or any such removal,
Requisite Lenders
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shall have the right, upon five Business Days' notice to Borrower, to appoint a
successor Administrative Agent acceptable to Borrower (which acceptance shall
not be unreasonably withheld). Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed
Administrative Agent and the retiring or removed Administrative Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
B. SUCCESSOR SWING LINE LENDER. Any resignation or removal of
Administrative Agent pursuant to subsection 9.5A shall also constitute the
resignation or removal of Fleet or its successor as Swing Line Lender, and any
successor Administrative Agent appointed pursuant to subsection 9.5A shall, upon
its acceptance of such appointment, become the successor Swing Line Lender for
all purposes hereunder. In such event (i) Borrower shall prepay any outstanding
Swing Line Loans made by the retiring or removed Administrative Agent in its
capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or
removed Administrative Agent and Swing Line Lender shall surrender any Swing
Line Note held by it to Borrower for cancellation, and (iii) if so requested by
the successor Administrative Agent and Swing Line Lender in accordance with
subsection 2.1E, Borrower shall issue a new Swing Line Note to the successor
Administrative Agent and Swing Line Lender substantially in the form of EXHIBIT
VII annexed hereto, in the principal amount of the Swing Line Loan Commitment
then in effect and with other appropriate insertions.
9.6 COLLATERAL DOCUMENTS AND GUARANTIES.
Each Lender hereby further authorizes Administrative Agent, on
behalf of and for the benefit of Lenders, to enter into each Collateral Document
as secured party and to be the agent for and representative of Lenders under the
Guaranties, and each Lender agrees to be bound by the terms of each Collateral
Document and each Guaranty; PROVIDED that Administrative Agent shall not (i)
enter into or consent to any material amendment, modification, termination or
waiver of any provision contained in any Collateral Document or the Guaranties
or (ii) release any Collateral (except as otherwise expressly permitted or
required pursuant to the terms of this Agreement or the applicable Collateral
Document), in each case without the prior consent of Requisite Lenders (or such
other Lenders as may be required to give such instructions under subsection
10.6); PROVIDED FURTHER, HOWEVER, that, without further written consent or
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted by this
Agreement or to which Requisite Lenders have otherwise consented or (b) release
any Subsidiary from its Guaranty if all of the capital stock (or other
equivalent equity interest) of such Subsidiary is sold to any Person (other than
an Affiliate of Borrower) pursuant to a sale or other disposition permitted
hereunder or to which Requisite Lenders have otherwise consented. Anything
contained in any of the Loan Documents to the
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contrary notwithstanding, Borrower, Administrative Agent and each Lender hereby
agree that (X) no Lender shall have any right individually to realize upon any
of the Collateral under any Collateral Document or to enforce the Guaranties, it
being understood and agreed that all powers, rights and remedies under the
Collateral Documents and the Guaranties may be exercised solely by
Administrative Agent for the benefit of Lenders in accordance with the terms
thereof, and (Y) in the event of a foreclosure by Administrative Agent on any of
the Collateral pursuant to a public or private sale, Administrative Agent or any
Lender may be the purchaser of any or all of such Collateral at any such sale
and Administrative Agent, as agent for and representative of Lenders (but not
any Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Administrative Agent at such sale.
SECTION 10. MISCELLANEOUS
10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
A. GENERAL. Subject to subsection 10.1B, each Lender shall have the
right at any time (i) to sell, assign or transfer to any Eligible Assignee, or
(ii) to sell participations to any Person in, all or any part of its Commitments
or any Loan or Loans made by it or its Letters of Credit or participations
therein or any other interest herein or in any other Obligations owed to it;
PROVIDED that no such sale, assignment, transfer or participation shall, without
the consent of Borrower, require Borrower to file a registration statement with
the SEC or apply to qualify such sale, assignment, transfer or participation
under the securities laws of any state; PROVIDED FURTHER that no such sale,
assignment or transfer described in clause (i) above shall be effective unless
and until an Assignment Agreement effecting such sale, assignment or transfer
shall have been accepted by Agents and recorded in the Register as provided in
subsection 10.1B(ii); PROVIDED FURTHER that no such sale, assignment, transfer
or participation of any Letter of Credit or any participation therein may be
made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Lender effecting such sale, assignment, transfer or participation; and
PROVIDED FURTHER that anything contained herein to the contrary notwithstanding,
the Swing Line Loan Commitment and the Swing Line Loans of Swing Line Lender may
not be sold, assigned or transferred as described in clause (i) above to any
Person other than a successor Administrative Agent and Swing Line Lender to the
extent contemplated by subsection 9.5. Except as otherwise provided in this
subsection 10.1, no Lender shall, as between Borrower and such Lender, be
relieved of any of its obligations hereunder as a result of any sale, assignment
or transfer of, or any granting of participations in, all or any part of its
Commitments or the Loans, the Letters of Credit or participations therein, or
the other Obligations owed to such Lender.
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B. ASSIGNMENTS.
(i) AMOUNTS AND TERMS OF ASSIGNMENTS. Each Commitment, Loan,
Letter of Credit or participation therein, or other Obligation may (a) be
assigned in a minimum amount of $1,000,000 to another Lender, to an
Affiliate of the assigning Lender or another Lender, or, with respect to
any Lender that is an investment fund that invests in commercial loans, any
other investment fund that invests in commercial loans and that is managed
by the same investment advisor as such Lender or by an Affiliate of such
investment advisor, with the giving of notice to Borrower and Agents or (b)
be assigned in an aggregate amount of not less than $5,000,000 (or such
lesser amount as shall constitute the aggregate amount of the Commitments,
Loans, Letters of Credit and participations therein, and other Obligations
of the assigning Lender) to any other Eligible Assignee with the consent of
Borrower and Agents (which consent of Borrower and Agents shall not be
unreasonably withheld or delayed, and in the case of any assignment by a
Lender that is an Agent or an Affiliate thereof, which consent of the
Agents shall not be required); PROVIDED, that the consent of Borrower shall
not be required for any assignment that occurs at any time when an Event of
Default under subsection 8.6 or 8.7 shall have occurred and be continuing.
To the extent of any such assignment in accordance with either clause (a)
or (b) above, the assigning Lender shall be relieved of its obligations
with respect to its Commitments, Loans, Letters of Credit or participations
therein, or other Obligations or the portion thereof so assigned. The
parties to each such assignment shall execute and deliver to Administrative
Agent, for its acceptance and recording in the Register, an Assignment
Agreement, together with a processing and recordation fee of $2,500 and
such forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Administrative Agent
pursuant to subsection 2.7B(iv)(a). Upon such execution, delivery,
acceptance and recordation, from and after the effective date specified in
such Assignment Agreement, (y) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment Agreement, shall have the rights
and obligations of a Lender hereunder and (z) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment Agreement, relinquish its
rights (other than any rights which survive the termination of this
Agreement under subsection 10.8B) and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement covering
all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party
hereto; PROVIDED that, anything contained in any of the Loan Documents to
the contrary notwithstanding, if such Lender is the Issuing Lender with
respect to any outstanding Letters of Credit such Lender shall continue to
have all rights and obligations of an Issuing Lender with respect to such
Letters of Credit until the cancellation or expiration of such Letters of
Credit and the reimbursement of any amounts drawn thereunder). The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of any Notes
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hereunder, the assigning Lender shall, at the time of assignment, surrender
its applicable Notes, if any, to Administrative Agent for cancellation, and
thereupon new Notes shall, if so requested by the assignee and/or the
assigning Lender in accordance with subsection 2.1E, be issued to the
assignee and to the assigning Lender, substantially in the form of EXHIBIT
IV, EXHIBIT V, EXHIBIT VI or EXHIBIT VII annexed hereto, as the case may
be, with appropriate insertions, to reflect the new Commitments and/or
outstanding Tranche A Term Loans and/or Tranche B Term Loans, as the case
may be, of the assignee and the assigning Lender.
(ii) ACCEPTANCE BY ADMINISTRATIVE AGENT; RECORDATION IN REGISTER.
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the processing and recordation fee referred to in subsection 10.1B(i) and
any forms, certificates or other evidence with respect to United States
federal income tax withholding matters that such assignee may be required
to deliver to Administrative Agent pursuant to subsection 2.7B(iv)(a), and
with respect to a Loan evidenced by a Note, surrender of the Note
evidencing such Loan for cancellation, Administrative Agent shall, if
Agents and Borrower have consented to the assignment evidenced thereby (in
each case to the extent such consent is required pursuant to subsection
10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart
thereof as provided therein (which acceptance shall evidence any required
consent of Administrative Agent to such assignment), (b) record the
information contained therein in the Register, and (c) give prompt notice
thereof to Borrower and Syndication Agent. Administrative Agent shall
maintain a copy of each Assignment Agreement delivered to and accepted by
it as provided in this subsection 10.1B(ii).
C. PARTICIPATIONS. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of any
Loan allocated to such participation or (ii) a reduction of the principal amount
of or the rate of interest payable on any Loan allocated to such participation
or a reduction of the fee payable in respect of any Letter of Credit allocated
to such participation or a reduction of any commitment fee in respect of any
Commitment allocated to such participation, and all amounts payable by Borrower
hereunder (including amounts payable to such Lender pursuant to subsections
2.6D, 2.7 and 3.6) shall be determined as if such Lender had not sold such
participation. Borrower and each Lender hereby acknowledge and agree that,
solely for purposes of subsections 10.4 and 10.5, (a) any participation will
give rise to a direct obligation of Borrower to the participant and (b) the
participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS AND FUND TRUSTEES. In
addition to the assignments and participations permitted under the foregoing
provisions of this subsection 10.1, any Lender may assign and pledge all or any
portion of its Loans, the other Obligations owed to such Lender, and its Notes
to any Federal Reserve Bank as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank and with the consent of Borrower and Agents,
any
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Lender which is an investment fund may pledge all or any portion of its Notes or
Loans to its trustee in support of its obligations to its trustee; PROVIDED that
(i) no Lender shall, as between Borrower and such Lender or between any Agent
and such Lender, be relieved of any of its obligations hereunder as a result of
any such assignment and pledge and (ii) in no event shall such Federal Reserve
Bank be considered to be a "Lender" or be entitled to require the assigning
Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Borrower and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.18.
F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 10.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
10.2 EXPENSES.
Subject to the making of the Term Loans to Borrower by Tranche A Term
Lenders and Tranche B Term Lenders on the Closing Date, and whether or not the
other transactions contemplated hereby shall be consummated, Borrower agrees to
pay promptly (i) all the actual and reasonable costs and expenses of preparation
of the Loan Documents and any consents, amendments, waivers or other
modifications thereto; (ii) all the costs of furnishing all opinions by counsel
for Borrower (including any opinions requested by Lenders as to any legal
matters arising hereunder) and of Borrower's performance of and compliance with
all agreements and conditions on its part to be performed or complied with under
this Agreement and the other Loan Documents including with respect to confirming
compliance with environmental, insurance and solvency requirements; (iii) the
reasonable fees, expenses and disbursements of counsel to Agents (including
allocated costs of internal counsel) in connection with the negotiation,
preparation, execution and administration of the Loan Documents and any
consents, amendments, waivers or other modifications thereto and any other
documents or matters requested by Borrower; (iv) all the actual costs and
reasonable expenses of creating and perfecting Liens in favor of Administrative
Agent on behalf of Lenders pursuant to any Collateral Document, including filing
fees, expenses and taxes, stamp or documentary taxes, search fees and reasonable
fees, expenses and disbursements of counsel to Agents; (v) all the actual costs
and reasonable expenses (including the reasonable fees, expenses and
disbursements of any environmental consultants retained by Agents or its
counsel) of obtaining and reviewing
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any environmental audits or reports provided for on or before the Closing Date;
(vi) all the actual costs and reasonable expenses of the custody or preservation
of any of the Collateral; (vii) all other actual and reasonable costs and
expenses incurred by Syndication Agent, Documentation Agent and Administrative
Agent in connection with the syndication of the Commitments and the negotiation,
preparation and execution of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and the transactions contemplated
thereby; and (viii) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees and costs of settlement, incurred
by Agents and each Lender in enforcing any Obligations of or in collecting any
payments due from any Loan Party hereunder or under the other Loan Documents by
reason of such Event of Default (including in connection with the sale of,
collection from, or other realization upon any of the Collateral or the
enforcement of the Guaranties) or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings.
10.3 INDEMNITY.
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Borrower agrees to defend (subject to Indemnitees' selection of counsel),
indemnify, pay and hold harmless Administrative Agent, Syndication Agent,
Documentation Agent and each Lender, and the officers, directors, employees,
trustees, partners, agents and affiliates of Administrative Agent, Syndication
Agent, Documentation Agent and each Lender (collectively called the
"INDEMNITEES"), from and against any and all Indemnified Liabilities (as
hereinafter defined); PROVIDED that Borrower shall not have any obligation to
any Indemnitee hereunder with respect to any Indemnified Liabilities to the
extent such Indemnified Liabilities arise solely from the gross negligence or
willful misconduct of that Indemnitee as determined by a final judgment of a
court of competent jurisdiction.
As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the reasonable fees and disbursements of counsel
for Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto, and any
fees or expenses incurred by Indemnitees in enforcing this indemnity), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including securities and
commercial laws, statutes, rules or regulations and Environmental Laws), on
common law or equitable cause or on contract or otherwise, that may be imposed
on, incurred by, or asserted against any such Indemnitee, in any manner relating
to or arising out of (i) this Agreement or the other Loan Documents or the
Related Agreements or the transactions contemplated hereby or thereby (including
Lenders' agreement to make the Loans hereunder or the use or intended use of the
proceeds thereof or the issuance of Letters of Credit hereunder or the use or
intended use of any thereof, or any enforcement of any of the Loan Documents
(including any sale of, collection
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from, or other realization upon any of the Collateral or the enforcement of the
Guaranties), (ii) the statements contained in the commitment letter delivered by
any Lender to Borrower with respect thereto, or (iii) any Environmental Claim or
any Hazardous Materials relating to or arising from, directly or indirectly, any
past or present activity, operation, land ownership, or practice of Borrower or
any of its Subsidiaries.
To the extent that the undertakings to defend, indemnify, pay and
hold harmless set forth in this subsection 10.3 may be unenforceable in whole or
in part because they are violative of any law or public policy, Borrower shall
contribute the maximum portion that it is permitted to pay and satisfy under
applicable law to the payment and satisfaction of all Indemnified Liabilities
incurred by Indemnitees or any of them.
10.4 SET-OFF.
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default each Lender is hereby authorized by Borrower at any time or
from time to time, without notice to Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, including Indebtedness evidenced by
certificates of deposit, whether matured or unmatured, but not including trust
accounts) and any other Indebtedness at any time held or owing by that Lender to
or for the credit or the account of Borrower against and on account of any
obligations and liabilities of Borrower then due and payable to that Lender
under this Agreement, the Letters of Credit and participations therein and the
other Loan Documents, irrespective of whether or not that Lender shall have made
any demand for payment thereof.
10.5 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "AGGREGATE
AMOUNTS DUE" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
each Agent and each other Lender of the receipt of such payment and (ii) apply a
portion of such payment to purchase participations (which it shall be deemed to
have purchased from each seller of a participation simultaneously upon the
receipt by such seller of its portion of such payment) in the Aggregate Amounts
Due to the other Lenders so that all such recoveries of Aggregate Amounts Due
shall be shared by all Lenders in proportion to the Aggregate Amounts Due to
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them; PROVIDED that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered from such Lender upon
the bankruptcy or reorganization of Borrower or otherwise, those purchases shall
be rescinded and the purchase prices paid for such participations shall be
returned to such purchasing Lender ratably to the extent of such recovery, but
without interest. Borrower expressly consents to the foregoing arrangement and
agrees that any holder of a participation so purchased may exercise any and all
rights of banker's lien, set-off or counterclaim with respect to any and all
monies owing by Borrower to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
10.6 AMENDMENTS AND WAIVERS.
A. No amendment, modification, termination or waiver of any
provision of the Loan Documents, or consent to any departure by Borrower
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; PROVIDED that no such amendment, modification, termination,
waiver or consent shall, without the consent of each Lender (with Obligations
directly affected in the case of the following clause (i)): (i) extend the
scheduled final maturity of any Loan or Note, or extend the stated expiration
date of any Letter of Credit beyond the Revolving Loan Commitment Termination
Date, or reduce the rate of interest on any Loan (other than any waiver of any
increase in the interest rate applicable to any Loan pursuant to subsection
2.2E) or any commitment fees or letter of credit fees payable hereunder, or
extend the time for payment of any such interest or fees, or reduce the
principal amount of any Loan or any reimbursement obligation in respect of any
Letter of Credit, (ii) amend, modify, terminate or waive any provision of this
subsection 10.6, (iii) reduce the percentage specified in the definition of
"Requisite Lenders" (it being understood that, with the consent of Requisite
Lenders, additional extensions of credit pursuant to this Agreement may be
included in the determination of "Requisite Lenders" on substantially the same
basis as the Term Loans, the Revolving Loan Commitments and the Revolving Loans
are included on the Closing Date) or (iv) consent to the assignment or transfer
by Borrower of any of its rights and obligations under this Agreement; PROVIDED,
FURTHER that no such amendment, modification, termination or waiver shall (1)
increase the Commitments of any Lender over the amount thereof then in effect
without the consent of such Lender (it being understood that no amendment,
modification or waiver of any condition precedent, covenant, Potential Event of
Default or Event of Default shall constitute an increase in the Commitment of
any Lender, and that no increase in the available portion of any Commitment of
any Lender shall constitute an increase in such Commitment of such Lender); (2)
amend, modify, terminate or waive any provision of subsection 2.1A(iv) or any
other provision of this Agreement relating to the Swing Line Loan Commitment or
the Swing Line Loans without the consent of Swing Line Lender; (3) amend the
definition of "Supermajority Class Lenders" without the consent of the
Supermajority Class Lenders of each Class, or release all or substantially all
of the Collateral or all or substantially all of the Subsidiary Guarantors from
the Subsidiary Guaranty except as expressly provided in the Loan Documents,
without the consent of the Supermajority Class Lenders of each Class, (4) amend
the definition of "Requisite Class Lenders" without the consent of Requisite
Class Lenders of each Class, or alter the required application of any repayments
or prepayments as
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between Classes pursuant to subsection 2.4B(iv) without the consent of Requisite
Class Lenders of each Class which is being allocated a lesser repayment or
prepayment as a result thereof (although Requisite Lenders may waive, in whole
or in part, any mandatory prepayment so long as the application, as between
Classes, of any portion of such prepayment which is still required to be made is
not altered); (5) without the consent of Requisite Class Lenders of the
respective Class, waive, reduce or postpone any scheduled repayment (other than
the repayment scheduled on the scheduled final maturity date of any Loan or
Note) set forth in subsection 2.4A(i) or 2.4A(ii) with respect to the applicable
Term Loans of such affected Class; (6) amend, modify, terminate or waive any
obligation of Lenders relating to the purchase of participations in Letters of
Credit as provided in subsection 3.1C without the written concurrence of
Administrative Agent and of each Issuing Lender which has a Letter of Credit
then outstanding or which has not been reimbursed for a drawing under a Letter
of Credit issued it; or (7) amend, modify, terminate or waive any provision of
Section 9 as the same applies to Administrative Agent, or any other provision of
this Agreement as the same applies to the rights or obligations of
Administrative Agent, in each case without the consent of Administrative Agent;
PROVIDED, FURTHER, that at any time that no Potential Event of Default or Event
of Default has occurred and is continuing, the Revolving Loan Commitment of any
Lender may be increased, with the consent of such Lender and the Borrower and
without the consent of the Requisite Lenders, (x) so long as (I) the Increased
Commitment Amount (as defined below) at such time, when added to the amount of
Indebtedness permitted pursuant to subsection 7.1(x)(b) and outstanding at such
time, does not exceed the limits set forth therein, (II) the capital stock (or
other equivalent equity interest) of such Person (which Person shall become a
direct Domestic Subsidiary of Borrower in connection with the Acquisition
referred to therein) whose Indebtedness is permitted to remain outstanding under
subsection 7.1(x)(b) shall be pledged by Borrower in accordance with subsection
6.7A, and (III) such Person shall execute and deliver to Administrative Agent a
supplement to the Subsidiary Guaranty in accordance with subsection 6.7A, and
(y) to the extent determined by the Administrative Agent to be necessary to
ensure pro rata borrowings commencing with the initial borrowing after giving
effect to such increase, the Borrower shall prepay any LIBOR Loans outstanding
immediately prior to such initial borrowing; as used herein, the "INCREASED
COMMITMENT AMOUNT" means at any time, the aggregate amount of all increases
pursuant to this PROVISO made at or prior to such time less the aggregate amount
of all reductions of the Revolving Loan Commitments made prior to such time.
B. Administrative Agent may, but shall have no obligation to,
with the concurrence of any Lender, execute amendments, modifications, waivers
or consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 10.6 shall be binding upon each Lender at the time
outstanding, each future Lender and Borrower, if signed by Borrower.
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10.7 NOTICES.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; PROVIDED that notices to either Agent shall not be
effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof or (i) as to Borrower and each Agent, such other address as shall be
designated by such Person in a written notice delivered to the other parties
hereto and (ii) as to each other party, such other address as shall be
designated by such party in a written notice delivered to Administrative Agent.
10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
A. All representations, warranties and agreements made herein
shall survive the execution and delivery of this Agreement and the making of the
Loans and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Borrower set forth in subsections 2.6D, 2.7,
3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in
subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn thereunder, and the termination of this Agreement.
10.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of any Agent or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
10.10 MARSHALLING; PAYMENTS SET ASIDE.
Neither Administrative Agent, nor Syndication Agent nor any Lender
shall be under any obligation to marshal any assets in favor of Borrower or any
other party or against or in payment of any or all of the Obligations. To the
extent that Borrower makes a payment or payments to either Agent or Lenders (or
to either Agent for the benefit of Lenders), or either Agent or Lenders enforce
any security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
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subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
10.11 SEVERABILITY.
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.12 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS.
The obligations of Lenders hereunder are several and no Lender
shall be responsible for the obligations or Commitments of any other Lender
hereunder. Nothing contained herein or in any other Loan Document, and no
action taken by Lenders pursuant hereto or thereto, shall be deemed to
constitute Lenders as a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.
10.13 HEADINGS.
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.14 APPLICABLE LAW.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
10.15 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and
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assigns of Lenders (it being understood that Lenders' rights of assignment are
subject to subsection 10.1). Borrower's rights or obligations hereunder or
under the other Loan Documents or any interest therein may not be assigned or
delegated by Borrower without the prior written consent of all Lenders.
10.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND
DELIVERING THIS AGREEMENT, BORROWER, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO BORROWER AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.7;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER BORROWER IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST BORROWER IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.16 RELATING
TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST
EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR
OTHERWISE.
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10.17 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS AMONG THEM
RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.17 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
10.18 CONFIDENTIALITY.
Each Lender shall hold all non-public information obtained pursuant
to the requirements of this Agreement which has been identified as confidential
by Borrower in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, it being understood and agreed by Borrower that in any event
a Lender may make disclosures to Affiliates of such Lender or disclosures
reasonably required by any bona fide assignee, transferee or participant in
connection with the contemplated assignment or transfer by such Lender of any
Loans or any participations therein or disclosures required or requested by any
governmental agency or representative thereof, or the National Association of
Insurance Commissioners (the "NAIC") or any other Person with the prior written
consent of Borrower and Agents in the exercise of their respective sole
discretion or pursuant to legal process; PROVIDED that, unless specifically
prohibited by applicable law or court order, each Lender shall notify Borrower
of any request by any governmental agency or representative thereof or the NAIC
(other than any such request in connection with any examination of the financial
condition of such Lender by such governmental agency or the NAIC) for disclosure
of any such non-public information prior to disclosure of
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such information; and PROVIDED, FURTHER that in no event shall any Lender be
obligated or required to return any materials furnished by Borrower or any of
its Subsidiaries.
10.19 COUNTERPARTS; EFFECTIVENESS.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by Borrower and
Agents of written or telephonic notification of such execution and authorization
of delivery thereof.
10.20 OTHER TRANSACTIONS.
Nothing contained herein shall preclude the Administrative Agent,
the Syndication Agent, the Documentation Agent, any Issuing Lender or any other
Lender from engaging in any transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with Borrower or any of its
Affiliates in which Borrower or such Affiliate is not restricted hereby from
engaging with any other Person.
10.21. ENTIRE AGREEMENT.
This Agreement, together with the other Loan Documents and the Fee
Letters, embodies the entire agreement and understanding among Borrower, Lenders
and Agents, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
THE BOYDS COLLECTION, LTD.
By: /s/ Christine Bell
------------------------------
Name: Christine Bell
Title: Chief Operating Officer
Notice Address: 350 South Street
McSherrystown, PA 17344
Attention: Gary Lowenthal
Facsimile: 717-633-1188
AGENTS:
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent
By: /s/ Harold J. Philipps
------------------------------
Name: Harold J. Philipps
Title: Managing Director
Notice Address: 277 Park Avenue
New York, NY 10172
Attention: Diane Albanese
Facsimile: 212-892-7272
S-1
<PAGE>
FLEET NATIONAL BANK,
as Administrative Agent
By: /s/ Alex Saole
------------------------------
Name: Alex Saole
Title: Director
Notice Address: One Federal Street
Third Floor
Boston, MA 02211
Attention: Kerry McElhiney
Facsimile: 617-346-5093
THE FUJI BANK, LIMITED,
NEW YORK BRANCH,
as Documentation Agent
By: /s/ Teiji Teramoto
------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
Notice Address: Two World Trade Center
79th Floor
New York, NY 10048
Attention: Teiji Teramoto
Facsimile: 212-898-2398
S-2
<PAGE>
LENDERS:
DLJ CAPITAL FUNDING, INC.
By: /s/ Harold J. Philipps
------------------------------
Name: Harold J. Philipps
Title: Managing Director
Notice Address: 277 Park Avenue
New York, NY 10172
Attention: Diane Albanese
Facsimile: 212-892-6031
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ Teiji Teramoto
------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
Notice Address: Two World Trade Center
79th Floor
New York, NY 10048
Attention: Teiji Teramoto
Facsimile: 212-898-2398
S-3
<PAGE>
LENDERS:
FLEET NATIONAL BANK
By: /s/ Alex Saole
------------------------------
Name: Alex Saole
Title: Director
Notice Address: One Federal Street
Third Floor
Boston, MA 02211
Attention: Kerry McElhiney
Facsimile: 617-346-5093
S-4
<PAGE>
Exhibit 10.3
1998 OPTION PLAN
FOR KEY EMPLOYEES OF
THE BOYDS COLLECTION, LTD.
1. PURPOSE OF PLAN
The 1998 Option Plan for Key Employees of The Boyds Collection, Ltd.
and Subsidiaries (the "Plan") is designed:
(a) to promote the long term financial interests and growth of The Boyds
Collection, Ltd. (the "Company") and its subsidiaries by attracting and
retaining management personnel with the training, experience and ability to
enable them to make a substantial contribution to the success of the Company's
business;
(b) to motivate management personnel by means of growth-related incentives
to achieve long range goals; and
(c) to further the alignment of interests of participants with those of the
stockholders of the Company through opportunities for increased stock, or
stock-based, ownership in the Company.
2. DEFINITIONS
As used in the Plan, the following words shall have the following
meanings:
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board of
Directors.
(d) "Common Stock" or "Share" means Common Stock of the Company which
may be authorized but unissued, or issued and reacquired.
(e) "Employee" means a person, including an officer, in the regular
full-time employment of the Company or one of its Subsidiaries who, in the
opinion of the Committee, is, or is expected to be, primarily responsible for
the management, growth or protection of some part or all of the business of the
Company.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
(g) "Fair Market Value" means such value of a Share as reported
for stock exchange transactions and/or determined in accordance with any
applicable resolutions or regulations of the Committee in effect at the
relevant time.
(h) "Management Stockholder's Agreement" means an agreement
between the Company and a Participant that sets forth the terms and
conditions and limitations applicable to any Shares purchased pursuant to
Options granted under this Plan.
(i) "Option Agreement" means an agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
a grant of Options pursuant to the Plan.
(j) "Option" means an option to purchase shares of the Common Stock
which will not be an "incentive stock option" (within the meaning of Section 422
of the Code).
(k) "Participant" means an Employee, or other person having a
relationship with the Company or one of its Subsidiaries, to whom one or more
grants of Options have been made and such grants have not all been forfeited or
terminated under the Plan.
(l) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group of
commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
3. ADMINISTRATION OF PLAN
(a) The Plan shall be administered by the Committee. The members of
the Committee shall qualify to administer the Plan for purposes of Rule 16b-3
(and any other applicable rule) promulgated under Section 16(b) of the Exchange
Act to the extent that the Company is subject to such rule. The Committee may
adopt its own rules of procedure, and action of a majority of the members of the
Committee taken at a meeting, or action taken without a meeting by unanimous
written consent, shall constitute action by the Committee. The Committee shall
have the power and authority to administer, construe and interpret the Plan, to
make rules for carrying it out and to make changes in such rules. Any such
interpretations, rules and administration shall be consistent with the basic
purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and
to other senior officers of the Company its duties under the Plan subject to
such conditions and limitations as the Committee shall prescribe except that
only the Committee may designate and make Option grants to Participants who are
subject to Section 16 of the Exchange Act.
(c) The Committee may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company, and the
officers and directors of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Participants, the Company and all
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other interested persons. No member of the Committee shall be personally liable
for any action, determination or interpretation made in good faith with respect
to the Plan or Option grants, and all members of the Committee shall be fully
protected by the Company with respect to any such action, determination or
interpretation.
4. ELIGIBILITY
The Committee may from time to time make Option grants under the Plan
to such Employees, or other persons having a relationship with Company or any of
its Subsidiaries, and in such form and having such terms, conditions and
limitations as the Committee may determine. Options may be granted singly, in
combination or in tandem. The terms, conditions and limitations of each Option
grant under the Plan shall be set forth in an Option Agreement, in a form
approved by the Committee, consistent, however, with the terms of the Plan and
the Management Stockholder's Agreement.
5. GRANTS
From time to time, the Committee, in its sole discretion, will
determine the forms and amounts of Options to be granted to Participants. At the
time of an Option grant, the Committee shall determine, and shall include in the
Option Agreement or other Plan rules, the option exercise period, the option
price, and such other conditions or restrictions on the grant or exercise of the
Option as the Committee deems appropriate. In addition to other restrictions
contained in the Plan, an Option granted under this Paragraph 5, (i) may not be
exercised more than 10 years after the date it is granted and (ii) may not have
an option exercise price less than 50% of the Fair Market Value of Common Stock
on the date the Option is granted. Payment of the option price shall be made in
cash or in shares of Common Stock, or a combination thereof, in accordance with
the terms of the Plan, the Option Agreement and of any applicable guidelines of
the Committee in effect at the time.
Options may be granted prior to the effective date of the Plan (as
determined pursuant to Paragraph 13 herein); provided, however, that no Option
shall be exercisable prior to the date of the approval of the Plan by the
stockholders of the Company.
6. LIMITATIONS AND CONDITIONS
(a) The number of Shares available under this Plan shall be 2,000,000
shares of the authorized Common Stock as of the effective date of the Plan. The
number of Shares subject to Options under this Plan to any one Participant shall
not be more than 500,000 Shares. Unless restricted by applicable law, Shares
related to Options that are forfeited, terminated, cancelled or expire
unexercised, shall immediately become available to be subject to Option grants.
(b) No Options shall be granted under the Plan beyond ten years after
the effective date of the Plan, but the terms of Options granted on or before
the expiration of the Plan may extend beyond such expiration. At the time an
Option is granted or amended or the terms or
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conditions of an Option are changed, the Committee may provide for limitations
or conditions on such grant or purchase consistent with the terms of the
Management Stockholder's Agreement.
(c) Nothing contained herein shall affect the right of the Company to
terminate any Participant's employment at any time or for any reason.
(d) Other than as specifically provided with regard to the death of a
Participant, no benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to do so shall be void. No such benefit shall, prior to
receipt thereof by the Participant, be in any manner liable for or subject to
the debts, contracts, liabilities, engagements, or torts of the Participant.
(e) Participants shall not be, and shall not have any of the rights
or privileges of, stockholders of the Company in respect of any Shares
purchasable in connection with any Option grant unless and until certificates
representing any such Shares have been issued by the Company to such
Participants.
(f) No election as to benefits or exercise of Options may be made
during a Participant's lifetime by anyone other than the Participant except by a
legal representative appointed for or by the Participant.
(g) Absent express provisions to the contrary, any grant of Options
under this Plan shall not be deemed compensation for purposes of computing
benefits or contributions under any retirement plan of the Company or its
Subsidiaries and shall not affect any benefits under any other benefit plan of
any kind now or subsequently in effect under which the availability or amount of
benefits is related to level of compensation. This Plan is not a "Retirement
Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of
1974, as amended.
(h) Unless the Committee determines otherwise, no benefit or promise
under the Plan shall be secured by any specific assets of the Company or any of
its Subsidiaries, nor shall any assets of the Company or any of its Subsidiaries
be designated as attributable or allocated to the satisfaction of the Company's
obligations under the Plan.
7. TRANSFERS AND LEAVES OF ABSENCE
For purposes of the Plan, unless the Committee determines otherwise:
(a) a transfer of a Participant's employment without an intervening period of
separation among the Company and any Subsidiary shall not be deemed a
termination of employment, and (b) a Participant who is granted in writing a
leave of absence shall be deemed to have remained in the employ of the Company
during such leave of absence.
8. ADJUSTMENTS
In the event of any change in the outstanding Common Stock by reason of a
stock split, spin-off, stock dividend, stock combination or reclassification,
recapitalization or merger, change
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of control, or similar event, the Committee may adjust appropriately the number
of Shares subject to the Plan and available for or covered by Option grants and
exercise prices related to outstanding Option grants and make such other
revisions to outstanding Option grants as it deems are equitably required.
9. MERGER, CONSOLIDATION, EXCHANGE, ACQUISITION, LIQUIDATION OR DISSOLUTION
In its absolute discretion, and on such terms and conditions as it
deems appropriate, coincident with or after the grant of any Option, the
Committee may provide that such Option cannot be exercised after the merger or
consolidation of the Company into another corporation, the exchange of all or
substantially all of the assets of the Company for the securities of another
corporation, the acquisition by another corporation of 80% or more of the
Company's then outstanding shares of voting stock or the recapitalization,
reclassification, liquidation or dissolution of the Company (a "Transaction"),
and if the Committee so provides, it shall, on such terms and conditions as it
deems appropriate, also provide, either by the terms of such Option or by a
resolution adopted prior to the occurrence of such Transaction, that, for some
reasonable period of time prior to such Transaction, such Option shall be
exercisable as to all Shares subject thereto, notwithstanding anything to the
contrary herein (but subject to the provisions of Paragraph 6(b)) and that, upon
the occurrence of such event, such Option shall terminate and be of no further
force or effect; provided, however, that the Committee may also provide, in its
absolute discretion, that even if the Option shall remain exercisable after any
such event, from and after such event, any such Option shall be exercisable only
for the kind and amount of securities and/or other property, or the cash
equivalent thereof, receivable as a result of such event by the holder of a
number of shares of stock for which such Option could have been exercised
immediately prior to such event.
10. AMENDMENT AND TERMINATION
The Committee shall have the authority to make such amendments to any
terms and conditions applicable to outstanding Option grants as are consistent
with this Plan provided that, except for adjustments under Paragraph 8 or 9
hereof, no such action shall modify such Option grant in a manner adverse to the
Participant without the Participant's consent except as such modification is
provided for or contemplated in the terms of the Option grant.
The Board of Directors may amend, suspend or terminate the Plan except
that no such action, other than an action under Paragraph 8 or 9 hereof, may be
taken which would, without shareholder approval, increase the aggregate number
of Shares subject to Options under the Plan, decrease the exercise price of
outstanding Options, change the requirements relating to the Committee or extend
the term of the Plan.
11. FOREIGN OPTIONS AND RIGHTS
The Committee may grant Options to Employees who are subject
to the laws of nations other than the United States, which Option grants may
have terms and conditions that differ from the terms thereof as provided
elsewhere in the Plan for the purpose of complying with foreign laws.
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12. WITHHOLDING TAXES
The Company shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes required by law
to be withheld with respect to such payment. It shall be a condition to the
obligation of the Company to deliver Shares upon the exercise of an Option that
the Participant pay to the Company such amount as may be requested by the
Company for the purpose of satisfying any liability for such withholding taxes.
Any Option Agreement may provide that the Participant may elect, in accordance
with any conditions set forth in such Option Agreement, to pay a portion or all
of such withholding taxes in shares of Common Stock.
13. EFFECTIVE DATE AND TERMINATION DATES
The Plan shall be effective on and as of the date of its approval by
the stockholders of the Company and shall terminate ten years later, subject to
earlier termination by the Board of Directors pursuant to Paragraph 10.
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EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
INCORPORATION/FORMATION
------------------------------
<S> <C>
The Boyds Collection Ltd., L.P. Delaware
Boyds Operations, Inc. Delaware
H.C. Accents Illinois
</TABLE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints Marc S. Lipschultz and Christine L. Bell, and each of them, as
his attorneys-in-fact, with full power of substitution and resubstitution, to
execute in the name and on behalf of such person, individually and in the
capacity stated below, and to file all amendments and post-effective amendments
to this Registration Statement, which amendment or amendments may make such
changes in and additions to this Registration Statement as such
attorneys-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ GARY M. LOWENTHAL
- ------------------------------ Chief Executive Officer December 21, 1998
Gary M. Lowenthal and Director
/s/ ROBERT T. COCCOLUTO
- ------------------------------ Director December 21, 1998
Robert T. Coccoluto
/s/ HENRY R. KRAVIS
- ------------------------------ Director December 21, 1998
Henry R. Kravis
/s/ GEORGE R. ROBERTS
- ------------------------------ Director December 21, 1998
George R. Roberts
/s/ SCOTT M. STUART
- ------------------------------ Director December 21, 1998
Scott M. Stuart
/s/ MARC S. LIPSCHULTZ
- ------------------------------ Director December 21, 1998
Marc S. Lipschultz
</TABLE>
<PAGE>
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints Marc S. Lipschultz and Christine L. Bell, and each of them, as
his attorneys-in-fact, with full power of substitution and resubstitution, to
execute in the name and on behalf of such person, individually and in the
capacity stated below, and to file all amendments and post-effective amendments
to this Registration Statement, which amendment or amendments may make such
changes in and additions to this Registration Statement as such
attorneys-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ TIMOTHY BRADY
- ------------------------------ Director February 8, 1999
Timothy Brady
</TABLE>
