<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JO-ANN STORES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
OHIO 5949 34-0720629
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) Number)
</TABLE>
------------------------
5555 DARROW ROAD
HUDSON, OHIO 44236
(330) 656-2600
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
------------------------
CT CORPORATION
1300 EAST 9TH STREET
SUITE 1010
CLEVELAND, OHIO 44114
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
------------------------
COPIES TO:
PAUL N. HARRIS, ESQ.
Thompson Hine & Flory LLP
3900 Key Center
127 Public Square
Cleveland, Ohio 44114-1216
(216) 566-5500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, 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(d)
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. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
10 3/8% senior subordinated notes due
2007..................................... $150,000,000 98.5% $147,750,000 $41,074.50(1)
Guarantees of 10 3/8% senior subordinated
notes due 2007........................... -- -- -- (2)
</TABLE>
(1) Pursuant to Rule 457(o) under the Securities Act.
(2) The subsidiaries of Jo-Ann Stores are guaranteeing the 10 3/8% senior
subordinated notes due 2007. According to Rule 457(n) under the Securities
Act, no additional fee is required for the registration of these guarantees.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
TABLE OF CO-REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
OF PRIMARY STANDARD
INCORPORATION INDUSTRIAL IRS EMPLOYER
OR CLASSIFICATION IDENTIFICATION
NAME ORGANIZATION CODE NUMBER NUMBER
- --------------------------------------------------------------- -------------- ------------------- -------------
<S> <C> <C> <C>
FCA of Ohio, Inc............................................... Ohio 5949 34-1780524
FCA Financial, Inc............................................. Ohio 5949 34-0819987
Fabri-Centers of California, Inc............................... Ohio 5949 34-1694372
Fabri-Centers of South Dakota, Inc............................. Ohio 5949 34-1451235
House of Fabrics, Inc.......................................... Delaware 5949 95-3426136
</TABLE>
<PAGE>
Subject to Completion--Dated June 16, 1999
PROSPECTUS
[LOGO]
EXCHANGE OFFER FOR
$150,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
We are offering to exchange 10 3/8% senior subordinated notes due 2007 for
our currently outstanding 10 3/8% senior subordinated notes due 2007. The
exchange notes are identical to the outstanding notes, except that the exchange
notes have been registered under the federal securities laws and will not bear
any legend restricting their transfer. The exchange notes will represent the
same debt as the outstanding notes, and we will issue the exchange notes under
the same indenture. The principal features of the exchange offer are as follows:
- Expires , EDT, on , 1999, unless extended.
- We will exchange all outstanding notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tendered outstanding notes at any time before the
expiration of the exchange offer.
- We will not receive any proceeds from the exchange offer.
- The exchange of outstanding notes in the exchange offer will be a tax-free
event for United States federal tax purposes.
- We do not intend to apply for the listing of the exchange notes on any
securities exchange or automated quotation system.
Broker-dealers receiving exchange notes in exchange for outstanding notes
acquired for their own account through market-making or other trading activities
must deliver a prospectus in any resale of the exchange notes.
------------------------
AN INVESTMENT IN THE EXCHANGE NOTES INVOLVES A HIGH DEGREE OF RISK. RISK
FACTORS BEGIN ON PAGE 10.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is June , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary.................................................................................................... 1
Risk Factors............................................................................................... 10
Use of Proceeds............................................................................................ 17
Capitalization............................................................................................. 17
Selected Historical Consolidated Financial Data............................................................ 18
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 20
Business................................................................................................... 28
Management................................................................................................. 38
Principal Shareholders..................................................................................... 40
Certain Transactions....................................................................................... 43
Description of Certain Indebtedness........................................................................ 44
The Exchange Offer......................................................................................... 46
Description of the Notes................................................................................... 54
Federal Tax Consequences................................................................................... 95
Plan of Distribution....................................................................................... 101
Legal Matters.............................................................................................. 102
Independent Public Accountants............................................................................. 102
Where You Can Find More Information About Jo-Ann Stores.................................................... 102
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
------------------
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. When used in this
prospectus, words such as "anticipates," "plans," "estimates," "expects,"
"believes," and similar expressions used in connection with Jo-Ann Stores, Inc.
or our management, are intended to identify forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. However, our actual results, performance, or
achievements may materially differ from those expressed in the forward-looking
statements. Risks, uncertainties, and assumptions that could cause or contribute
to material differences include, among other things:
- general economic conditions;
- changes in customer demand;
- changes in trends in the fabric and craft industry;
- seasonality;
- our failure to manage our growth;
- loss of key management;
- the availability of merchandise;
- changes in the competitive pricing for products;
i
<PAGE>
- the impact of competitor store openings and closings; and
- the ability to address internal and external Year 2000 issues.
We undertake no obligation publicly to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Due to these risks, uncertainties and assumptions, the forward-looking events
discussed in this prospectus might not occur.
------------------
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to incorporate by reference
the information we file with the Commission. This means that we can disclose
important information to you by referring you to those documents. Any
information we incorporate by reference is considered part of this prospectus,
except for any information updated and superseded by information contained
directly in this prospectus. This prospectus incorporates by reference the
documents listed below that we have previously filed with the Commission. These
documents contain important business and financial information about Jo-Ann
Stores that is not included in or delivered with this prospectus.
We incorporate by reference into this prospectus:
(a) Our annual report on Form 10-K for the fiscal year ended January 30,
1999;
(b) Our proxy statement for the 1999 annual meeting of shareholders
including the information under the caption "Executive Compensation;" and
(c) Our quarterly report on Form 10-Q for the quarter ended May 1, 1999.
We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until all of
the outstanding notes are exchanged for exchange notes. Any new information we
file with the Commission after the date of this prospectus and until this
exchange offer is completed will update and supersede the information contained
in this prospectus.
We will provide, upon written or oral request, without charge, to each
person to whom a prospectus is delivered, a copy of any or all of the
information that has been incorporated by reference in this prospectus but not
delivered with this prospectus. If you would like to obtain this information
from us, please direct your request, either in writing or by telephone, to
Jo-Ann Stores, Inc., 5555 Darrow Road, Hudson, Ohio 44236, Attention: Chief
Financial Officer, (330) 656-2600. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST
THE INFORMATION NO LATER THAN , 1999 WHICH IS FIVE BUSINESS DAYS
BEFORE THE DATE BY WHICH YOU MUST MAKE YOUR INVESTMENT DECISION.
------------------
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to exchange the outstanding notes for the exchange notes in any jurisdiction
except where the exchange is permitted. You should assume that the information
appearing in this prospectus is accurate only as of the date on the front cover
of this prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
This prospectus is based on information provided by us and by other sources
that we believe are reliable. We cannot assure you that this information is
accurate or complete. This prospectus summarizes documents and other information
and we refer you to them for a more complete understanding of what we discuss in
this prospectus. In making an investment decision, you must rely on your own
examination of our company and the terms of the offering and the exchange notes,
including the merits and risks involved.
------------------
ii
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS.
FOR A MORE COMPLETE UNDERSTANDING OF THIS EXCHANGE OFFER, WE ENCOURAGE YOU TO
READ THIS ENTIRE PROSPECTUS. WE BASED MARKET SHARE AND OTHER INDUSTRY DATA
INCLUDED IN THIS PROSPECTUS ON STUDIES BY THE HOBBY INDUSTRY ASSOCIATION AND
INTERNALLY GENERATED REPORTS. WE HAVE NOT VERIFIED THE INDUSTRY REPORTS AND URGE
INVESTORS IN THE EXCHANGE NOTES NOT TO PLACE UNDUE RELIANCE ON THIS DATA. IN
THIS PROSPECTUS, THE WORDS "JO-ANN STORES, INC.," "JO-ANN STORES," "JO-ANN
FABRICS AND CRAFTS," "JO-ANN ETC," "JO-ANN," "WE," "OUR," AND "US" REFER TO
JO-ANN STORES, INC. AND, UNLESS THE CONTEXT REQUIRES OTHERWISE, TO OUR
SUBSIDIARIES. OUR FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO JANUARY 31 AND
REFERS TO THE YEAR IN WHICH THE PERIOD ENDS (E.G., FISCAL 1999 ENDED JANUARY 30,
1999).
THE COMPANY
We are the largest national category-dominant retailer serving the retail
fabric and craft industry, which generated estimated combined revenues of $10.0
billion in 1998. We have an approximately 20% market share in the consolidated
fabric and sewing-related products segment and an approximately four percent
market share in the highly fragmented craft products segment. We were founded as
a single retail store in 1943. As of January 30, 1999, we operated 1,034 Jo-Ann
Fabrics and Crafts traditional stores in 49 states and 24 Jo-Ann etc superstores
in 12 states. We serve the approximately 70% of U.S. households that engaged in
crafts and hobbies during the past year by offering a large variety of
competitively priced, high quality apparel, quilting and craft fabrics and
sewing-related products, home decorating fabrics, floral, craft and seasonal
products, and by offering educational classes and custom services.
We have increased our net sales and EBITDA over the past five years from
$677.3 million and $41.5 million, respectively, in fiscal 1995 to $1,242.9
million and $87.7 million, respectively, in fiscal 1999. These increases
represent compound annual growth rates of approximately 16% and 21%,
respectively. In addition, we have achieved 18 consecutive quarters of positive
comparable store sales growth.
Our traditional stores primarily serve small and middle markets. Our
recently developed superstores serve selected markets where traditional store
performance and area demographics are favorable. We believe that many of our
traditional stores are located in markets that are currently underserved. Over
the past five years we have strategically relocated some of our traditional
stores, increasing average square footage per store by 20% and sales per square
foot by 11%. As a result, net sales per traditional store have increased 33% to
$1.2 million over this period. In November 1995 we opened our first large format
"category killer" superstore. Our superstores offer a more comprehensive product
assortment and higher-margin custom services including framing, home decoration,
and furniture and floral design. In fiscal 1999 these superstores generated
approximately five times more revenue and 40% higher sales per square foot than
our traditional stores. Our superstores accounted for approximately seven
percent of fiscal 1999 net sales. We believe our superstores will be our future
growth vehicle.
Our principal executive offices are located at 5555 Darrow Road, Hudson,
Ohio 44236, and our telephone number is (330) 656-2600. For more information
regarding the company, see "Business."
1
<PAGE>
THE EXCHANGE OFFER
On May 5, 1999, we privately placed $150.0 million of 10 3/8% senior
subordinated notes due 2007. All of our wholly-owned operating subsidiaries
guarantee these outstanding notes.
Simultaneously with the private placement, we entered into a registration
rights agreement with the initial purchasers of the outstanding notes. Under the
terms of that agreement we agreed to file a registration statement for the
exchange offer and the exchange notes by June 19, 1999, cause the registration
statement to be declared effective by the Commission by September 2, 1999, and
complete this exchange offer by October 2, 1999. If we do not meet one of these
requirements, we must pay additional interest on the outstanding notes until we
meet the requirement. In this exchange offer, you may exchange your outstanding
notes for the exchange notes. The exchange notes have the same terms as the
outstanding notes except that the exchange notes will be registered under the
Securities Act and will not have registration rights. You should read the
discussions under the heading "The Exchange Offer" and "Description of the
Notes" for more information regarding the notes to be issued in the exchange
offer.
SUMMARY OF TERMS OF EXCHANGE OFFER
The following is a brief summary of terms of the exchange offer. For a more
complete description of the exchange offer, see "The Exchange Offer" in this
prospectus.
<TABLE>
<S> <C>
Registration Rights Agreement................ We sold the outstanding notes on May 5, 1999
to the initial purchasers under a purchase
agreement dated May 5, 1999. Pursuant to the
purchase agreement, our company, our
subsidiaries who guaranteed our obligations
under the outstanding notes and the initial
purchasers entered into a registration rights
agreement which granted the holders of the
outstanding notes exchange and registration
rights. This exchange offer is intended to
satisfy our obligations under the
registration rights agreement.
The Exchange Offer........................... We are offering to exchange up to $150.0
million aggregate principal of the exchange
notes for up to $150.0 million aggregate
principal of the outstanding notes.
Outstanding notes may be exchanged only in
$1,000 increments.
The terms of the exchange notes are identical
in all material respects to the outstanding
notes except for transfer restrictions and
registration rights relating to the
outstanding notes.
Transferability of Exchange Notes............ We believe that you will be able to freely
transfer the exchange notes without
registration or any prospectus delivery
requirement. However, broker-dealers who
acquire the exchange notes and our affiliates
may be required to deliver copies of this
prospectus if they resell any exchange notes.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Effect of Not Tendering...................... Any outstanding notes that are not tendered
or that are tendered but not accepted will
continue to be subject to the existing
restrictions upon transfer. Since the
outstanding notes have not been registered
under the federal securities laws, they bear
a legend restricting their transfer absent
registration or the availability of a
specific exemption from registration. Upon
the completion of the exchange offer, we will
have no further obligations to provide for
registration of the outstanding notes under
the federal securities laws.
Expiration Date.............................. .m., EDT, on , 1999, unless the
exchange offer is extended.
Procedures For Tendering Outstanding Notes... If you wish to accept the exchange offer, you
must complete the letter of transmittal
accompanying this prospectus in accordance
with the instructions. You should then mail
or deliver the letter of transmittal, along
with the outstanding notes and any other
required documentation, to Harris Trust and
Savings Bank, the exchange agent, at the
address provided in this prospectus.
By executing the letter of transmittal, you
will represent to us that:
- you are acquiring the exchange notes in
the ordinary course of your business;
- you are not participating in and do not
intend to participate in any
distribution of the exchange notes;
- you have no arrangement with any person
to participate in the distribution of
the exchange notes;
- you are not our affiliate; and
- you are not acting on behalf of any
person or entity who could not truthfully
make the foregoing representations.
Withdrawal Rights............................ You may withdraw outstanding notes you tender
in the exchange offer by furnishing a written
notice of withdrawal to the exchange agent
containing the information described in "The
Exchange Offer--Withdrawal Rights."
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Interest on The Exchange Notes And The
Outstanding Notes.......................... Interest on the exchange notes will accrue
from the date of the last periodic payment of
interest on the outstanding notes. We will
not pay any additional interest on any of the
outstanding notes tendered and accepted for
exchange.
Conditions to the Exchange Offer............. We will not be required to complete the
exchange offer and we may terminate or amend
it if, at any time before we accept any
tendered notes for exchange, we determine
that the exchange offer violates any law,
interpretation of the Commission or order of
any governmental agency or court.
Acceptance of Outstanding Notes And Delivery
of Exchange Notes.......................... If you meet the conditions described in this
prospectus, we will accept for exchange any
and all outstanding notes that you properly
tender in the exchange offer prior to
, 1999, the expiration date. We
will deliver to you the exchange notes issued
in the exchange offer promptly following the
expiration date.
Federal Tax Consequences..................... There will be no federal income tax
consequences to you if you exchange your
outstanding notes for exchange notes in the
exchange offer.
Exchange Agent............................... Harris Trust and Savings Bank, the trustee
under the indenture, is serving as exchange
agent in connection with the exchange offer.
The exchange agent's mailing address is 311
West Monroe Street, 12(th) Floor, Chicago,
Illinois 60606. You can request additional
copies of this prospectus, the letter of
transmittal or the notice of guaranteed
delivery, by calling the exchange agent at
(312) 416-7380 or by faxing your request to
the exchange agent at (312) 765-8012.
See "The Exchange Offer" for more detailed
information concerning the terms of the
exchange offer.
</TABLE>
4
<PAGE>
SUMMARY OF TERMS OF THE OFFERED NOTES
The following is a brief summary of terms of the exchange notes. For a more
complete description of the terms of the exchange notes, see "Description of the
Notes" in this prospectus.
<TABLE>
<S> <C>
Issuer............................ Jo-Ann Stores, Inc.
Notes Offered..................... $150,000,000 principal amount of 10 3/8% senior
subordinated notes due 2007.
Maturity.......................... May 1, 2007.
Interest Payment Dates............ May 1 and November 1, beginning November 1, 1999.
Guarantees........................ Each of our restricted subsidiaries will fully and
unconditionally guarantee the exchange notes on a senior
subordinated basis. Future restricted subsidiaries will
also be required to guarantee the exchange notes if
those subsidiaries guarantee any of our debt. See
"Description of the Notes-- Guarantees."
Ranking........................... The exchange notes will be unsecured senior subordinated
obligations and will be junior to all of our existing
and future senior debt. The subsidiary guarantees will
be unsecured senior subordinated obligations and will be
junior to all existing and future senior debt of those
subsidiaries. The exchange notes effectively will be
junior to all existing and future debt and other
liabilities of our subsidiaries that are not guarantors.
Because the exchange notes are junior in right of
payment to senior debt, in the event of bankruptcy,
liquidation or dissolution, holders of the exchange
notes will not receive any payment until holders of our
senior debt and the senior debt of our restricted
subsidiaries have been paid in full.
Assuming we had completed the offering of the
outstanding notes on January 30, 1999, and applied the
net proceeds as intended, the notes and the guarantees
would have been junior to $39.5 million of our and our
restricted subsidiaries' senior debt.
Optional Redemption............... We may redeem some or all of the exchange notes at any
time on or after May 1, 2003, at the redemption prices
described in this prospectus.
Public Equity Offering
Optional Redemption............. Before May 1, 2002, we may redeem up to 35% of the
exchange notes with the net proceeds of a public equity
offering at the redemption price described in this
prospectus, if at least 65% of the exchange notes
originally issued remain outstanding after such
redemption. See "Description of the Notes--Optional
Redemption."
Change of Control................. Upon change of control events described in this
prospectus, each holder of exchange notes may require us
to repurchase some or all of its exchange notes at a
purchase price equal to 101% of their principal amount,
plus accrued interest. See
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
"Description of the Notes--Purchase of Notes Upon a
Change of Control."
Restrictive Covenants............. The indenture governing the exchange notes will contain
covenants that, among other things, will limit our
ability and the ability of our restricted subsidiaries
to:
- borrow money;
- pay dividends on, redeem or repurchase our or our
restricted subsidiaries' capital stock;
- make restricted payments and investments;
- issue or sell capital stock of our restricted
subsidiaries;
- use assets as security in other transactions;
- in the case of our restricted subsidiaries, create
any restrictions on the payment of dividends or other
payments to us;
- guarantee debt;
- engage in transactions with affiliates;
- create unrestricted subsidiaries; and
- sell assets in excess of specified amounts or merge
with or into other companies.
There are important exceptions and qualifications to
these covenants, which are described under the heading
"Description of the Notes" in this prospectus.
Use of Proceeds................... We will not receive any proceeds from the exchange
offer. See "Use of Proceeds."
</TABLE>
RISK FACTORS
See "Risk Factors" and the other information in this prospectus for a
discussion of some factors you should carefully consider before deciding to
tender your outstanding notes.
6
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents our summary historical consolidated financial
data for each of the five fiscal years ending January 30, 1999. We derived the
summary historical consolidated financial data from audited financial
statements. You should read these financial statements in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements and related notes appearing
elsewhere in this prospectus and other financial data that we have filed with
the Securities and Exchange Commission.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------------------------------
JANUARY 28, JANUARY 27, FEBRUARY 1, JANUARY 31, JANUARY 30,
1995 1996 1997 1998 1999
------------- ------------- ------------- ------------- -------------
(DOLLARS IN MILLIONS, EXCEPT FOR SALES PER SQUARE FOOT)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales(1)................................. $677.3 $834.6 $929.0 $975.0 $1,242.9
Cost of sales................................ 378.6 456.6 516.9 533.2 678.5
------ ------ ------ ------ -------------
Gross profit................................. 298.7 378.0 412.1 441.8 564.4
Selling, general and administrative
expenses................................... 257.2 319.9 340.9 363.1 476.7
Depreciation and amortization................ 14.0 18.2 21.2 21.7 27.7
Non-recurring charge(2)...................... -- -- -- -- 25.1
------ ------ ------ ------ -------------
Operating profit............................. 27.5 39.9 50.0 57.0 34.9
Interest expense............................. 8.4 12.0 10.7 5.9 12.5
------ ------ ------ ------ -------------
Income before income taxes................... 19.1 27.9 39.3 51.1 22.4
Income taxes................................. 7.3 10.5 14.8 19.2 8.8
Extraordinary item(3)........................ -- -- -- (1.1 ) --
------ ------ ------ ------ -------------
Net income................................... $ 11.8 $ 17.4 $ 24.5 $ 30.8 $ 13.6
------ ------ ------ ------ -------------
------ ------ ------ ------ -------------
OTHER DATA:
EBITDAR(4)................................... $108.7 $138.9 $155.4 $170.2 $ 206.2
Rental expense(5)............................ 67.2 80.8 84.2 91.5 118.5
EBITDA(6).................................... 41.5 58.1 71.2 78.7 87.7
Capital expenditures......................... $ 11.7 $ 34.7 $ 13.2 $ 36.6 $ 75.1
Percentage increase in comparable store
sales(7)................................... 1.0% 3.0% 7.5% 3.8% 3.5%
Store square footage (000's), at end of
period(8).................................. 11,423 11,522 11,613 12,119 15,270
Sales per square foot(9)..................... $ 77 $ 74 $ 81 $ 82 $ 86
Number of stores, end of period:
Traditional stores(10)..................... 964 935 913 896 1,034
Superstores................................ -- 1 1 7 24
<CAPTION>
JANUARY 30, 1999
----------------------------
AS
ACTUAL ADJUSTED(11)
------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and temporary cash investments....................................................... $ 20.4 $ 20.4
Total assets.............................................................................. 701.4 706.2
Long-term debt............................................................................ 182.5 187.3
Shareholders' equity...................................................................... 259.0 259.0
</TABLE>
FOOTNOTES ON FOLLOWING PAGE
7
<PAGE>
- ------------------------
(1) The following represents a break-out of our net sales between our
traditional stores and our superstores (unaudited):
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27, FEBRUARY 1, JANUARY 31, JANUARY 30,
1995 1996 1997 1998 1999
------------- ------------- ------------- ------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales:
Traditional stores....................... $ 677.3 $ 833.2 $ 923.2 $ 953.5 $ 1,154.6
Superstores.............................. -- 1.4 5.8 21.5 88.3
------ ------ ------ ------ -----------
Total net sales............................ $ 677.3 $ 834.6 $ 929.0 $ 975.0 $ 1,242.9
------ ------ ------ ------ -----------
------ ------ ------ ------ -----------
</TABLE>
(2) We recorded a non-recurring charge of $25.1 million ($15.3 million on an
after-tax basis) related to the House of Fabrics acquisition in fiscal
1999. This charge consisted of write-downs of previously owned assets
affected by the House of Fabrics acquisition to estimated net realizable
value, the cost of operating duplicate corporate facilities during the
six-month transition period following the House of Fabrics acquisition, and
costs associated with the re-merchandising of the acquired stores. The
total cash costs included in the non-recurring charge were approximately
$15.9 million. We completed the planned integration events associated with
the acquisition by the end of the third quarter of fiscal 1999.
(3) We recorded an extraordinary item in fiscal 1998 for the early redemption
of convertible subordinated debentures outstanding. The extraordinary item,
net of taxes, consisted of the redemption premium, unamortized debenture
issuance costs and other related expenses.
(4) EBITDAR represents net income before taking into consideration interest
expense, income tax expense, depreciation and amortization expense,
non-recurring charges and rental expense. EBITDAR is not a measurement of
financial performance under generally accepted accounting principles.
Accordingly, you should not regard this figure as an alternative to net
income or as an indicator of our operating performance. We believe that
EBITDAR is widely used by analysts, investors and other interested parties
in our industry but is not necessarily comparable with similarly titled
measures for other companies.
(5) Rental expense includes base rent, percentage rent, common area
maintenance, real estate taxes, merchant association dues, landlord
property insurance and sublease rental income.
(6) EBITDA represents net income before taking into consideration interest
expense, income tax expense, depreciation and amortization expense, and
non-recurring charges. EBITDA is not a measurement of financial performance
under generally accepted accounting principles and does not represent cash
flow from operations. Accordingly, you should not regard this figure as an
alternative to net income or as an indicator of our operating performance
or as an alternative to cash flows as a measure of liquidity. We believe
that EBITDA is widely used by analysts, investors and other interested
parties in our industry but is not necessarily comparable with similarly
titled measures for other companies.
(7) New stores are included in the calculation of comparable store sales on the
one-year anniversary of the store opening.
(8) Total store square footage includes selling floor space and inventory
storage areas.
(9) For fiscal 1999, average sales per square foot were $84 and $120, for
traditional stores and superstores, respectively. We based sales per square
foot on the total store square footage, which includes selling floor space
and inventory storage areas. To accommodate openings and closings of store
locations throughout the year, we calculated sales per square foot using an
average square foot amount for the year, rather than the fiscal year end
square foot amount.
FOOTNOTES CONTINUED ON FOLLOWING PAGE
8
<PAGE>
(10) In April 1998, we completed the acquisition of House of Fabrics which had
annual net sales of approximately $240.0 million and operated 261 fabric
and craft stores in 27 states. Following the acquisition, we closed 60
House of Fabric stores and 30 Jo-Ann Fabrics and Crafts stores in
overlapping geographic locations.
(11) The as adjusted data gives effect to the offering of the outstanding
notes, application of the proceeds and borrowings under the new senior
credit facility. See "Use of Proceeds."
9
<PAGE>
RISK FACTORS
In addition to the other information contained in this prospectus, you
should consider carefully the following factors before deciding to tender your
outstanding notes.
OUR SUBSTANTIAL INDEBTEDNESS COULD RESTRICT OUR OPERATIONS, MAKE US MORE
VULNERABLE TO ADVERSE ECONOMIC CONDITIONS AND MAKE IT MORE DIFFICULT FOR US TO
MAKE PAYMENTS ON THE EXCHANGE NOTES
We have had and will continue to have a significant amount of indebtedness.
The following chart presents important credit statistics regarding our company
after giving effect to the offering of the outstanding notes, the application of
the net proceeds from that offering and borrowings under the new senior credit
facility.
<TABLE>
<CAPTION>
PRO FORMA
JANUARY 30, 1999
-------------------
(DOLLARS IN
MILLIONS)
<S> <C>
Long-term debt............................................................ $ 187.3
Debt to capitalization percentage......................................... 42%
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations relating to the
exchange notes;
- reduce the availability of our cash flow from operations to fund working
capital, capital expenditures, acquisitions and other general corporate
requirements because we will have to dedicate a substantial portion of our
cash flow from operations to payments on our indebtedness;
- limit our ability to borrow funds to pay for future working capital,
capital expenditures, acquisitions and other general corporate
requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a disadvantage compared to our competitors who have less debt;
and
- make us more vulnerable to negative changes in economic and industry
conditions.
Our ability to make payments on our indebtedness, including the exchange
notes, depends upon our ability to generate cash flow in the future. Our ability
to generate that cash flow depends upon, among other things, our future
operating performance and our ability to refinance indebtedness when necessary.
To a large extent, each of these factors depends upon economic, financial,
competitive and other factors beyond our control. If we cannot generate enough
cash from operations to make payments on our indebtedness, we will need to
refinance our indebtedness, obtain additional financing, or sell assets. We
cannot assure you that our business will generate cash flow or that we will be
able to obtain acceptable financing to satisfy our debt obligations, including
our payments on the exchange notes.
The indenture and the new senior credit facility will permit us and the
guarantors to incur substantial additional indebtedness. As of January 30, 1999,
after giving pro forma effect to the offering of the outstanding notes, the
application of the net proceeds of that offering, and borrowings under the new
senior credit facility, we would have had $219.9 million of availability under
our new senior credit facility. All of those borrowings would be senior to the
exchange notes and the guarantees. If we incur new indebtedness, the related
risks that we face could intensify. See "Description of the Notes."
10
<PAGE>
WE MAY NOT BE ABLE TO FINANCE FUTURE NEEDS OR ADAPT OUR BUSINESS PLAN TO CHANGES
BECAUSE OF RESTRICTIONS PLACED ON US BY OUR SENIOR CREDIT FACILITY AND THE
INDENTURE
The indenture governing the exchange notes, and the instruments governing
our other indebtedness, including the new senior credit facility, will contain
restrictive and financial covenants, which will limit our ability to borrow
money, make investments, redeem or make payments on our capital stock, incur
liens and take other actions. For a description of the restrictive covenants in
the indenture, see "The Exchange Notes." For a description of the covenants in
the senior credit facility, see "Description of Certain Indebtedness."
Our ability to remain in compliance with these covenants and satisfy the
financial ratios and tests may be affected by events beyond our control. If we
fail to meet these tests or breach any of the covenants, the lenders under the
senior credit facility or the holders of the exchange notes could declare all
amounts outstanding under their indebtedness, including accrued interest, to be
immediately due and payable. A declaration of acceleration under the senior
credit facility would constitute a default under the indenture, and a default
under the indenture would constitute a default under the senior credit facility.
The operating and financial restrictions may adversely affect and may limit or
prohibit our ability to finance future acquisitions, our operations and our
capital needs.
HOLDERS OF SENIOR INDEBTEDNESS WILL BE PAID BEFORE HOLDERS OF THE EXCHANGE NOTES
ARE PAID
The exchange notes will be subordinated to our senior indebtedness. The
guarantees will be subordinated to all guarantor senior indebtedness. As of
January 30, 1999, after giving pro forma effect to the offering of the
outstanding notes, the application of the net proceeds of that offering and
borrowings under the new senior credit facility, we would have had $39.5 million
of senior indebtedness and the subsidiary guarantors would have had no guarantor
senior indebtedness (other than their guarantees under the new senior credit
facility and the exchange notes). If we become bankrupt, liquidate, or dissolve,
our assets would be available to pay obligations on the exchange notes only
after our senior indebtedness has been paid. Similarly, if one of our
subsidiaries becomes bankrupt, liquidates or dissolves, that subsidiary's assets
would be available to pay obligations on the guarantee only after payments have
been made on its guarantor senior indebtedness. We cannot assure you that there
will be sufficient assets to pay amounts due on the exchange notes. See
"Description of the Notes."
If a payment default occurs with respect to our designated senior
indebtedness, we may make payments on the exchange notes only if we cure the
default or the holder of the senior indebtedness waives the default. Moreover,
if any non-payment default exists under our designated senior indebtedness, we
may not make any cash payments on the exchange notes for a period of up to 179
days in any 365 day period, unless we cure the default, the holder of the senior
indebtedness waives the default or rescinds acceleration of the indebtedness, or
we repay the indebtedness in full. See "Description of the Notes."
OUR FAILURE TO MANAGE OUR GROWTH WOULD HAVE A NEGATIVE IMPACT ON OUR OPERATIONS
During the past five years, we have experienced rapid growth in sales,
expansion of our product offerings, and acquisitions. In April 1998, we merged
with House of Fabrics, a chain of 261 fabric and craft stores. In October 1994,
we acquired Cloth World, a chain of 342 fabric stores. A significant part of our
strategy is to expand our retailing concepts and to continue our retail
expansion plans. We intend to accomplish this expansion by opening new stores
and possibly by buying other businesses. The opening of additional stores in new
geographic markets could present competitive and merchandising challenges
different from those we face in our existing markets. In addition, we may incur
high costs related to advertising, administration, and distribution as we enter
new markets. Moreover, as we move stores or renew leases in existing markets we
may incur higher lease expenses. Also, integrating newly
11
<PAGE>
acquired stores can involve diversion of management's attention, strains on our
logistics and other systems, difficult personnel issues and other risks.
The number of new stores we open and the sales and profitability of those
stores depends on various factors. These factors include:
- the availability of working capital;
- our ability to obtain financing;
- our ability to penetrate new markets;
- the availability of desirable locations and the negotiation of acceptable
leases for these sites;
- the availability of management resources;
- the effectiveness of our national advertising campaign;
- the hiring and training of skilled personnel; and
- the maintenance or upgrade of our information processing systems and the
integration of those systems at the new stores.
Our failure to respond effectively to these difficulties related to rapid
expansion could prevent us from growing or could have a significant negative
impact on our business and prospects.
Our growth strategy contemplates the development of additional superstores
and an increasing percentage of our revenues coming from our superstores. Our
superstores combine under one roof a large selection of sewing and fabrics,
crafts and home decorative items. It is possible that the superstore concept
will not gain market acceptance among our customers and that customers will
prefer to purchase goods at stores which specialize in a particular category
rather than shop at superstores. Any failure of the superstore concept to gain
market acceptance could have a material adverse effect on our business and
prospects.
In addition, an important part of our strategy includes improving our
logistics systems in order to enable us to fully integrate acquired and new
stores. During the second half of fiscal 1999 and the beginning of fiscal 2000,
we have experienced higher costs than in prior periods due principally to higher
freight and logistics costs. We are working with a leading consulting firm to
design and implement a national logistics network in order to reduce these
expenses and provide for a more efficient logistics network. We believe that
this network will result in the addition of at least one new distribution center
at an estimated cost for construction and equipment of $30.0 million. During the
next 18 to 24 months, we expect to operate within our existing distribution
center in Hudson, Ohio together with a contract facility in California to handle
seasonal product demand. Until we complete the implementation of our new
logistics network, we may continue to experience higher costs as a result of
these factors. Any failure to fully implement new logistics systems could have a
material adverse effect on our business and prospects.
LOSS OF KEY EXECUTIVES AND FAILURE TO ATTRACT QUALIFIED MANAGEMENT COULD LIMIT
OUR GROWTH AND NEGATIVELY IMPACT OUR OPERATIONS
Our future success depends in large part on our ability to retain our senior
management team. We do not have employment agreements with our senior officers
other than in the event of a change in control. We do not maintain key person
life insurance with respect to any executive. The loss of the services of one or
more of these persons could materially adversely affect our operations and
financial condition. In addition, our continued success depends upon our ability
to attract and retain qualified management, administrative and sales personnel
to support our future growth. Our inability to do so may have a material adverse
effect on our business and prospects. See "Management."
12
<PAGE>
IF CUSTOMER INTEREST IN THE FABRIC AND CRAFT INDUSTRY DECLINES, OUR REVENUES MAY
DECLINE
The success of our operations depends on our customers' purchasing our
fabric and craft products. Craft products in particular are not necessities.
These products compete with numerous other leisure activities and other forms of
entertainment. If our customers' interest in the fabric and craft industry
declines, that decline would likely result in the reduction of our revenues and
have a negative impact on our business and prospects. In addition, changes in
demographic and societal trends, including decreases in the number of people
interested in sewing, could have a material adverse effect on our business and
prospects.
WEAK SALES DURING THE SECOND HALF OF THE YEAR WILL NEGATIVELY IMPACT OUR
OPERATING RESULTS
Our quarterly results of operations may fluctuate significantly as the
result of:
- retail consumers' purchasing patterns;
- the timing of the opening of, and the amount of net sales contributed by,
new stores;
- the timing of costs associated with the selection, leasing, construction
and opening of new stores;
- the impact of extreme hot or cold weather conditions; and
- seasonal factors, product introductions and changes in product mix.
Our business is seasonal. Sales and earnings are relatively lower during the
first and second fiscal quarters than in the third and fourth fiscal quarters.
Our best quarter in terms of sales and profitability historically has been the
fourth quarter. In fiscal 1999, the fourth quarter, which includes the Christmas
selling season, accounted for approximately 34% of our sales and approximately
65% of our operating income, excluding the non-recurring charge. In addition,
excluding the effects of new store openings, our inventories and related
short-term financing needs have been seasonal. The greatest requirements occur
during our second and third fiscal quarters as we increase our inventory in
preparation for our peak selling season. Weak sales during the second half of
the year will negatively impact our operating results by reducing our cash flow,
leaving us with excess inventory. In addition, weak sales may make it more
difficult for us to finance our capital requirements. See Note 10 to our
consolidated financial statements included elsewhere in this prospectus.
OUR DEPENDENCE ON FOREIGN SUPPLIERS MAKES US VULNERABLE TO POSSIBLE DELAYS IN
RECEIPT OF MERCHANDISE AND TO THE RISKS INVOLVED IN FOREIGN OPERATIONS
In fiscal 1999, we purchased approximately 15% of our products directly from
manufacturers located in foreign countries. We currently use suppliers located
in Hong Kong, China and Taiwan. In addition, many of our domestic suppliers
purchase a portion of their products from foreign suppliers. Because a large
percentage of our products are manufactured or sourced abroad, we are required
to order these products further in advance than would be the case if products
were manufactured domestically. If we underestimate consumer demand, we may not
be able to fill orders on a timely basis. If we overestimate consumer demand, we
may be required to hold goods in inventory for a long period of time. We do not
have long-term contracts with any manufacturers, and none of our suppliers
manufacture products for us exclusively.
Foreign manufacturing also makes us vulnerable to a number of other risks,
including work stoppages, transportation delays and interruptions, political
instability, economic disruptions, the imposition of tariffs and import and
export controls, changes in governmental policies and other events. If any of
these events occur, it could result in a material adverse effect on our
business, financial condition, results of operations and prospects. In addition,
reductions in the value of the U.S. dollar could ultimately increase the prices
that we pay for our products. During fiscal 1999, we experienced an
13
<PAGE>
increase in the cost of containers as a result of economic difficulties in Asia.
Future increases in container costs could have a material adverse effect on our
results of operations.
BECAUSE OF OUR DEPENDENCE ON FOREIGN SUPPLIERS, INCREASED RESTRICTIONS ON
IMPORTS MAY NEGATIVELY IMPACT OUR OPERATIONS
Due to our dependence on foreign suppliers, we are susceptible to risks
associated with importing products into the United States. Substantially all of
our import operations are subject to the terms of bilateral textile agreements
between the United States and a number of foreign countries. These agreements
impose quotas on the amounts and types of merchandise which may be imported into
the United States from these countries. These agreements also allow the United
States to impose at any time restrictions on the importation of categories of
merchandise that, under the terms of the agreements, are not subject to
specified limits.
Our imported products are also subject to United States customs duties.
These duties are a significant portion of our cost of sales. The United States
and countries in which our products are manufactured may at times impose new
quotas, duties, tariffs or other restrictions or negatively adjust presently
prevailing quotas, duties or tariffs. Any new or increased quotas, duties,
tariffs, or other similar restrictions could have a significant negative effect
on our business, financial condition, results of operations, and prospects.
COMPETITION COULD NEGATIVELY IMPACT OUR OPERATIONS DUE TO PRICE REDUCTIONS AND
LOSS OF MARKET SHARE
Competition is intense in the retail fabric and craft industry. This
competition could result in the reduction of our prices and our loss of market
share. We must remain competitive in the areas of quality, price, selection, and
convenience. The location and atmosphere of retail stores are an additional
competitive factor in our retail business.
Our primary competition is comprised of specialty fabric and craft
retailers, fabric retailers and craft retailers. Our competitors include
Michaels Stores, Inc., a chain which operates approximately 585 retail craft and
framing stores in 47 states, Hancock Fabrics, Inc., a chain which operates
approximately 462 retail fabric stores in 39 states, and A.C. Moore, a chain
which operates approximately 37 retail craft stores in the Philadelphia and New
York markets. We also compete with mass merchants that dedicate a portion of
their selling space to a limited selection of fabrics, craft supplies, and
seasonal and holiday merchandise. Some of our competitors have stores
nationwide. Several operate regional chains. Numerous others are local
merchants. Some of our competitors, particularly the mass merchants, are larger
and have greater financial resources than we do. Our sales are also impacted by
store liquidations of our competitors. In addition, we ultimately compete with
alternate sources of entertainment and leisure for our customers. Alternate
methods of selling fabrics and crafts on the Internet could become competitors
in the future. See "Business--Competition."
THE FAILURE OF PARTIES WITH WHOM WE DO BUSINESS TO ADDRESS THEIR YEAR 2000
ISSUES COULD PREVENT US FROM ADEQUATELY STOCKING OUR STORES
The Year 2000 issue refers to computer programs being written using two
digits rather than four to define an applicable year. A company's hardware,
information technology systems or computer programs that have a two digit field
to define the year may recognize a date using "00" as the year 1900 rather than
the year 2000. This faulty recognition could result in a system failure,
disruption of operations, or inaccurate information or calculations.
Possible consequences to us of Year 2000 issues include, but are not limited
to, temporary disruption of our normal business operations, loss of
communications links with store locations, loss of electric power, inability to
process transactions, problems with ordering and receiving merchandise and
problems with banks and other financial institutions. We believe that our worst
case scenario involves
14
<PAGE>
the inability of electric utility companies to service our various stores due to
Year 2000 problems. If the electric utility companies cannot provide power to a
significant number of our stores, our business and operations could be
materially disrupted. For a more detailed discussion of this risk and the status
of our Year 2000 program, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000."
FEDERAL AND STATE STATUTES ALLOW COURTS TO FURTHER SUBORDINATE OR VOID THE
GUARANTEES
Fraudulent conveyance laws have been enacted for the protection of
creditors. Under these fraudulent conveyance laws, a court could further
subordinate the subsidiary guarantees to our present and future indebtedness or
take other detrimental actions, including voiding the subsidiary guarantees. The
court could take that action if it found that at the time any subsidiary issued
its guarantee, (a) it issued the guarantee with the intent of hindering,
delaying or defrauding any current or future creditor or contemplated insolvency
with a design to favor one or more creditors to the total or partial exclusion
of other creditors, or (b) it received less than reasonably equivalent value or
fair consideration for issuing its guarantee and:
- was insolvent or made insolvent because of the related transaction;
- was engaged in a business or transaction for which its assets constituted
unreasonably small capital;
- intended to incur, or believed that we would incur, debts beyond its
ability to pay as they matured; or
- was a defendant in an action for money damages or had a judgment for money
damages docketed against it, which was unsatisfied.
The court could subordinate or invalidate the guarantee relating to the
exchange notes if it found that the above conditions applied to the guarantor.
Any payment by the guarantor under the guarantee could be voided and required to
be repaid to the guarantor or to a fund for the benefit of the creditors of the
guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
vary depending on the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a party would be
considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets; or
- the present fair saleable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature; or
- it could not pay its debts as they become due.
Among other things, a legal challenge of a subsidiary's guarantee of the
exchange notes on fraudulent conveyance grounds may focus on the benefits, if
any, realized by that subsidiary as a result of our issuance of the exchange
notes. To the extent a subsidiary's guarantee of the exchange notes is voided as
a result of being deemed a fraudulent conveyance or held unenforceable for any
other reason, the exchange note holders would cease to have any claim in respect
of that guarantee. The exchange note holders would be creditors solely of the
company and any guarantor whose guarantee was not voided.
On the basis of historical financial information, recent operating history
and other factors, we believe that, after giving effect to the debt incurred by
the company and the guarantors in connection with the exchange notes, the
company and the guarantors will not be insolvent, will have sufficient
15
<PAGE>
capital to meet their obligations as they mature and to operate their business
effectively, and will not have incurred debts beyond their ability to pay as
they mature. We cannot assure you, however, that a court would apply the same or
similar standards in making a determination or that a court would agree with our
conclusions in this regard.
YOU MAY BE UNABLE TO SELL YOUR EXCHANGE NOTES IF A TRADING MARKET FOR THE
EXCHANGE NOTES DOES NOT DEVELOP
The exchange notes will be new securities for which there is currently no
established trading market, and none may develop. The initial purchasers have
indicated to us that they intend to make a market in the exchange notes, as
permitted by applicable laws and regulations. However, they are under no
obligation to do so. At their discretion, the initial purchasers could
discontinue their market-making efforts at any time without notice. Accordingly,
we can give you no assurance that an active trading market for the exchange
notes will develop or, if a market develops, as to the liquidity of the market.
We intend to have the exchange notes designated as eligible for trading in
the PORTAL market. However, we do not intend to apply for listing of the
exchange notes on any securities exchange or for quotation on any automated
dealer quotation system.
The liquidity of any market for the exchange notes will depend on the number
of holders of the exchange notes, the interest of securities dealers in making a
market in the exchange notes and other factors. Accordingly, we can give you no
assurance as to the development or liquidity of any market for the exchange
notes. If an active trading market for the exchange notes does not develop, the
market price and liquidity of the exchange notes may be adversely affected.
16
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the exchange notes in
the exchange offer. We will retire or cancel all of the outstanding notes
tendered in the exchange offer.
CAPITALIZATION
The following table sets forth our capitalization as of January 30, 1999 and
as adjusted to reflect the completion of the offering of the outstanding notes
and the new senior credit facility. See "Use of Proceeds." You should read this
table in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the consolidated financial statements and
notes appearing elsewhere in this prospectus and other financial data we have
filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
JANUARY 30, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN MILLIONS)
<S> <C> <C>
Cash and temporary cash investments...................................... $ 20.4 $ 20.4
--------- -----------
--------- -----------
Long-term debt:
Existing senior credit facility........................................ $ 182.5 $ --
New senior credit facility(1).......................................... -- 39.5
Notes offered hereby, net of discount of 2.2........................... -- 147.8
--------- -----------
Total long-term debt(2).............................................. $ 182.5 $ 187.3
--------- -----------
--------- -----------
Shareholders' equity:
Common stock........................................................... $ 1.0 $ 1.0
Additional paid-in-capital............................................. 94.4 94.4
Retained earnings...................................................... 185.8 185.8
Treasury stock and other............................................... (22.2) (22.2)
--------- -----------
Total shareholders' equity........................................... 259.0 259.0
--------- -----------
Total capitalization............................................... $ 441.5 $ 446.3
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) As adjusted, we would have had available under the new senior credit
facility approximately $219.9 million of additional borrowing capability
(which reflects $40.6 million letters of credit outstanding) as of January
30, 1999. See "Description of Certain Indebtedness."
(2) As of January 30, 1999, we had $581.9 million of obligations under operating
leases which are not included in the amount shown in the table above. See
Note 9 of the consolidated financial statements included elsewhere in this
prospectus.
17
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents our selected historical consolidated financial
data for each of the five fiscal years ending January 30, 1999. We derived the
selected historical consolidated financial data from audited financial
statements. You should read this financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements and related notes appearing
elsewhere in this prospectus and other financial data that we have filed with
the Securities and Exchange Commission.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------------------
JANUARY 28, JANUARY 27, FEBRUARY 1, JANUARY 31, JANUARY 30,
1995 1996 1997 1998 1999
------------- ------------- ------------- ------------- -----------
(DOLLARS IN MILLIONS, EXCEPT FOR SALES PER SQUARE FOOT)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales(1).................................. $677.3 $834.6 $929.0 $975.0 $1,242.9
Cost of sales................................. 378.6 456.6 516.9 533.2 678.5
------ ------ ------ ------ -----------
Gross profit.................................. 298.7 378.0 412.1 441.8 564.4
Selling, general and administrative
expenses.................................... 257.2 319.9 340.9 363.1 476.7
Depreciation and amortization................. 14.0 18.2 21.2 21.7 27.7
Non-recurring charge(2)....................... -- -- -- -- 25.1
------ ------ ------ ------ -----------
Operating profit.............................. 27.5 39.9 50.0 57.0 34.9
Interest expense.............................. 8.4 12.0 10.7 5.9 12.5
------ ------ ------ ------ -----------
Income before income taxes.................... 19.1 27.9 39.3 51.1 22.4
Income taxes.................................. 7.3 10.5 14.8 19.2 8.8
Extraordinary item(3)......................... -- -- -- (1.1 ) --
------ ------ ------ ------ -----------
Net income.................................... $ 11.8 $ 17.4 $ 24.5 $ 30.8 $ 13.6
------ ------ ------ ------ -----------
------ ------ ------ ------ -----------
DATA PER COMMON SHARE:
Net income, before extraordinary item
Basic....................................... $ 0.64 $ 0.95 $ 1.37 $ 1.74 $ 0.72
Diluted..................................... 0.63 0.90 1.26 1.60 0.69
OTHER DATA:
EBITDAR(4).................................... $108.7 $138.9 $155.4 $170.2 $ 206.2
Rental expense(5)............................. 67.2 80.8 84.2 91.5 118.5
EBITDA(6)..................................... 41.5 58.1 71.2 78.7 87.7
Capital expenditures.......................... $ 11.7 $ 34.7 $ 13.2 $ 36.6 $ 75.1
Ratio of earnings to fixed charges(7)......... 1.7 x 1.8 x 2.2 x 2.7 x 1.5 x
Percentage increase in comparable store
sales(8).................................... 1.0% 3.0% 7.5% 3.8% 3.5%
Store square footage (000's), at end of
period(9)................................... 11,423 11,522 11,613 12,119 15,270
Sales per square foot(10)..................... $ 77 $ 74 $ 81 $ 82 $ 86
Number of stores, end of period:
Traditional stores(11)...................... 964 935 913 896 1,034
Superstores................................. -- 1 1 7 24
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and temporary cash
investments................................. $ 21.9 $ 11.6 $ 12.6 $ 14.8 $ 20.4
Total assets.................................. 427.3 479.6 429.2 447.8 701.4
Long-term debt................................ 127.0 155.5 72.1 24.7 182.5
Shareholders' equity.......................... $161.7 $181.0 $199.4 $240.9 $ 259.0
</TABLE>
FOOTNOTES CONTINUED ON FOLLOWING PAGE
18
<PAGE>
- ------------------------------
(1) The following represents a break-out of our net sales between our
traditional stores and our superstores (unaudited):
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27, FEBRUARY 1, JANUARY 31, JANUARY 30,
1995 1996 1997 1998 1999
------------- ------------- ------------- ------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales:
Traditional stores.......... $ 677.3 $ 833.2 $ 923.2 $ 953.5 $ 1,154.6
Superstores................. -- 1.4 5.8 21.5 88.3
------ ------ ------ ------ -----------
Total net sales............... $ 677.3 $ 834.6 $ 929.0 $ 975.0 $ 1,242.9
------ ------ ------ ------ -----------
------ ------ ------ ------ -----------
</TABLE>
(2) We recorded a non-recurring charge of $25.1 million ($15.3 million on an
after-tax basis) related to the House of Fabrics acquisition in fiscal
1999. This charge consisted of write-downs of previously owned assets
affected by the House of Fabrics acquisition to estimated net realizable
value, the cost of operating duplicate corporate facilities during the
six-month transition period following the House of Fabrics acquisition, and
costs associated with the remerchandising of the acquired stores. The total
cash costs included in the non-recurring charge were approximately $15.9
million. We completed the planned integration events associated with the
acquisition by the end of the third quarter of fiscal 1999.
(3) We recorded an extraordinary item in fiscal 1998 for the early redemption
of convertible subordinated debentures outstanding. The extraordinary item,
net of taxes, consisted of the redemption premium, unamortized debenture
issuance costs and other related expenses.
(4) EBITDAR represents net income before taking into consideration interest
expense, income tax expense, depreciation and amortization expense,
non-recurring charges and rental expense. EBITDAR is not a measurement of
financial performance under generally accepted accounting principles.
Accordingly, you should not regard this figure as an alternative to net
income or as an indicator of our operating performance. We believe that
EBITDAR is widely used by analysts, investors and other interested parties
in our industry but is not necessarily comparable with similarly titled
measures for other companies.
(5) Rental expense includes base rent, percentage rent, common area
maintenance, real estate taxes, merchant association dues, landlord
property insurance and sublease rental income.
(6) EBITDA represents net income before taking into consideration interest
expense, income tax expense, depreciation and amortization expense, and
non-recurring charges. EBITDA is not a measurement of financial performance
under generally accepted accounting principles and does not represent cash
flow from operations. Accordingly, you should not regard this figure as an
alternative to net income or as an indicator of our operating performance
or as an alternative to cash flows as a measure of liquidity. We believe
that EBITDA is widely used by analysts, investors and other interested
parties in our industry but is not necessarily comparable with similarly
titled measures for other companies.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes and fixed charges. Fixed charges
consist of interest expense, amortization of deferred debt issuance costs
and the portion of occupancy expense deemed representative of interest.
(8) New stores are included in the calculation of comparable store sales on the
one-year anniversary of the store opening.
(9) Total store square footage includes selling floor space and inventory
storage areas.
(10) For fiscal 1999, average sales per square foot were $84 and $120, for
traditional stores and superstores, respectively. We based sales per
square foot on the total store square footage, which includes selling
floor space and inventory storage areas. To accommodate openings and
closings of store locations throughout the year, we calculated sales per
square foot using an average square foot amount for the year, rather than
the fiscal year end square foot amount.
(11) In April 1998, we completed the acquisition of House of Fabrics which had
annual net sales of approximately $240.0 million and operated 261 fabric
and craft stores in 27 states. Following the acquisition, we closed 60
House of Fabric stores and 30 Jo-Ann Fabrics and Crafts stores in
overlapping geographic locations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING INCLUDES A DISCUSSION OF OUR MOST RECENTLY COMPLETED FISCAL
YEARS. WE URGE YOU TO REVIEW OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED MAY 1, 1999 FOR MORE CURRENT INFORMATION ON JO-ANN STORES. SEE
"INCORPORATION OF DOCUMENTS BY REFERENCE" FOR INSTRUCTIONS ON HOW YOU MAY
RECEIVE OUR QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MAY 1, 1999, AND
OTHER FILINGS INCORPORATED INTO THIS PROSPECTUS BY REFERENCE, WITHOUT CHARGE.
We are the largest national category-dominant retailer, based on number of
stores, serving the retail fabric and craft industry. The retail fabric and
craft industry generated estimated combined revenues of $10.0 billion in 1998.
We operate 1,034 Jo-Ann Fabrics and Crafts traditional stores in 49 states and
24 Jo-Ann etc superstores in 12 states as of January 30, 1999. We serve the
approximately 70% of U.S. households that engaged in crafts and hobbies during
the past year by offering a large variety of competitively priced, high quality
apparel, quilting and craft fabrics and sewing-related products, home decorating
fabrics, floral, craft and seasonal products, educational classes and custom
services.
We have an approximately 20% market share in the consolidated fabric and
sewing-related products segment of the industry and an approximately four
percent market share in the highly fragmented craft products segment of the
industry.
Our traditional stores average 13,700 square feet, and we believe many are
located in markets that are currently underserved. Over the past five years we
have strategically relocated certain traditional stores, increasing average
square footage per store by 20% and sales per square foot by 11%. As a result,
net sales per traditional store have increased 33% to $1.2 million over this
period. In November 1995 we opened our first large format "category killer"
superstore which offers a more comprehensive product assortment and
higher-margin custom services including framing, home decoration, and furniture
and floral design. These superstores average 46,900 square feet and in fiscal
1999 generated approximately five times more revenue and 40% higher sales per
square foot than our traditional stores. We believe our superstores, which
accounted for approximately seven percent of fiscal 1999 net sales, will be our
future growth vehicle.
On March 9, 1998, we acquired, through a cash tender offer, 77.2% of the
outstanding common stock of House of Fabrics, Inc., a retail chain operating 261
fabric and craft stores predominantly on the West Coast. On April 21, 1998, the
merger of House of Fabrics with one of our wholly owned subsidiaries was
approved at a special meeting of the shareholders of House of Fabrics. Operating
results of the House of Fabrics stores continuing in operation have been
included in our results of operations since the date of the House of Fabrics
acquisition.
During fiscal 2000, we plan to proceed with the next phase of a three-year
project of implementing an enterprise-wide information technology system which
began in fiscal 1999. The project is expected to fully integrate financial and
operations systems at a cost of approximately $30.0 million, of which $8.8
million has been spent to date.
During the second half of fiscal 1999 and the beginning of fiscal 2000, we
have experienced higher costs than in prior periods due principally to higher
freight and logistics costs. We are working with a leading consulting firm to
design and implement a national logistics network in order to reduce these
expenses and provide for a more efficient logistics network. We believe that
this network will result in the addition of at least one new distribution center
at an estimated cost for construction and equipment of $30.0 million. During the
next 18 to 24 months, we expect to operate within our existing distribution
center in Hudson, Ohio together with a contract facility in California to handle
seasonal product demand. Until we complete the implementation of our new
logistics network, we may continue to experience higher costs as a result of
these factors.
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RESULTS OF OPERATIONS
The following table sets forth certain financial information from our
audited consolidated financial statements of income expressed as a percentage of
net sales and should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-------------------------------------------
<S> <C> <C> <C>
FISCAL YEARS ENDED
-------------------------------------------
<CAPTION>
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net sales.................................................................. 100.0% 100.0% 100.0%
Cost of sales.............................................................. 54.6 54.7 55.6
----- ----- -----
Gross profit............................................................... 45.4 45.3 44.4
Selling, general and administrative expenses............................... 38.4 37.2 36.7
Depreciation and amortization.............................................. 2.2 2.2 2.3
----- ----- -----
Operating profit before non-recurring charge............................... 4.8 5.9 5.4
Non-recurring charge....................................................... 2.0 -- --
----- ----- -----
Operating profit........................................................... 2.8 5.9 5.4
Interest expense........................................................... 1.0 0.6 1.1
----- ----- -----
Income before income taxes and extraordinary item.......................... 1.8 5.3 4.3
Income taxes............................................................... 0.7 2.0 1.7
----- ----- -----
Net income before extraordinary item....................................... 1.1 3.3 2.6
Extraordinary item......................................................... -- (0.1) --
----- ----- -----
Net income................................................................. 1.1% 3.2% 2.6%
----- ----- -----
----- ----- -----
</TABLE>
COMPARISON OF THE 52 WEEKS ENDED JANUARY 30, 1999 AND JANUARY 31, 1998
NET SALES. Net sales for fiscal 1999 were $1,242.9 million compared to
$975.0 million in fiscal 1998, an increase of $267.9 million, or 27.5%, compared
to fiscal 1998. Of this increase, $188.8 million was attributable to the
acquired House of Fabrics stores. Excluding the impact of the House of Fabrics
stores, sales increased 8.1%, or $79.1 million, compared to fiscal 1998. The
majority of this sales growth (excluding House of Fabrics) was generated by the
increase in the number of superstores, our 46,000 square foot format.
Twenty-four superstores were in operation at January 30, 1999 compared to seven
superstores at January 31, 1998. Comparable store sales increased 3.5% for
fiscal 1999 over fiscal 1998 and comparable store sales increased 3.8% for
fiscal 1998 over fiscal 1997.
GROSS PROFIT. Gross profit for fiscal 1999 was $564.4 million compared to
$441.8 million in fiscal 1998, an increase of $122.6 million, or 27.8%, compared
to fiscal 1998. As a percentage of net sales, fiscal 1999 gross profit was
45.4%, an increase of 0.1 percentage points from fiscal 1998. The gross profit
percentage improvement resulted from a continued improvement in shrink as
pricing to consumers and product costs were relatively constant between years.
In addition, higher freight costs, due to the increased level of inventory
handled during the year and a higher proportion of stores operating on the West
Coast, were partially offset by increased vendor support in the form of quantity
discounts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, excluding non-recurring charges, were $476.7 million in
fiscal 1999 compared to $363.1 million in fiscal 1998, an increase of $113.6
million, or 31.3%, over fiscal 1998. Selling, general and administrative
expenses as a percentage of net sales were 38.4% in fiscal 1999 compared to
37.2% in fiscal 1998, an increase of 1.2 percentage points from fiscal 1998. The
increase, as a percentage of sales, consisted primarily of
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increases in distribution expenses due to the higher level of inventory handled,
store opening expenses and Year 2000 compliance expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for
fiscal 1999 was $27.7 million compared to $21.7 million in fiscal 1998, an
increase of $6.0 million, or 27.6%, compared to fiscal 1998. Of this increase,
$4.2 million was due to the House of Fabrics acquisition and the balance was
attributable to higher capital expenditure levels in the most recent and prior
year.
NON-RECURRING CHARGE. During fiscal 1999, we incurred a non-recurring
charge of $25.1 million pretax ($15.3 million on an after-tax basis) related to
the House of Fabrics acquisition. This charge consisted of write-downs of
previously owned assets affected by the House of Fabrics acquisition to
estimated net realizable value, the cost of operating duplicate corporate
facilities during the six-month transition period following the House of Fabrics
acquisition, and costs associated with the remerchandising of the acquired
stores. The total cash costs included in the non-recurring charge were
approximately $15.9 million. The planned integration events associated with the
acquisition were completed by the end of the third quarter of fiscal 1999.
OPERATING PROFIT. Operating profit for fiscal 1999 was $34.9 million,
compared to $57.0 million in fiscal 1998, a decrease of $22.1 million, or 38.8%,
compared to fiscal 1998. Excluding the non-recurring charge incurred in fiscal
1999, operating profit would have been $60.0 million in fiscal 1999, an increase
of $3.0 million over fiscal 1998.
INTEREST EXPENSE. Interest expense for fiscal 1999 was $12.5 million
compared to $5.9 million in fiscal 1998, an increase of $6.6 million compared to
fiscal 1998. The increase was due to higher debt levels resulting from the House
of Fabrics acquisition and increased inventory levels.
INCOME TAXES. Income taxes during fiscal 1999 were $8.8 million compared to
$19.2 million in fiscal 1998, a decrease of $10.4 million compared to fiscal
1998. The effective income tax rate was 39.0% for fiscal 1999 compared to 37.5%
for fiscal 1998. The effective tax rate increased due to higher state income tax
expense as a result of fully utilizing state tax net operating loss carry
forwards during fiscal 1999 and the impact of nondeductible amortization of
goodwill from the House of Fabrics acquisition.
NET INCOME. Net income during fiscal 1999 was $13.6 million compared to
$30.8 million in fiscal 1998, a decrease of $17.2 million, or 55.8%, compared to
fiscal 1998. Excluding the non-recurring charge in fiscal 1999, net income would
have been $28.9 million in fiscal 1999, a decrease of $1.9 million or 6.2%
compared to fiscal 1998.
COMPARISON OF THE 52 WEEKS ENDED JANUARY 31, 1998 AND THE 53 WEEKS ENDED
FEBRUARY 1, 1997
NET SALES. Net sales for fiscal 1998 were $975.0 million compared to $929.0
million in fiscal 1997, an increase of $46.0 million, or 5.0%, compared to
fiscal 1997. The sales increase was $62.6 million, or 6.9%, after adjusting
fiscal 1997 to 52 weeks. Comparable store sales increased 3.8% in fiscal 1998
over fiscal 1997, and comparable store sales increased by 7.5% in fiscal 1997
compared to fiscal 1996.
GROSS PROFIT. Gross profit for fiscal 1998 was $441.8 million compared to
$412.1 million in fiscal 1997, an increase of $29.7 million, or 7.2%, compared
to fiscal 1997. As a percent of net sales, gross profit for fiscal 1998 was
45.3%, an increase of 0.9 percentage points from fiscal 1997. The gross profit
margin percent improvement resulted primarily from reduced markdowns on seasonal
merchandise and improvements in store inventory shrink due to a focus on
inventory control disciplines, including enhanced shrinkage controls.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $363.1 million in fiscal 1998 compared to $340.9
million in fiscal 1997, an increase of $22.2 million, or
22
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6.5%, compared to fiscal 1997. Selling, general and administrative expenses were
37.2% of net sales for fiscal 1998, an increase of 0.5 percentage points from
fiscal 1997. The increase, as a percentage of sales, consisted primarily of
increases in advertising, distribution and store occupancy expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $21.7
million in fiscal 1998 compared to $21.2 million in fiscal 1997, an increase of
$0.5 million.
OPERATING PROFIT. Operating profit was $57.0 million in fiscal 1998
compared to $50.0 million in fiscal 1997, an increase of $7.0 million, or 14.0%,
compared to fiscal 1997.
INTEREST EXPENSE. Interest expense was $5.9 million in fiscal 1998 compared
to $10.6 million in fiscal 1997, a decrease of $4.7 million, or 44.3%. Interest
expense for fiscal 1998 decreased due to a $47.4 million reduction in debt
levels from the beginning of the year, coupled with an $83.4 million reduction
in debt in the year earlier period. These debt reductions were achieved
primarily through cash flows from operations and reductions in working capital.
INCOME TAXES. Income taxes were $19.2 million in fiscal 1998 compared to
$14.8 million in fiscal 1997, an increase of $4.4 million compared to fiscal
1997. The effective income tax rate was 37.5% for fiscal 1998 and fiscal 1997.
EXTRAORDINARY ITEM. During the second quarter of fiscal 1998, we incurred
an extraordinary loss of $1.1 million, or $0.06 per share, related to the early
redemption of our 6 1/4% Convertible Subordinated Debentures due 2002. The
redemption was funded through the use of our senior credit facility.
NET INCOME. Net income was $30.8 million in fiscal 1998 compared to $24.6
million in fiscal 1997, an increase of $6.2 million, or 25.2%, compared to
fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
FISCAL 1999 CASH FLOWS
Cash, including temporary cash investments, increased $5.6 million during
fiscal 1999 to $20.4 million as of January 30, 1999.
Net cash used for operating activities was $15.3 million in fiscal 1999,
compared to net cash provided by operating activities of $78.1 million in fiscal
1998. Cash generated by operations in fiscal 1999, before working capital items,
totaled $61.2 million, an improvement of $6.7 million compared to the $54.5
million generated during fiscal 1998. Working capital consumed $76.5 million of
cash. Inventories, net of payables support, increased $81.4 million due to the
opening of 17 additional superstores, the remerchandising of the acquired House
of Fabrics stores with a denser mix of inventory per square foot, and higher
levels of inventory in the distribution service center.
Net cash used for investing activities for fiscal 1999 totaled $94.3 million
compared to $37.1 million in fiscal 1998. The primary investment activities in
fiscal 1999 were the acquisition of House of Fabrics and capital expenditures.
We completed our acquisition of the outstanding stock of House of Fabrics during
the first quarter of fiscal 1999 for a total purchase price of $23.5 million. In
addition to the cost of the outstanding stock, we assumed approximately $73.6
million in debt and other long-term liabilities, including a $22.5 million
income tax contingency discussed in Note 2 to the consolidated financial
statements appearing elsewhere in this prospectus. We made a payment to the
Internal Revenue Service of $16.1 million in February 1999, representing $12.3
million of the $22.5 million income tax liability and $3.8 million of accrued
interest, in connection with this income tax contingency. We are currently in
discussions with the Internal Revenue Service regarding this contingency.
Capital expenditures were $75.1 million during fiscal 1999 and are discussed
further under the caption "--Capital Expenditures."
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<PAGE>
Net cash provided by financing activities during fiscal 1999 was $115.2
million, of which $111.3 million represented an increase in borrowings under our
senior credit facility and $4.4 million represented the proceeds and tax benefit
from the exercise of stock options.
In December 1998, our board of directors authorized the repurchase of up to
an additional 2.0 million shares of our common stock. This authorization, when
coupled with prior authorizations by the board of directors, allows for the
repurchase of up to approximately 3.1 million shares at January 30, 1999. During
fiscal years 1999 and 1998, we purchased a total of 83,499 shares at an
aggregate price of $1.5 million under these authorizations. We have purchased an
additional 647,860 shares in fiscal 2000 at an aggregate price of $8.6 million
through April 9, 1999.
FISCAL 1998 CASH FLOWS
Cash, including temporary cash investments, increased $2.2 million during
fiscal 1998 to $14.8 million as of January 31, 1998.
Net cash provided by operating activities was $78.1 million in fiscal 1998
compared to $103.9 million in fiscal 1997. Cash generated by operations, before
working capital items, totaled $54.5 million, an improvement of $8.9 million
from the $45.6 million generated during fiscal 1997. Working capital generated
$23.6 million of cash, due to inventory levels being held constant with an
improvement in trade payables support.
Net cash used for investing activities in fiscal 1998 totaled $37.1 million,
substantially all of which related to capital expenditures, as discussed further
under the caption "--Capital Expenditures."
Net cash used for financing activities was $38.8 million. Borrowings of
$87.3 million during fiscal 1998 were offset by repayments of $77.7 million of
long-term debt and the redemption for $57.0 million of our convertible
debentures. We also received $8.4 million from the exercise and tax benefit of
stock options.
CAPITAL EXPENDITURES
During fiscal 1999, we reinvested $75.1 million into our business, of which
$52.6 million represented investment in new stores and upgrades through
relocation or remodel of our existing store base, including $16.0 million to
remodel the acquired House of Fabrics stores. During fiscal 1999, we opened 31
stores, including 17 superstores, and relocated 19 traditional stores.
We spent $4.9 million in fiscal 1999 on capital projects for our
distribution service center to, among other initiatives, install a fabric
selection module and a split case selection module to improve picking
efficiency. A second fabric selection module is scheduled to be installed in the
52 weeks ended January 29, 2000.
We spent $15.3 million in fiscal 1999 on capitalizable systems technology,
of which $8.8 million related to the first year of a three-year project to
replace substantially all of our existing legacy systems with a fully integrated
enterprise-wide system, utilizing software supplied by SAP AG. The total cost of
this project is estimated to be $30.0 million and will replace all of our
financial, merchandising and human resource systems. The financial systems were
installed and became operational in the fourth quarter of fiscal 1999.
During fiscal 1998, we reinvested $36.6 million into our business, of which
$24.0 million represented our investment in new and relocated stores. During
fiscal 1998, we opened 24 stores, including six superstores, and relocated or
expanded 42 traditional stores. We spent $4.5 million in fiscal 1998 on our
distribution service center to install conveyor equipment and construct
additional shipping docks. The balance of our capital expenditures in fiscal
1998 were primarily for capitalizable systems technology enhancements.
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During fiscal 2000, we intend to open up to 30 new stores, including 18
superstores, relocate 25 traditional stores, and remodel an additional 15
traditional stores. We also intend to continue our enterprise-wide system
implementation program. Our total capital expenditures are expected to
approximate $70.0 million in fiscal 2000. We also plan to spend approximately
$30.0 million in future fiscal years for construction and equipment in
connection with the addition of at least one new distribution center ($5.0
million of which will be spent in fiscal 2000). We have no material commitments
in connection with these planned capital expenditures. Funds for these
expenditures are expected to be provided from borrowings under our senior credit
facility and cash generated internally.
SOURCES OF LIQUIDITY
We have three principal sources of liquidity:
- cash from operations;
- cash and temporary cash investments; and
- our senior credit facility.
Our existing senior credit facility is an unsecured revolving facility
maturing on January 31, 2003 and provides for total credit commitments,
including letters of credit and related acceptances, of $250.0 million, plus an
additional $30.0 million of outside bank lines. As of January 30, 1999, we had
cash borrowings of $182.5 million under the senior credit facility and outside
bank lines. In addition, we had $40.6 million in letters of credit and related
acceptances outstanding under the senior credit facility at January 30, 1999. As
of April 29, 1999, we had $233.9 million of debt outstanding under the senior
credit facility (not including $45.0 million of letters of credit). The senior
credit facility includes a number of financial, operating and restrictive
covenants. We are currently in compliance with all such covenants.
We are currently in the process of negotiating a new five-year senior
unsecured revolving credit facility that will increase the total credit
commitment, including letters of credit and related acceptances, to $300.0
million, plus an additional $30.0 million of outside bank lines. The new senior
credit facility will provide us with greater financial flexibility because it
will permit this offering and, subject to the satisfaction of some of its
financial covenants, also will permit us to incur additional senior and
subordinated debt. We believe that our new senior credit facility, coupled with
cash on hand and from operations and the net proceeds of this offering, will be
sufficient to cover our working capital, capital expenditure and debt service
requirement needs for the foreseeable future. The closing of the sale of the
notes is conditioned upon our closing the new senior credit facility in the
aggregate amount of at least $250.0 million. See "Description of Certain
Indebtedness."
SEASONALITY AND INFLATION
Our business exhibits seasonality which is typical for most retail
companies, with much stronger sales in the second half of the year than the
first half of the year. Net earnings are highest during the months of September
through December when sales volumes provide significant operating leverage.
Capital requirements needed to finance our operations fluctuate during the year
and reach their highest levels during the second and third fiscal quarters as we
increase our inventory in preparation for our peak selling season.
We believe that inflation has not had a significant effect on the growth of
net sales or on net income over the past three years.
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YEAR 2000
The "Year 2000 issue" refers to the inability of computers and related
software to correctly interpret and process Year 2000 dated transactions. The
software problem results from a memory-saving practice of using two digits
instead of four to denote years in a program. Computer systems that are not Year
2000 compliant may not be able to be relied upon to process data accurately for
transactions dated after the year 1999.
We have developed and are executing plans to address possible exposures
related to the impact on our computer systems of the Year 2000 issue. Our
planned modification of our existing systems was complete as of January 30,
1999, and testing and certification of these completed modifications is in
process and is expected to be completed by August 31, 1999. Expenditures for
modifying existing software to address Year 2000 issues are estimated to total
$2.5 to $3.0 million, of which $2.1 million has been spent to date, $1.6 million
in fiscal 1999 and $0.5 million in fiscal 1998. All expenditures are being
expensed as incurred. We expect that we will be able to test and certify the
affected systems that we have modified in time to avoid any material disruption
to operations; however, unforeseen developments or delays could cause this
expectation to change.
We are also engaged in a significantly larger project of implementing an
enterprise-wide system which began in fiscal 1999 and will continue over the
next several years at a total cost of approximately $30.0 million. The project
is expected to fully integrate financial and operations systems, creating
increased reliability and usefulness of our data. Our financial systems became
operational under this enterprise-wide system implementation in the fourth
quarter of fiscal 1999 and are Year 2000 compliant. The merchandise and human
resource operating systems are expected to become operational in fiscal 2000 and
2001. However, as discussed above, we are not relying on this implementation to
address Year 2000 issues related to our existing operational systems.
We are also in the process of developing contingency plans that focus on
reducing any disruption that might be created by product suppliers with whom we
do business being Year 2000 noncompliant. We have communicated with our key
suppliers to identify the nature and potential impact of issues presented by the
Year 2000 on the businesses of such suppliers. We are not presently aware of any
product supplier-related issue presented by the Year 2000 that is likely to have
a material impact on us. None of our suppliers in fiscal 1999 provided more than
2% of our products. In the first half of fiscal 2000, we will evaluate any
supplier-related issues and other external risks and we will develop contingency
plans as necessary. There can be no assurances that the systems or products of
third parties on which we rely will be converted on a timely basis or that a
failure by a third party, or a conversion that is incompatible with our systems,
would not have a material adverse effect on our results of operations, financial
condition or business.
We anticipate minimal business disruption will occur as a result of Year
2000 issues. However, possible consequences include, but are not limited to,
temporary disruption of our normal business operations, loss of communications
links with store locations, loss of electric power, inability to process
transactions, problems with ordering and receiving merchandise and problems with
banks and other financial institutions. We believe that our worst case scenario
involves the inability of electric utility companies to service our various
stores due to Year 2000 problems. If the electric utility companies cannot
provide power to a significant number of our stores, our business and operations
could be materially disrupted.
DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISK
We are exposed to the impact of:
- interest rate changes on our outstanding borrowings under the senior
credit facility; and
- foreign currency fluctuations on merchandise that is sourced
internationally.
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In the normal course of business, we employ established policies and
procedures to manage our exposure to changes in interest rates. Our objective in
managing the exposure to interest rate changes is to limit the impact of
interest rate changes on earnings and cash flows and to lower our overall
borrowing costs. To achieve our objective, we utilize interest rate swaps to
manage net exposure to interest rate changes related to our debt structure. On
March 15, 1998, we entered into a five-year interest rate swap agreement to
hedge our interest rate exposure. The notional amount of this interest rate swap
is $75.0 million, with a fixed London Interbank Offered Rate of 5.98%, reducing
to $50.0 million on March 15, 2001 for the remaining term of the agreement.
Foreign currency exchange rate fluctuations, we believe, do not contain
significant market risk due to the nature of our relationships with our
international vendors. All merchandise contracts are denominated in U.S. dollars
and are subject to negotiation prior to our commitment for purchases.
Approximately 15% of our purchases are sourced internationally and no single
vendor makes up more than 10% of this total. As a result, there is not a direct
correlation of merchandise prices relative to fluctuations in the exchange rate.
RECENT ACCOUNTING PRONOUNCEMENTS
COMPREHENSIVE INCOME. In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130, "Reporting on
Comprehensive Income." This statement became effective in our first quarter of
fiscal 1999. This statement establishes standards for reporting and display of
comprehensive income and its components. We currently have no items that qualify
as comprehensive income under the definitions of this statement and the
presentation of previously reported results is not affected.
SEGMENT REPORTING. In June 1997, Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information," was issued. Based on the information utilized by our operating
decision makers to manage the business, we currently have no segments which
require disclosure under the quantitative thresholds defined by the statement.
DERIVATIVES. In June 1998, Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," was issued.
We must adopt the statement in fiscal 2000. Under provisions of this statement,
we will be required to record all derivatives on the balance sheet at fair value
and establish special accounting rules for the different types of hedges.
Implementation of this standard is not expected to have a material impact on our
financial position or results of operations.
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<PAGE>
BUSINESS
We are the largest national category-dominant retailer serving the retail
fabric and craft industry, which generated estimated combined revenues of $10.0
billion in 1998. We were founded as a single retail store in 1943. As of January
30, 1999, we operated 1,034 Jo-Ann Fabrics and Crafts traditional stores in 49
states and 24 Jo-Ann etc superstores in 12 states. We serve the approximately
70% of U.S. households that engaged in crafts and hobbies during the past year
by offering a large variety of competitively priced, high quality apparel,
quilting and craft fabrics and sewing-related products, home decorating fabrics,
floral, craft and seasonal products, educational classes and custom services. We
have increased our net sales and EBITDA over the past five years from $677.3
million and $41.5 million, respectively, in fiscal 1995 to $1,242.9 million and
$87.7 million, respectively, in fiscal 1999. These increases represent compound
annual growth rates of approximately 16% and 21%, respectively. In addition, we
have achieved 18 consecutive quarters of positive comparable store sales growth.
We have an approximately 20% market share in the consolidated fabric and
sewing-related products segment and an approximately four percent market share
in the highly fragmented craft products segment. Our preferred mailing list
includes more than four million customers, and we believe that we have many
loyal customers who visit our stores at least every two weeks. In addition, our
website (www.joann.com) is accessed approximately 100,000 times per month. We
believe that our customers visit our website to obtain information on our
products, classes and services and to communicate with other sewing and craft
enthusiasts.
Our traditional stores primarily serve small and middle markets, and our
recently developed superstores serve selected markets where traditional store
performance and area demographics are favorable. Our traditional stores average
13,700 square feet, and we believe many are located in markets that are
currently underserved. Over the past five years we have strategically relocated
certain traditional stores, increasing average square footage per store by 20%
and sales per square foot by 11%. As a result, net sales per traditional store
have increased 33% to $1.2 million over this period. In November 1995 we opened
our first large format "category killer" superstore which offers a more
comprehensive product assortment and higher-margin custom services including
framing, home decoration, and furniture and floral design. These superstores
average 46,900 square feet and in fiscal 1999 generated approximately five times
more revenue and 40% higher sales per square foot than our traditional stores.
We believe our superstores, which accounted for approximately seven percent of
fiscal 1999 net sales, will be our future growth vehicle.
Historically, we have grown and increased market share principally through
existing store growth, new store openings and strategic acquisitions. In April
1998, we acquired House of Fabrics, a chain of 261 fabric and craft stores
located primarily on the West Coast. By September 1998, we successfully
integrated, remerchandised and rebranded the former House of Fabrics stores.
These stores had been significantly under-inventoried as a result of the
previous owner's financial constraints. In addition to eliminating duplicate
overhead, we expect to re-establish these stores' former sales base by
increasing product selection and availability.
COMPETITIVE STRENGTHS
We believe that we have the following competitive advantages in our
industry:
- LEADING MARKET SHARE. We are the largest national category-dominant
retailer in the estimated $10.0 billion fabric and craft industry based on
number of stores and have a well-established national brand name. We
estimate that we enjoy an approximately 20% market share in the
approximately $4.0 billion consolidated fabric and sewing-related products
segment and an approximately four percent market share in the
approximately $6.0 billion highly fragmented craft products segment. We
have only one national competitor in each of these segments, and the
balance of our competitors are regional and local operators.
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- ABILITY TO BENEFIT FROM SOCIETAL TRENDS. We believe that societal trends
toward lifestyle improvement, family-oriented activities and the recent
proliferation of home decorating, gardening and crafting programming on
television have served to promote interest in the retail fabric and craft
industry. As the largest national category-dominant retailer serving this
industry, we believe that we are well positioned to serve the
approximately 70% of all U.S. households that completed at least one craft
or hobby project during the past year. We believe influential figures
including Martha Stewart and Rosie O'Donnell increase consumer awareness
of sewing and crafting through their highly rated television programs. We
are a sponsor of THE CAROL DUVALL SHOW on The Home and Garden Television
network, INTERIOR MOTIVES on the Discovery Channel and AMERICA SEWS on
PBS.
- LOYAL CUSTOMER BASE SUPPORTED BY EXCEPTIONAL CUSTOMER SERVICE. Our mission
is to serve and inspire creativity. We provide a solution-oriented
shopping experience with employees who are trained to assist customers in
creating and completing creative projects. Many of our store level
employees are sewing and/or craft enthusiasts, which enables them to
provide exceptional customer service. We believe our focus on service
contributes to a high proportion of repeat business from our customers,
and that we have many loyal customers who visit our stores at least every
two weeks. More than 50% of our advertising budget is allocated to our
direct mail program targeting three to four million of our preferred
customers.
- DIVERSE SELECTION OF HIGH QUALITY PRODUCTS. We believe our superstores are
uniquely designed to create a destination location for our customers and
offer a complete selection of fabric, craft and home decorating supplies
and services. Our traditional stores offer a comprehensive and fashionable
selection of fabric and a competitive, convenient assortment of crafts.
During fiscal 1999, sewing, craft and seasonal, and home decorating and
floral products represented 58%, 26%, and 16% of our net sales,
respectively. We believe our merchandise is of superior quality,
represents good value to our customers, and provides us with a diverse
revenue base.
- FAVORABLE REAL ESTATE SELECTION AND MANAGEMENT. We believe that our store
locations are integral to our success. We have built a five-member real
estate management team that collectively has more than 160 years of
experience in real estate site selection and lease negotiation. As a
result of our 56-year operating history and more than 15 million square
feet of stores under lease, we have developed long-term relationships with
real estate developers nationwide and are generally able to negotiate
advantageous lease terms. Additionally, we often obtain favorable store
sites because developers recognize that our stores draw customers to
shopping centers and there is less competition for real estate within our
retailing segment. As a result, our traditional store leases typically
provide for five-year terms, renewable at our option, rather than the
ten-year industry standard, and often allow us to cancel them before the
end of their initial terms. For example, in the recently completed House
of Fabrics acquisition, we have already negotiated rent settlements for 70
of the 90 overlap locations that we closed.
- EXPERIENCED MANAGEMENT TEAM. Our eight-member senior management team
collectively has more than 160 years of retail industry experience and
more than 70 years of fabric and craft industry experience. In addition,
our three general merchandise managers collectively have more than 50
years of fabric and craft industry buying experience.
BUSINESS STRATEGY
Our business strategy is to emphasize and build on our significant
competitive strengths to increase net sales and EBITDA. The key components of
this strategy include:
- MAINTAIN HIGHLY ATTRACTIVE STORE ECONOMICS. Our return on new store
investment has been rapid, with both new traditional stores and
superstores generating breakeven cash flows after approximately 2.5 years
(3.5 years including inventory investment). We conduct an internal rate
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of return analysis on all new and relocation store projects based on their
projected ten-year after-tax cash flow, including distribution and
corporate overhead costs. We generally approve new and relocation store
projects that provide a minimum 15% internal rate of return.
- CONTINUE SUPERSTORE OPENINGS. We believe our superstores are the best
vehicle to bring our product to market in major metropolitan areas. Our
superstores are staffed with expert personnel and carry comprehensive
product selections that create a destination-oriented shopping experience
and draw customers from a broader geographic area than our traditional
stores. We expect to add superstores in selected markets where current
traditional store performance and area demographics are favorable. On
average, we plan to close one to two traditional stores for each
superstore we open in an existing market. We expect this to increase our
total store square footage but not necessarily our total store count. At
the end of fiscal 1999, we operated 24 superstores and during fiscal 2000
we plan to open 18 new superstores.
- REPOSITION AND ADD TRADITIONAL STORES. Our traditional stores will
continue to be our vehicle for bringing creativity to small and middle
markets, many of which we believe are currently underserved. We will
continue to actively manage this portion of our store base, relocating and
opening new traditional stores as market conditions and leasing
opportunities dictate. Over the past five years, this repositioning has
increased average square footage by more than 20% and sales per square
foot by 11%. As a result, sales per traditional store have increased 33%
to $1.2 million.
- INCREASE SALES PER SQUARE FOOT IN TRADITIONAL STORES. We believe that by
increasing the breadth of our merchandise assortments, we can increase
sales per square foot in our traditional stores. In fiscal 1999, we
completely remerchandised the 201 retained House of Fabrics stores,
developing product assortments based on their assessed potential. The
result was an increase in average net sales per House of Fabrics store
from 85% of our average net sales per traditional store at the time of
acquisition to more than 100% in the 28 weeks after the grand reopening of
these stores under the Jo-Ann name. We plan to selectively remodel 15
traditional stores during fiscal 2000 to increase inventory density,
expand product assortment and improve sales productivity.
- IMPLEMENT INTEGRATED MANAGEMENT INFORMATION SYSTEMS. We are currently
implementing a fully integrated management information system designed by
SAP AG at a cost of approximately $30.0 million, of which $8.8 million has
been spent to date. We are implementing the system software in three major
phases, with financial systems already installed and operational, retail
systems scheduled for installation during fiscal 2000 and human resource
systems scheduled for installation during fiscal 2001. This project is
designed to improve inventory management and gross margins by providing
automatic merchandise replenishment to each store based on historical
demand. This project is also designed to merge all of our financial and
operational systems and link our business processes on a single software
platform.
- IMPROVE MARGINS THROUGH ENHANCED LOGISTICS NETWORK. We are working with a
leading consulting firm to design and implement a national logistics
network. This network, when completed, is expected to include at least one
additional permanent distribution center, at an estimated cost for
construction and equipment of $30.0 million, and create a more efficient
operating cost structure. During the next 18 to 24 months, we expect to
utilize our existing distribution center in Hudson, Ohio, along with a
contract facility in California to handle seasonal product demand.
PRODUCT SELECTION
Each of our stores offers a broad selection of traditional sewing, craft and
seasonal, and home decorating and floral merchandise.
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The following table shows our sales by principal product lines as a
percentage of total net sales:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Principal product line:
Traditional sewing................................... 58% 62% 65%
Craft and seasonal................................... 26 24 22
Home decorating and floral........................... 16 14 13
--- --- ---
Total............................................ 100% 100% 100%
--- --- ---
--- --- ---
</TABLE>
Our traditional stores have historically carried a full selection of sewing
merchandise and a convenient assortment of craft, seasonal, home decorating and
floral products. Our superstores offer a competitive assortment of merchandise
in all of our principal product lines and have a more diversified sales mix.
During fiscal 1999, 36% of superstore net sales were derived from traditional
sewing, 33% from crafts and seasonal and 31% from home decorating and floral.
TRADITIONAL SEWING
We believe that we provide the most extensive offering of apparel, quilting
and craft fabrics and sewing-related products available to our customers. We
offer the following traditional sewing selection:
- apparel fabrics, used primarily in the construction of garments, including
a wide variety of solid and printed cottons, linens, wools, fleece and
outerwear;
- an upscale selection of fabrics, including satins, metallics, evening
wear, bridal and special occasion;
- craft fabrics, used primarily in the construction of quilts, craft and
holiday projects, including calico, quilting, solids, holiday fabric and
juvenile designs;
- printed fabrics, including juvenile prints, seasonal designs for spring,
summer, fall and winter, and logo-related prints such as team emblems of
the National Football League;
- proprietary print designs which are unique to our stores; and
- notions, which represent all items incidental to sewing-related projects
other than fabric, including cutting implements, threads, zippers, trims,
tapes, pins, elastics, buttons and ribbons.
We also sell patterns and a limited number of sewing machines. Our high
volume stores offer a wider selection of sewing machines through leased
departments with third parties from whom we receive sublease income.
CRAFTS AND SEASONAL
Our superstores offer a full line of craft products, while our traditional
stores offer a convenient assortment. We carry both perennial and seasonal
products in a wide variety of categories. We offer the following craft
selection:
- general craft materials, including items used for stenciling, doll making,
jewelry making, woodworking, wall decor, rubber stamps, memory books and
plaster;
- brand name fine art materials, including items such as pastels, water
colors, oil paints, acrylics, easels, brushes, paper and canvas;
- hobby items, including wooden and plastic model kits and related supplies,
and paint-by-number kits;
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- home accessories, including baskets, candles and potpourri; and
- needlecraft items, including hand-knitting yarns, needles, canvas,
needlepoint, embroidery and cross-stitching, knitting, crochet and other
stitchery supplies.
In addition to the basic categories described above, our stores regularly
feature seasonal products, which complement our core merchandising strategy. Our
seasonal offering spans all product lines and includes decorations, gifts and
supplies that focus on holidays including Easter, Halloween and Christmas, as
well as seasonal categories such as patio/garden. We own several private label
seasonal brands including the "Cottontale Collection," "Spooky Hollow" and
"Santa's Workbench."
During the Christmas selling season, a significant portion of floor and
shelf space is devoted to seasonal crafts, decorating and gift-making
merchandise. Due to the project-oriented nature of these items, our peak selling
season extends longer than that of other retailers and generally runs from
October through December. Accordingly, a fully developed seasonal merchandising
program, including inventory, merchandise layout and instructional ideas, is
implemented in every store during our third quarter of each fiscal year. This
program includes increasing inventory levels so that each store is fully stocked
during our peak selling season.
HOME DECORATING AND FLORAL
We offer an extensive selection of fabrics used in home decorating projects
such as window treatments and furniture and bed coverings. In addition, our
superstores offer custom window treatments and a full service framing department
stocked with picture framing materials, including ready-made and custom frames,
mat boards, glass, backing materials and related supplies, framed art and photo
albums.
Our floral products line includes silk flowers, dried flowers, artificial
plants sold separately or in ready-made and custom floral arrangements. We also
carry a broad selection of accessories required for floral arranging and wreath
making.
CUSTOMER SERVICE
We believe that customer service is an important aspect of our merchandising
strategy. Each store is staffed with knowledgeable employees and uses displays
in an effort to stimulate and promote new project ideas.
We believe that our extensive instructional programs conducted in our
superstores are the best in the industry, and serve to add new customers and
build customer loyalty. We view these programs as educational tools for our
customers and investments in our employees. Each of our superstores offers more
than 1,500 classes per year to approximately 4,000 customers. In addition, our
website (www.joann.com), which is accessed approximately 100,000 times per
month, offers information on our products, classes and services and provides a
forum for craft enthusiasts to interact.
MARKETING
We have recently rebranded all of our stores under the Jo-Ann name and have
begun a national advertising campaign. Our proprietary mailing list of more than
four million preferred customers allows us to efficiently reach our target
market. Through our national advertising campaign and proprietary mailing list,
we believe that we are able to create high impact, low cost marketing campaigns.
We focus our advertising on direct mail circulars and to a lesser extent on
newspaper advertising. We have found that mailing full-color circulars to
frequent customers is our most effective advertising program. Each circular
features numerous products offered at competitive prices and emphasizes the wide
selection of merchandise available in the stores.
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PURCHASING
We have numerous competitive domestic and international sources of supply
available for each category of merchandise that we sell. During fiscal 1999,
approximately 85% of our purchases were sourced domestically and 15% were
sourced internationally. Although we have no long-term purchase commitments with
any of our suppliers, we strive to maintain continuity with them. All purchases
are centralized through our corporate office, allowing store managers and sales
associates to focus on customer sales and service and enabling us to negotiate
volume discounts, control product mix and ensure quality. Currently, none of our
suppliers represents more than two percent of our purchasing volume and the top
ten suppliers represent less than 17% of our total purchasing volume. We
currently utilize more than 1,200 suppliers, with the top 200 representing more
than 80% of our purchasing volume.
LOGISTICS
We operate one owned distribution center in Hudson, Ohio, which ships
products to all of our stores on a weekly basis. Approximately 80% of the
merchandise sold in a traditional store and 65% of the merchandise sold in a
superstore is handled through this facility with the remainder shipped directly
from our vendors. We also utilize a contract warehouse in California to
distribute peak seasonal product. As part of our strategic logistics network
design project, we expect to build a new permanent distribution center at an
estimated cost for construction and equipment of $30.0 million.
We transport merchandise from our distribution center to our stores
utilizing contract carriers. Some merchandise is transported to 28 regional
"hubs" and repacked for local delivery. We do not own either the regional hubs
or local delivery vehicles.
STORES
LOCATION. The following table shows our stores by type and state at January
30, 1999:
<TABLE>
<CAPTION>
TRADITIONAL SUPERSTORE TOTAL
------------- ------------- ---------
<S> <C> <C> <C>
Alabama.............. 4 -- 4
Alaska............... 5 -- 5
Arizona.............. 17 2 19
Arkansas............. 3 -- 3
California........... 129 -- 129
Colorado............. 17 -- 17
Connecticut.......... 19 1 20
Delaware............. 3 -- 3
Florida.............. 57 4 61
Georgia.............. 16 -- 16
Idaho................ 10 -- 10
Illinois............. 49 -- 49
Indiana.............. 33 1 34
Iowa................. 12 -- 12
Kansas............... 10 1 11
Kentucky............. 7 -- 7
Louisiana............ 9 -- 9
Maine................ 5 -- 5
Maryland............. 21 2 23
Massachusetts........ 26 -- 26
Michigan............. 63 1 64
Minnesota............ 24 1 25
Mississippi.......... 1 -- 1
Missouri............. 14 -- 14
Montana.............. 7 -- 7
<CAPTION>
TRADITIONAL SUPERSTORE TOTAL
------------- ------------- ---------
<S> <C> <C> <C>
Nebraska............. 6 -- 6
Nevada............... 6 1 7
New Hampshire........ 10 -- 10
New Jersey........... 16 -- 16
New Mexico........... 6 -- 6
New York............. 49 2 51
North Carolina....... 7 -- 7
North Dakota......... 4 -- 4
Ohio................. 78 5 83
Oklahoma............. 7 -- 7
Oregon............... 26 -- 26
Pennsylvania......... 61 -- 61
Rhode Island......... 3 -- 3
South Carolina....... 2 -- 2
South Dakota......... 2 -- 2
Tennessee............ 4 3 7
Texas................ 73 -- 73
Utah................. 15 -- 15
Vermont.............. 4 -- 4
Virginia............. 24 -- 24
Washington........... 38 -- 38
West Virginia........ 7 -- 7
Wisconsin............ 23 -- 23
Wyoming.............. 2 -- 2
----- --- ---------
Total............ 1,034 24 1,058
----- --- ---------
----- --- ---------
</TABLE>
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The following table reflects the number of stores opened, expanded or
relocated, closed and acquired during each of the past five fiscal years:
<TABLE>
<CAPTION>
STORES IN
STORES EXPANDED OR STORES STORES OPERATION AT
FISCAL YEAR OPENED RELOCATED CLOSED ACQUIRED YEAR-END
- ----------- ------------- ----------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1995...... 10 28 43 342(1) 964
1996...... 14 48 42 -- 936
1997...... 13 37 35 -- 914
1998...... 24 42 35 -- 903
1999...... 31 26 47 171(2) 1,058
</TABLE>
- ------------------------
(1) In October 1994, we acquired Cloth World, a division of Brown Group, Inc., a
chain of 342 fabric stores located primarily in the southern half of the
United States.
(2) In April 1998, we completed a merger with House of Fabrics, Inc., a chain of
261 fabric and craft stores located primarily on the West Coast. Of the 261
stores acquired, 90 stores were consolidated with existing traditional
stores. As a result, 171 net new units were added to the store base.
During fiscal 2000, we expect to open up to 30 new stores, including 18
superstores, relocate 25 traditional stores, and remodel an additional 15
traditional stores. We have committed to 15 locations for these new stores.
SITE SELECTION. We believe that our store locations are integral to our
success. Sites are selected through a coordinated effort of our real estate and
operations management teams. In evaluating the desirability of a potential store
site, we consider both market demographics and site-specific criteria. Market
demographic criteria that we consider important include total population, number
of households, median household income, percentage of home ownership versus
rental, and historical and projected population growth over a ten-year period.
Site-specific criteria that we consider important include rental terms, our
position within the shopping strip location, size of the location, age of the
shopping strip location, co-tenants, proximity to highway access, traffic
patterns and ease of entry from the major roadways framing the strip location.
Our expansion strategy is to give priority to adding stores in existing
markets in order to create economies of scale associated with advertising,
distribution, field supervision, and other regional expenses. We believe that
there are attractive opportunities in most of our existing markets and numerous
new markets. We also intend to continue to selectively review acquisition
opportunities in existing and new markets.
COSTS OF OPENING STORES. We employ standard operating procedures that allow
us to efficiently open new stores and integrate them into our information and
distribution systems. We develop a standardized floor plan, inventory layout,
and marketing program for each new store we open. We typically open new stores
during the period from February through October to maximize sales during our
peak Christmas selling season.
Our new store opening costs depend on the building type, store size and
general cost levels in the area. During fiscal 1999, we opened 14 new
traditional stores, with an average square footage per store of 15,500 square
feet. Our average net opening cost of these traditional stores was approximately
$0.3 million per store, which included leasehold improvements, furniture,
fixtures and equipment, and pre-opening expenses. The initial inventory
investment, net of payables support, associated with each new traditional store
during fiscal 1999 was approximately $0.3 million. Also during fiscal 1999, we
opened 17 superstores, with an average square footage per store of approximately
46,900 square feet. Our average net opening cost of these superstores was
approximately $1.3 million per store, which included leasehold improvements,
furniture, fixtures and equipment, and pre-opening expenses. The
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initial inventory investment, net of payables support, associated with each new
superstore in fiscal 1999 was approximately $0.9 million.
STORE MANAGEMENT. Traditional stores have approximately five full-time
employees and ten part-time employees, while superstores typically have
approximately 20 full-time employees and 40 part-time employees. Store managers
are compensated with a base salary plus a bonus which is tied to quarterly store
sales. The average tenure of our store managers is approximately six years.
Store managers are typically promoted from a group of top performing sales
associates, some of whom started as our customers. This continuity serves to
solidify long-standing relationships between our stores and our customers. When
a traditional store is closed due to the opening of a superstore, we generally
retain its employees to staff the new superstore.
Each store is under the supervision of a district manager who reports to a
regional vice president. Our centralized human resource department and field
management organization are responsible for recruiting and training new store
managers. Our prospective store managers are assigned to one of our existing
stores as manager-trainees for several weeks where they receive in-depth
on-the-job training. In addition, quarterly training seminars are conducted for
existing store managers and two-week orientation and training programs are
conducted for new sales associates.
INFORMATION TECHNOLOGY
We believe we have employed industry leading information technology in our
stores. We have had point of sale systems operational in all of our stores and
interfaced into our financial and merchandising systems since fiscal 1994. We
utilize point of sale registers and scanning devices to record the sale of
merchandise at a stock keeping unit (SKU) level at the stores. We also utilize
hand-held radio frequency terminals for a variety of store tasks including price
look-up, ordering and fabric sales processing. Point of sale register
transactions are polled nightly and interfaced with our sales and merchandising
systems.
Information obtained from item-level scanning through our point of sale
system enables us to identify important trends to assist in managing inventory
by facilitating the elimination of less profitable SKUs, increasing the in-stock
level of more popular SKUs, analyzing product margins, and generating data for
advertising cost/benefit evaluations. We also believe that our point of sale
systems allow us to provide better customer service by increasing the speed and
accuracy of register check out, enabling us to more rapidly restock merchandise
and efficiently re-price sale items.
We are currently implementing a fully integrated management information
system designed by SAP AG at a cost of approximately $30.0 million, of which
$8.8 million has been spent to date. We are implementing the system software in
three major phases, with financial systems already installed and operational,
retail systems scheduled for installation during fiscal 2000 and human resource
systems scheduled for installation during fiscal 2001. This project is designed
to improve inventory management and gross margins by providing automatic
merchandise replenishment to each store based on historical demand. This project
is also designed to merge all of our financial and operational systems and link
our business processes on a single software platform.
TRADEMARKS
We do business under the federally registered trademarks "Jo-Ann Fabrics and
Crafts" and "Jo-Ann etc." We believe that these names are significant to our
business.
COMPETITION
We are the largest national category-dominant retailer serving the retail
fabric and craft industry. Our stores compete with other specialty fabric and
craft retailers and selected mass merchants that
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<PAGE>
dedicate a portion of their selling space to a limited selection of fabrics and
craft supply items. We compete on the basis of product assortment, price,
convenience and customer service. We believe the combination of our product
assortment, customer service emphasis, systems technology and frequent
advertising provides us with a competitive advantage.
The domestic retail fabric and craft industry generated estimated combined
revenues of $10.0 billion in 1998. We have an approximately 20% market share in
the consolidated fabric and sewing-related products segment and an approximately
four percent market share in the highly fragmented craft products segment. We
have only one national competitor in each of the fabric segment and craft
segment of the industry, with the balance of the competitors being regional and
local operators. We believe that there are only a few competitors with fabric or
crafts sales exceeding $200.0 million annually, and that we are, based on store
count, approximately twice the size of our nearest competitor. We believe that
we have several advantages over most of our competitors, including:
- purchasing power;
- ability to support an efficient nationwide distribution; and
- the financial resources to support ongoing capital investments in our
infrastructure and new store development annual advertising expenditures.
See "Risk Factors--Competition could negatively impact our operations due to
price reductions and loss of market share."
PROPERTIES
Our corporate office and distribution center are located in an approximately
1.4 million square foot facility, that we own, on approximately 120 acres in
Hudson, Ohio. The distribution center occupies approximately 1.1 million square
feet and the remainder is used as our corporate office and a superstore. We own
approximately 100 acres of land adjacent to our Hudson facility.
The remaining properties that we occupy are leased retail store facilities
that are located primarily in high-traffic shopping centers. All store leases
are operating leases, generally for periods of five to ten years with renewal
options for up to 20 years. Certain retail store leases contain escalation
clauses and in some cases provide for contingent rents based on a percent of
sales in excess of defined minimums. During the fiscal year ended January 30,
1999, we incurred $118.5 million of rental expense for store locations.
As of January 30, 1999, the current terms of our store leases, assuming we
exercise all lease renewal options, were as follows:
<TABLE>
<CAPTION>
NUMBER OF
YEARS LEASE TERMS EXPIRE STORE LEASES
- ------------------------------------------------------------ -------------
<S> <C>
Month-to-month.............................................. 34
2000........................................................ 48
2001........................................................ 38
2002........................................................ 30
2003........................................................ 45
2004........................................................ 38
Thereafter.................................................. 822
-----
Total..................................................... 1,055
-----
-----
</TABLE>
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EMPLOYEES
As of January 30, 1999, we had approximately 22,000 full and part-time
employees, of which 20,700 worked in our stores, 750 were employed in our
distribution service center, and the balance held corporate and administrative
positions. The number of part-time employees is substantially increased during
the Christmas selling season. We believe our employee turnover is below average
for retailers primarily because our stores are staffed with sewing and crafting
enthusiasts. In addition, we provide an attractive work environment, employee
discounts, flexible hours and competitive compensation packages within the local
labor markets. Our ability to offer flexible scheduling is important in
attracting and retaining these employees since approximately 75% of our
employees work part-time.
The United Steelworkers of America, Upholstery and Allied Industries
Division currently represent employees who work in our distribution service
center. We recently negotiated a three-year contract, which expires May 2001. We
believe that our relations with our employees and the union are good.
LEGAL PROCEEDINGS
We are involved in various litigation matters in the ordinary course of our
business. We are not currently involved in any litigation which we expect,
either individually or in the aggregate, will have a material adverse effect on
our financial condition or results of operations.
On February 18, 1997, we settled enforcement proceedings brought by the
Securities and Exchange Commission involving our financial statements for the
fiscal year ended February 1, 1992, the use of those statements in connection
with the sale in March 1992 of our 6 1/4% convertible subordinated debentures
due 2002 (subsequently redeemed in June 1997), our financial statements for the
first three quarters of fiscal 1993, and the adequacy of certain disclosures
relating to such periods. The principal allegation was that we materially
overstated earnings for such periods because of the manner in which we
calculated one of our inventory-related reserves, thereby allegedly violating
certain federal securities laws, including provisions regarding anti-fraud,
reporting, internal controls and books and records. The accounting and
disclosure issues that were raised are not related to any current period, and no
current accounting policies or financial statements were in question. At the
same time as the settlement, the Securities and Exchange Commission filed a
civil action against us and our former chief financial officer and former
controller in the United States District Court for the District of Columbia.
Without admitting or denying the allegations, we consented to the entry of an
order enjoining us from violations of the federal securities laws and agreed to
pay $3.3 million in settlement of the action against us. The litigation is
proceeding against the former officers.
Alan Rosskamm, our Chief Executive Officer, consented to a separate
Securities and Exchange Commission administrative cease and desist order
settling certain allegations, without admitting or denying the allegations. The
Commission contended that Mr. Rosskamm violated certain federal securities laws
as a result of not making adequate inquiry of the financial staff before signing
management representation letters given to our auditors in connection with the
1992 debenture offering, and as a result of signing our Form 10-Q for the
quarter ended May 2, 1992.
37
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Alan Rosskamm(1)..................................... 49 Chairman of the Board, President and Chief Executive
Officer
Jane Aggers.......................................... 51 Executive Vice President, Merchandising, Marketing
and Inventory Management
Dave Bolen........................................... 47 Executive Vice President, Stores and Business
Development
Brian Carney......................................... 38 Executive Vice President and Chief Financial Officer
Les Duncan........................................... 51 Senior Vice President and Chief Information Officer
Betty Rosskamm....................................... 71 Senior Vice President, Secretary and Director
Alma Zimmerman....................................... 86 Senior Vice President and Director
Scott Cowen(1)(2)(3)................................. 52 Director
Ira Gumberg(1)(2).................................... 45 Director
Frank Newman(1)(2)(3)................................ 50 Director
Gregg Searle(1)(2)(3)................................ 50 Director
Debra Walker(1)(2)(3)................................ 43 Director
</TABLE>
- ------------------------
(1) Member of the Corporate Governance Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
ALAN ROSSKAMM has been Chairman of the Board, President and Chief Executive
Officer of our company for more than five years and a Director of our company
since 1985. He is a member of one of the two founding families of our company
and has been employed by us since 1978. Mr. Rosskamm is also a Director of
Charming Shoppes Inc., a women's apparel retailer.
JANE AGGERS has been Executive Vice President, Merchandising, Marketing and
Inventory Management of our company for more than five years. She was previously
Senior Vice President, General Merchandise Manager of our company. Ms. Aggers
has been employed by us since 1977 in positions of increasing responsibility.
DAVE BOLEN has been Executive Vice President, Stores and Business
Development of our company since December 1998. He was Executive Vice President,
Business Development since August 1997 and Senior Vice President, General
Manager Jo-Ann etc from March 1997 to August 1997. Prior to joining our company,
he was Executive Vice President--Operations of Michaels Stores from July 1994 to
August 1996, and Executive Vice President, Chief Operating Officer and a
Director of Leewards Creative Crafts, from January 1986 to July 1994.
BRIAN CARNEY has been Executive Vice President and Chief Financial Officer
of our company since October 1997. Prior to joining our company, he was Senior
Vice President--Finance from May 1996 to August 1997, and Vice President and
Controller from June 1992 to May 1996, of Revco D.S., Inc. (previously a public
company).
38
<PAGE>
LES DUNCAN has been Senior Vice President and Chief Information Officer of
our company since October 1997. Prior to joining our company, he was Vice
President and Chief Information Officer of Express, the largest division of The
Limited, Inc., from September 1993 to October 1997.
BETTY ROSSKAMM has been Senior Vice President and Secretary of our company
for more than five years and a Director of our company since 1967. Betty
Rosskamm is the mother of Alan Rosskamm.
ALMA ZIMMERMAN has been Senior Vice President of our company for more than
five years and a Director since 1967.
SCOTT COWEN has been President of Tulane University since July 1998.
Previously, he was Dean of the Weatherhead School of Management and A.J.
Weatherhead III Professor of Management, Case Western Reserve University, for
more than five years. Mr. Cowen has been a Director of our company since 1987
and is also a Director of American Greetings Corporation, Forest City
Enterprises, Inc. and Newell Rubbermaid Inc.
IRA GUMBERG has been Chief Executive Officer and President of J.J. Gumberg
Co., a real estate management and development company, for more than five years.
He has been a Director of our company since 1992 and is also a Director of
Mellon Bank, N.A.
FRANK NEWMAN has been Chairman of the Board since February 1997 and
President and Chief Executive Officer since February 1996 of Eckerd Corporation,
a pharmacy retailer. He has been President of Eckerd Corporation since July 1993
and was Chief Operating Officer from July 1993 to February 1996 and a Director
of Eckerd Corporation since July 1993. He has been a Director of our company
since 1991.
GREGG SEARLE was President and Chief Operating Officer from November 1996 to
September 1998 and Executive Vice President from August 1993 to February 1996 of
Diebold, Incorporated. He has been a private investor since September 1998. He
has been a Director of our company since 1996.
DEBRA WALKER has been Vice President and Chief Information Officer of The
Goodyear Tire and Rubber Company since March 1997. She was previously Vice
President--Retail for The Goodyear Tire and Rubber Company and was responsible
for the operation of all of its retail stores from February 1995 to March 1997
and Manager of Dealer Sales from January 1994 to February 1997. She has been a
Director of our company since August 1998.
39
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of June 7, 1999, the amount of our common
stock beneficially owned by (1) each person or group known to us to be
beneficial owners of more than 5% of our Class A or Class B common shares, (2)
each of our directors and nominees for directors, (3) our chief executive
officer and the four other most highly compensated executive officers, and (4)
all of our executive officers and directors as a group. We have obtained the
information provided in connection with this table from our records and a review
of statements filed with the Securities and Exchange Commission. Unless
otherwise indicated, each of the persons listed in the following table has sole
voting and investment power with respect to the common shares set forth opposite
his or her name. As of June 7, 1999, 9,123,202 Class A common shares were
outstanding and 9,192,794 Class B common shares were outstanding. Class A common
shares each have one vote per share and Class B common shares do not have voting
rights.
<TABLE>
<CAPTION>
CLASS A COMMON SHARES CLASS B COMMON SHARES
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
NUMBER OF NUMBER OF
COMMON SHARES COMMON SHARES
NAME OF BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS OWNED CLASS
- ----------------------------------------------------- --------------- ----------- --------------- -----------
5% SHAREHOLDERS:
Alan Rosskamm(1)(2).................................. 1,412,923 15.27% 844,741 9.00%
Betty Rosskamm(1)(3)................................. 878,335 9.63% 633,039 6.89%
First Pacific Advisors, Inc.(4)...................... 710,300 7.79% n/a n/a
FMR Corp(4)(5)....................................... 688,250 7.54% n/a n/a
Mr. Justin and Mrs. Alma Zimmerman(1)(6)............. 680,707 7.46% 571,646 6.22%
The State Teachers Retirement Board of Ohio
(STRS)(4).......................................... 580,700 6.37% n/a n/a
The Capital Group Companies, Inc.(4)(7).............. 525,000 5.76% n/a n/a
OTHER DIRECTORS AND EXECUTIVE OFFICERS:
Jane Aggers(1)(8).................................... 144,656 1.57% 200,567 2.15%
Brian Carney(1)(9)................................... 35,000 * 12,500 *
Dave Bolen(1)(10).................................... 32,127 * 49,769 *
Scott Cowen(11)...................................... 26,425 * 13,425 *
Frank Newman(12)..................................... 22,125 * 16,125 *
Ira Gumberg(13)...................................... 13,125 * 1,125 *
Gregg Searle(14)..................................... 9,750 * 6,750 *
Les Duncan(15)....................................... 5,000 * 8,000 *
Debra Walker(16)..................................... -- -- -- --
John Hermsen (1)(17)................................. -- -- -- --
All Executive Officers and Directors
as a group (13 persons)(1)(18)..................... 2,509,928 26.70% 2,048,105 21.30%
</TABLE>
- ------------------------
* Less than 1%.
FOOTNOTES ON FOLLOWING PAGE
40
<PAGE>
(1) With respect to common shares beneficially owned by such persons under our
Employees' Savings and Profit Sharing Plan, the common shares included are
as of December 31, 1998, the latest date for which statements are
available.
(2) Mr. Rosskamm's beneficial ownership includes 132,500 Class A common shares
and 196,250 Class B common shares subject to stock options granted that are
exercisable on or prior to August 6, 1999, 32,500 Class A common shares and
12,500 Class B common shares held as restricted stock under our Executive
Incentive Plan, and an aggregate of 182,188 Class A common shares and
211,066 Class B common shares held by his children, spouse, or by Mr.
Rosskamm as trustee for the benefit of family members and charities. His
beneficial ownership also includes 750,245 Class A common shares and
105,500 Class B common shares held by Rosskamm Family Partners, L.P., and
204,082 Class B common shares held by Rosskamm Family Partners, L.P. II. He
has shared voting and dispositive power with regard to Rosskamm Family
Partners, L.P. and Rosskamm Family Partners, L.P. II.
(3) Mrs. Rosskamm's beneficial ownership includes 22,803 Class A common shares
and 28,241 Class B common shares held as custodian for the benefit of her
grandchildren. Her beneficial ownership also includes 25,000 Class A common
shares and 25,000 Class B common shares held by The Rosskamm Family
Partnership, with regard to which she has sole voting and dispositive
power, 750,245 Class A common shares and 105,500 Class B common shares held
by Rosskamm Family Partners, L.P., with regard to which she has shared
voting and dispositive power and 204,082 Class B common shares held by
Rosskamm Family Partners, L.P. II, with regard to which she also has shared
voting and dispositive power. Betty Rosskamm, Justin and Alma Zimmerman,
and Jo-Ann Stores have entered into an agreement pursuant to which Ms.
Rosskamm has granted a right of first refusal with respect to her shares to
Mr. and Mrs. Zimmerman and Jo-Ann Stores, and Mr. and Mrs. Zimmerman have
granted a right of first refusal with respect to their shares to Ms.
Rosskamm and Jo-Ann Stores.
(4) The Class A common shares listed are reported on a Schedule 13G filed with
the Securities and Exchange Commission with respect to holdings as of
December 31, 1998.
(5) Fidelity Management & Research Company, a wholly owned subsidiary of FMR
Corp., reported beneficial ownership of 545,150 Class A common shares as a
result of acting as investment advisor to several investment funds that
hold such Class A common shares (the "Funds"). The voting of these 545,150
Class A common shares is directed by each of the Funds' Boards of Trustees.
In addition, Fidelity Management Trust Company, a wholly owned subsidiary
of FMR Corp., reported beneficial ownership of 143,100 Class A common
shares. FMR Corp. has sole voting and dispositive power with regard to
these 143,100 shares.
(6) Of the 680,707 Class A common shares beneficially owned by the Zimmermans,
Mr. Zimmerman disclaims beneficial ownership of 339,513 Class A common
shares beneficially owned by his wife and Mrs. Zimmerman disclaims
beneficial ownership of 341,194 Class A common shares beneficially owned by
her husband. Of the 571,646 Class B common shares beneficially owned by the
Zimmermans, Mr. Zimmerman disclaims beneficial ownership of 287,417 Class B
common shares beneficially owned by his wife and Mrs. Zimmerman disclaims
beneficial ownership of 284,229 Class B common shares beneficially owned by
her husband. See footnote (3) above.
(7) Capital Research and Management Company, a registered investment adviser
and an operating subsidiary of The Capital Group Companies, Inc., exercised
as of December 31, 1998 investment discretion with respect to 525,000 Class
A common shares or 5.76% of outstanding shares of the class, which were
owned by various institutional investors. Such subsidiary has no power to
direct the vote of the above shares.
FOOTNOTES CONTINUED ON FOLLOWING PAGE
41
<PAGE>
(8) Ms. Aggers beneficial ownership includes 81,000 Class A common shares and
129,750 Class B common shares subject to stock options granted that are
exercisable on or prior to August 6, 1999 and 35,000 Class A common shares
and 15,000 Class B common shares held as restricted stock under our
Executive Incentive Plan.
(9) Mr. Carney's beneficial ownership includes 12,500 Class A common shares and
12,500 Class B common shares subject to stock options granted that are
exercisable on or prior to August 6, 1999 and 20,000 Class A common shares
held as restricted stock under our Executive Incentive Plan.
(10) Mr. Bolen's beneficial ownership includes 43,125 Class B common shares
subject to stock options granted that are exercisable on or prior to
August 6, 1999 and 26,000 Class A common shares held as restricted stock
under our Executive Incentive Plan.
(11) Mr. Cowen's beneficial ownership includes 14,125 Class A common shares and
11,125 Class B common shares subject to stock options granted under the
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to August 6, 1999.
(12) Mr. Newman's beneficial ownership includes 22,125 Class A common shares
and 16,125 Class B common shares subject to stock options granted under
the Stock Option Plan for Non-Employee Directors that are exercisable on
or prior to August 6, 1999.
(13) Mr. Gumberg's beneficial ownership includes 7,125 Class A common shares
and 1,125 Class B common shares subject to stock options granted under the
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to August 6, 1999.
(14) Mr. Searle's beneficial ownership includes 6,750 Class A common shares and
6,750 Class B common shares subject to stock options granted under the
Stock Option Plan for Non-Employee Directors that are exercisable on or
prior to August 6, 1999.
(15) Mr. Duncan's beneficial ownership includes 5,000 Class B common shares
subject to stock options granted that are exercisable on or prior to
August 6, 1999 and 5,000 Class A common shares and 3,000 Class B common
shares held as restricted stock under our Executive Incentive Plan and
1998 Incentive Compensation Plan.
(16) Ms. Walker was elected to the Board of Directors on August 28, 1998.
(17) Mr. Hermsen resigned his position as Executive Vice President--Stores
effective January 1, 1999.
(18) Beneficial ownership for all executive officers and directors as a group
includes 276,125 Class A common shares and 421,750 Class B common shares
subject to stock options granted under our Stock Option Plans that are
exercisable on or prior to August 6, 1999 and 118,500 Class A common
shares and 30,500 Class B common shares of restricted stock awarded under
our Executive Incentive Plan and 1998 Incentive Compensation Plan. Total
excludes 750,245 Class A common shares and 309,582 Class B common shares
with shared voting and dispositive powers between Mr. Rosskamm and Mrs.
Rosskamm held in certain family partnerships.
42
<PAGE>
CERTAIN TRANSACTIONS
Ira Gumberg, one of our Directors, is President and Chief Executive Officer
and a principal shareholder of J.J. Gumberg Co. which manages numerous shopping
centers. Eleven of these shopping centers contain stores of our company. We
entered into three of the leases after Mr. Gumberg became a Director of our
company. We believe these leases are on terms no less favorable to us than could
have been obtained from an unrelated party. The aggregate rent and related
occupancy charges paid during fiscal 1999, fiscal 1998 and fiscal 1997 on these
stores amounted to $1.2 million, $1.2 million and $0.9 million, respectively.
Betty Rosskamm, Alma and Justin Zimmerman and Jo-Ann Stores have entered
into an agreement, dated September 26, 1997, relating to their shares of Jo-Ann
Stores Class A and Class B common stock. Under this agreement, Betty Rosskamm
and her lineal descendants and permitted holders, and Alma and Justin Zimmerman
and their lineal descendants and permitted holders, may each sell up to 200,000
shares of their Class A common stock in any calendar year. They may not sell
more than 100,000 of those shares in any 180-day period. Mrs. Rosskamm, and Mr.
and Mrs. Zimmerman collectively, may each sell up to 100,000 of their shares of
Jo-Ann's Class B common stock in any 60-day period. If either Mrs. Rosskamm or
Mr. and Mrs. Zimmerman sell a number of shares of their Class A common stock in
excess of the number permitted under the agreement, they must first offer to
sell those shares to the other family party to the agreement, and then with the
other family's permission, to Jo-Ann Stores. If either Mrs. Rosskamm or Mr. and
Mrs. Zimmerman sell a number of shares of their Class B common stock in excess
of the number permitted under the agreement, each family must first offer to
sell those shares to Jo-Ann Stores.
43
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW SENIOR CREDIT FACILITY
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS AND PROVISIONS OF OUR NEW
SENIOR CREDIT FACILITY. THIS SUMMARY IS NOT COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE AGREEMENT DESCRIBED, INCLUDING THE DEFINITIONS OF
THE CAPITALIZED TERMS USED IN THIS PROSPECTUS. COPIES OF THE AGREEMENT DESCRIBED
ARE AVAILABLE UPON REQUEST. SEE "WHERE YOU CAN FIND MORE INFORMATION ABOUT
JO-ANN STORES."
Upon the closing of the offering of the outstanding notes, we entered into a
senior credit facility with a group of institutions named therein, as lenders.
The senior credit facility provides for unsecured revolving credit loans in an
aggregate amount of up to $300.0 million, including a $100.0 million sublimit
for Letters of Credit, and replaces our existing $250.0 million senior credit
facility. The new senior credit facility contains a negative pledge on
substantially all of our assets and the capital stock of our restricted
subsidiaries and is guaranteed by all of our restricted subsidiaries.
The revolving credit loans will bear interest at floating rates of (a) the
Prime Rate, or, at our option (b) a rate equal to the Applicable Eurodollar
Margin plus the Adjusted LIBO Rate. The Applicable Eurodollar Margin will begin
at 110 basis points per annum, and can increase or decrease based on our future
financial performance in relation to certain measurements provided for in the
senior credit facility. We will also pay a quarterly facility fee in arrears at
a rate determined in accordance with our performance levels and a quarterly
letter of credit fee at a rate per annum equal to the Applicable Eurodollar
Margin on the Letters of Credit outstanding on the date of payment. We will also
pay a fronting fee upon issuance of each Letter of Credit to the individual
issuing lender at a rate agreed upon with such lender.
We may repay the loans at any time without penalty prior to the Maturity
Date (except for prepayments of Eurodollar Loans at times other than the end of
their respective interest periods, as to which breakage costs may be payable).
The senior credit facility has an initial Maturity Date of April 30, 2004, which
may be extended for one year periods at our request with the consent of each of
the lenders.
The senior credit facility contains restrictive covenants applicable to us
and our subsidiaries, subject to certain exceptions, regarding, among other
things, the following matters:
- changes in business operations;
- the incurrence of indebtedness;
- engaging in certain transactions with affiliates;
- liens;
- investments;
- distributions and dispositions of assets;
- advances or guarantees;
- maintenance of Minimum Consolidated Net Worth measured quarterly;
- maintenance of a Senior Leverage Ratio not to exceed specified quarterly
levels;
- maintenance of a Total Leverage Ratio not to exceed specified quarterly
levels;
- maintenance of a minimum Fixed Charge Coverage Ratio;
- maintenance of a ratio of Consolidated Current Assets to Consolidated
Current Liabilities plus Consolidated Total Senior Balance Sheet Debt not
exceeding specified quarterly levels; and
44
<PAGE>
- the reduction of our consolidated total balance sheet senior debt to no
more than $85.0 million for at least one 30-day period during every
12-month period (which amount will be increased by $15.0 million at the
end of each fiscal year beginning in fiscal 2001).
The senior credit facility also includes certain events of default,
including, but not limited to: failure to pay principal or interest; inaccuracy
of representations; covenant defaults (some of which become Events of Default
only if 30 days pass without resolution after notice of the default); final
judgments against us in the aggregate amount of $1.0 million which remain
undischarged, unsatisfied and unstayed for more than 30 days; certain bankruptcy
and similar events involving us or certain of our subsidiaries; cancellation,
revocation, termination or recission of any of the documents evidencing the
terms of the senior credit facility; and the occurrence of certain events with
respect to any pension plans.
OTHER LINES OF CREDIT
We have entered into a $10.0 million short-term facility and a $7.5 million
short-term facility, both of which may be used for general corporate purposes.
45
<PAGE>
THE EXCHANGE OFFER
REGISTRATION RIGHTS AGREEMENT
In connection with the issuance of the outstanding notes, the company
entered into a registration rights agreement with the initial purchasers of the
outstanding notes. The registration rights agreement requires the company to
register the exchange notes under the federal securities laws and offer to
exchange such notes with the holders of the outstanding notes. The exchange
notes will be issued without a restrictive legend and generally may be resold
without registration under the federal securities laws. The company is effecting
the exchange offer to comply with the registration rights agreement.
The registration rights agreement requires the company to:
- file a registration statement for the exchange offer and the exchange
notes on or before June 19, 1999;
- cause the registration statement filed for the exchange offer and the
exchange notes to be declared effective by the Commission on or before
September 2, 1999; and
- complete the exchange offer on or before October 2, 1999.
These requirements under the registration rights agreement will be satisfied
when the company completes the exchange offer. However, if the company fails to
meet any of these requirements, it must pay additional interest on the
outstanding notes until the applicable requirement has been met. The company
will be required to pay additional interest at the rate of 0.25% per year for
each requirement that it fails to meet. The company must pay an additional 0.25%
per year for each 90 days that a requirement has not been met. However, the
company will not be required to pay more than 1.0% per year in additional
interest on the outstanding notes. Immediately following the completion of a
requirement, any additional interest with respect to that particular requirement
will cease to accrue.
Under the registration rights agreement, the company's obligations to
register the outstanding notes and the exchange notes will terminate upon the
completion of the exchange offer. However, the company will be required to file
a "shelf" registration statement for a continuous offering by the holders of the
outstanding notes if:
- because of any change in law or position of the Commission, the company
cannot effect the exchange offer;
- the registration statement filed for the exchange offer and the exchange
notes is not declared effective by the Commission on or before September
2, 1999;
- the exchange offer is not completed on or before October 2, 1999;
- any of the initial purchasers of the outstanding notes so requests; or
- any holder of outstanding notes that is not permitted to participate in
the exchange offer or does not receive fully tradeable notes in the
exchange offer so requests.
If the company is required to file a "shelf" registration statement, it will
be required to use its best efforts to keep such registration statement
effective for the shorter of two years or the period ending when all of the
notes covered by the "shelf" registration statement have been sold. Other than
as described above, no holder will have the right to require the company to file
a "shelf" registration statement or otherwise register such holder's notes under
the federal securities laws.
This summary includes only the material terms of the registration rights
agreement. For a full description, you should refer to the complete copy of the
registration rights agreement, which has been filed as an exhibit to the
registration statement for the exchange offer and the exchange notes.
46
<PAGE>
TRANSFERABILITY OF THE EXCHANGE NOTES
Based on the position of the Commission stated in a series of no-action
letters, the company believes that the exchange notes may be resold by you, or
any other person receiving such notes, without compliance with the registration
and prospectus delivery requirements of the federal securities laws, if:
- you, or the person or entity receiving such notes, are acquiring the
exchange notes in the ordinary course of business;
- neither you nor any such person or entity is engaging in or intends to
engage in a distribution of the exchange notes;
- neither you nor any such person or entity has an arrangement or
understanding with any person or entity to participate in any distribution
of the exchange notes;
- neither you nor any such person or entity is an "affiliate" of the
company, within the meaning of the federal securities laws; and
- you are not acting on behalf of any person or entity who could not
truthfully make these statements.
To participate in the exchange offer, you must represent as the holder of
outstanding notes that each of these statements is true. Any noteholder who
tenders in the exchange offer to participate in a distribution of the exchange
notes cannot rely on this interpretation by the Commission. Such persons must
comply with the registration and prospectus delivery requirements of the federal
securities laws to resell any of the exchange notes.
Any holder of the outstanding notes who is our affiliate and who intends to
participate in the exchange offer for the purpose of distributing the exchange
notes:
- will not be able to rely on the interpretation of the Commission set forth
in the no-action letters described above;
- will not be able to tender notes in the exchange offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the
outstanding notes unless the sale or transfer is made pursuant to an
exemption from those requirements.
Broker-dealers receiving exchange notes in exchange for outstanding notes
acquired for their own account through market-making or other trading activities
may not rely on this interpretation by the Commission. Such broker-dealers may
be deemed to be "underwriters" within the meaning of the Securities Act and must
therefore deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the exchange notes. Such broker-dealers must
acknowledge, by signing the letter of transmittal, that they will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
such resale. The letter of transmittal states that by acknowledging that it will
deliver, and by delivering, a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. See
"Plan of Distribution."
Any broker-dealer that holds any outstanding notes that it acquired directly
from the company in the initial offering and not as a result of market-making or
other trading activities cannot rely on this interpretation by the Commission
and, in the absence of an exemption, must comply with the registration and
prospectus delivery requirements of the Securities Act. However, since the
initial purchasers that purchased all of the outstanding notes directly from the
company immediately resold all of the outstanding notes purchased by them, no
such broker-dealer exists.
47
<PAGE>
EFFECT OF NOT TENDERING
After the completion of the exchange offer, the outstanding notes will
remain subject to restrictions on transfer. Since the outstanding notes have not
been registered under the federal securities laws, they bear a legend
restricting their transfer absent registration or the availability of a specific
exemption from registration. The holders of outstanding notes not tendered into
the exchange offer will have no further registration rights, except for the
limited registration rights described above under the heading "--Registration
Rights Agreement." Accordingly, upon the completion of the exchange offer, the
liquidity of the market for the outstanding notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER; ACCEPTANCE OF TENDERED NOTES
The company will accept any of its outstanding notes validly tendered and
not validly withdrawn before .m., EDT, on , 1999, subject to
the conditions of the exchange offer. The company will issue $1,000 principal
amount of the exchange notes in exchange for each $1,000 principal amount of
outstanding notes accepted in the exchange offer. Noteholders may tender some or
all of their notes pursuant to the exchange offer. However, noteholders may only
tender outstanding notes in $1,000 increments.
The terms of the exchange notes are substantially identical to the terms of
the outstanding notes, except that the exchange notes have been registered under
the federal securities laws and will not bear any legend restricting their
transfer. The exchange notes will represent the same debt as the outstanding
notes and will be issued under the same indenture.
As of the date of this prospectus, outstanding notes representing $150.0
million in aggregate principal amount were outstanding and there was one
registered holder, a nominee of the Depository Trust Company. This prospectus
and the letter of transmittal are being sent to DTC and to others believed to
have beneficial interests in the outstanding notes. The company intends to
conduct the exchange offer in accordance with the applicable requirements of the
federal securities laws.
The company will be deemed to have accepted validly tendered notes when it
notifies the exchange agent of its acceptance. The exchange agent will act as
agent for the tendering holders for the purpose of receiving the exchange notes
from the company. If any tendered notes are not accepted for exchange because of
an invalid tender or otherwise, the exchange agent will return the applicable
certificates without expense to the tendering noteholder promptly after the
expiration of the exchange offer.
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees as part of the exchange offer.
Tendering noteholders will also not be required to pay transfer taxes in the
exchange offer. The company will pay all charges and expenses in connection with
the exchange offer. However, the company will not pay any taxes incurred in
connection with a noteholder's request to have exchange notes or nonexchanged
notes issued in the name of a person other than the registered holder. See
"--Transfer Taxes" in this section below.
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The exchange offer will expire at , EDT, on , 1999,
unless the company extends the exchange offer. To extend the exchange offer, the
company will notify the exchange agent and each registered holder of any
extension before 9:00 a.m., eastern daylight saving time, on the next business
day after the previously scheduled expiration date. The company reserves the
right to extend the exchange offer. The company also reserves the right to delay
accepting any tendered notes or, if any of the conditions described below under
the heading "--Conditions to the Exchange Offer" have not been satisfied, to
terminate the exchange offer. The company will give oral or written notice of
such delay, extension or termination to the exchange agent. The company also
reserves the right to amend the terms of the exchange offer in any manner.
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PROCEDURES FOR TENDERING
Only holders of outstanding notes may tender such notes into the exchange
offer. To tender notes into the exchange offer, you must use one of the
following methods.
- Complete the letter of transmittal provided with this prospectus, obtain
all required signature guarantees, and deliver the letter of transmittal
to the exchange agent before the expiration of the exchange offer.
- IF YOU HOLD YOUR NOTES THROUGH DTC, YOU MAY ACCEPT THE EXCHANGE OFFER
THROUGH DTC'S AUTOMATED TENDER OFFER PROGRAM, AS DESCRIBED BELOW UNDER THE
HEADING "--BOOK-ENTRY TRANSFER."
- Follow the book-entry transfer procedures described below under the
heading "--Book-Entry Transfer."
- Follow the guaranteed delivery procedures described below under the
heading "--Guaranteed Delivery Procedures."
All tenders not withdrawn before the expiration of the exchange offer will
constitute an agreement between the noteholder and the company in accordance
with the terms described in this prospectus and the letter of transmittal.
The method of delivery of outstanding notes and the letter of transmittal
and all other required documents to the exchange agent is at the election and
risk of the noteholder. Instead of delivery by mail, you should use an overnight
or hand delivery service. In all cases, you should allow for sufficient time to
ensure delivery to the exchange agent before the expiration of the exchange
offer. You may request your broker, dealer, commercial bank, trust company or
nominee to effect these transactions for you. YOU SHOULD NOT SEND ANY NOTE,
LETTER OF TRANSMITTAL OR OTHER REQUIRED DOCUMENT TO THE COMPANY.
If your notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you desire to tender, you should:
- contact the registered holder promptly and instruct the registered holder
to tender on your behalf; or
- if you wish to tender on your own behalf, before completing and executing
the letter of transmittal and delivering your notes, either make
appropriate arrangements to register ownership of the outstanding notes in
your name or obtain a properly completed bond power from the registered
holder.
Please note, however, that the transfer of registered ownership may take
considerable time.
The exchange of notes will be made only after timely receipt by the exchange
agent of certificates for outstanding notes, a letter of transmittal and all
other required documents, or timely completion of a book-entry transfer. If any
tendered notes are not accepted for any reason or if outstanding notes are
submitted for a greater principal amount than the holder desires to exchange,
the exchange agent will return such unaccepted or nonexchanged notes to the
tendering noteholder promptly after the expiration or termination of the
exchange offer. In the case of outstanding notes tendered by book-entry
transfer, the exchange agent will credit the nonexchanged notes to an account
maintained with DTC.
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GUARANTEE OF SIGNATURES
Noteholders must obtain a guarantee of all signatures on a letter of
transmittal or a notice of withdrawal unless the outstanding notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Delivery Instructions" on the letter of transmittal; or
- for the account of an "eligible guarantor institution."
Signature guarantees must be made by an "eligible guarantor institution," which
generally includes: banks; brokers and dealers; credit unions; national
securities exchanges; registered securities associations; learning agencies; and
savings associations.
SIGNATURE ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS
If the letter of transmittal is signed by a person other than the registered
holder of the outstanding notes, the registered holder must endorse the
outstanding notes or provide a properly completed bond power. Any such
endorsement or bond power must be signed by the registered holder as that
registered holder's name appears on the outstanding notes. Signatures on such
outstanding notes and bond powers must be guaranteed by an "eligible guarantor
institution."
If you sign the letter of transmittal or any outstanding notes or bond power
as a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation, fiduciary or in any other representative capacity, you must so
indicate when signing. You must submit satisfactory evidence to the exchange
agent of your authority to act in such capacity.
DETERMINATION OF VALID TENDERS; THE COMPANY'S RIGHTS UNDER THE EXCHANGE OFFER
All questions as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of tendered notes will be determined by the company,
which determination will be final and binding on all parties. The company
reserves the right to reject any outstanding notes not properly tendered or any
outstanding notes the acceptance of which would, in the opinion of counsel for
the company, be unlawful. The company also reserves the right to waive any
defects, irregularities or conditions of tender for any tendered note. The
company's interpretation of the terms of the exchange offer will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding notes must be cured by the tendering
noteholder within such time as the company determines.
Although the company intends to notify noteholders of defects or
irregularities in tenders of outstanding notes, the company will not be liable
for any failure to give such notification. Noteholders will be deemed to have
tendered outstanding notes only when such defects or irregularities have been
cured or waived. The exchange agent will return to the tendering noteholder,
after the expiration of the exchange offer, any outstanding notes that are not
properly tendered and as to which the defects have not been cured or waived.
In addition, the company reserves the right to terminate the exchange offer
or purchase any outstanding notes that are not tendered into the exchange offer.
The company's termination rights are described below under the heading
"--Conditions to the Exchange Offer." The company may, to the extent permitted
by law, purchase some or all of the outstanding notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such offers or
purchases could differ from the terms of the exchange offer.
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BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account for the
outstanding notes at DTC within two business days after the date of this
prospectus. Any financial institution that is a participant in DTC's systems may
make book-entry delivery of tendered notes by causing DTC to transfer such notes
into the exchange agent's account in accordance with DTC's book-entry transfer
procedures. However, even if delivery of outstanding notes is effected through
book-entry transfer at DTC, noteholders must compete a letter of transmittal and
transmit it to the exchange agent before the expiration of the exchange offer,
unless:
- the exchange offer is accepted through DTC's Automated Tender Offer
Program described in the next paragraph; or
- the guaranteed delivery procedures described in the next section are
complied with.
To accept the exchange offer through DTC's Automated Tender Offer Program,
participants in DTC must send electronic instruction to DTC through DTC's
communication system in lieu of sending a signed letter of transmittal. DTC is
obligated to communicate those electronic instructions to the exchange agent. To
tender outstanding notes through the Automated Tender Offer Program, the
electronic instructions sent to DTC and transmitted by DTC to the exchange agent
must contain the character by which the participant acknowledges to be bound by
the letter of transmittal.
GUARANTEED DELIVERY PROCEDURES
If your notes are currently unavailable or insufficient time exists for you
to tender your notes or complete the procedure for book-entry transfer, you may
tender your notes by taking each of the following steps.
- You must effect your tender through an "eligible guarantor institution,"
which is defined above under the heading "--Procedures for Tendering."
- The exchange agent must receive from the "eligible guarantor institution,"
before the expiration of the exchange offer, a properly completed letter
of transmittal and notice of guaranteed delivery by telegram, telex,
facsimile transmission, mail or hand delivery.
- The notice of guaranteed delivery, which has been provided with this
prospectus, must:
- include the name and address of the holder of the outstanding notes and
the amount of notes tendered;
- state that the tender is being made by the notice of guaranteed delivery;
and
- guarantee that within three New York Stock Exchange trading days after
the date of execution of the notice of guaranteed delivery, the
certificates for all tendered notes or a book-entry confirmation, and any
other documents required by the letter of transmittal, will be sent by
the "eligible guarantor institution" to the exchange agent.
- Certificates for all tendered notes or a book-entry confirmation, and any
other documents required by the letter of transmittal, must be received by
the exchange agent within three New York Stock Exchange trading days after
the date of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
Noteholders may withdraw tendered notes at any time before ,
EDT, on , 1999. For a withdrawal to be effective, a written notice of
withdrawal must be received by the exchange agent before the expiration of the
exchange offer. For DTC participants, a written
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notice of withdrawal may be made by electronic transmission through DTC's
Automated Tender Offer Program. Any notice of withdrawal must:
- specify the name of the person having tendered the notes to be withdrawn;
- identify the notes to be withdrawn, including the certificate number(s)
and principal amount of such notes;
- be signed by the noteholder in the same manner as the original signature
on the letter of transmittal by which such notes were tendered, with any
required signature guarantees, or be accompanied by documents of transfer
sufficient to transfer such notes into the name of the person withdrawing
the tender; and
- specify the name in which any such notes are to be registered, if
different from that of the registered holder.
All questions as to the validity, form, eligibility and time of receipt of
such notices will be determined by the company, whose determination will be
final and binding on all parties. Any withdrawn notes will be deemed not to have
been validly tendered for purposes of the exchange offer. The exchange agent
will return any withdrawn notes without cost to the noteholder promptly after
withdrawal of the notes. Noteholders may retender properly withdrawn notes at
any time before the expiration of the exchange offer by following one of the
procedures described above under the heading "--Procedures for Tendering."
CONDITIONS TO THE EXCHANGE OFFER
The company will not be required to complete the exchange offer and may
terminate or amend it if, at any time before the acceptance or exchange of
notes:
- the company determines that the exchange offer violates any applicable law
or interpretation of the Commission; or
- any action has been commenced or threatened in any court or before any
governmental agency with respect to the exchange offer which, in the
company's judgment, would reasonably be expected to impair the company's
ability to consummate the exchange offer.
These conditions are for the sole benefit of the company and may be asserted or
waived by the company at any time in its sole discretion. The company's failure
to exercise any of these rights at any time will not be deemed a waiver of such
rights. These rights will be ongoing and may be asserted by the company at any
time.
In addition, the company will not complete the exchange offer if any stop
order is threatened or issued with respect to the registration statement for the
exchange offer and the exchange notes. In any such event, the company must make
every reasonable effort to obtain the withdrawal of any stop order at the
earliest possible moment.
TRANSFER TAXES
Noteholders who tender outstanding notes will be obligated to pay any
transfer taxes in connection with their tender. However, holders who instruct
the company to (a) register exchange notes in the name of a person other than
the registered holder or (b) request that outstanding notes not tendered or
accepted for exchange be returned to a person other than the registered holder
will be responsible for the payment of any transfer tax arising from such
transfer.
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THE EXCHANGE AGENT
Harris Trust and Savings Bank is serving as the exchange agent for the
exchange offer. ALL EXECUTED LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE
EXCHANGE AGENT AT THE ADDRESS LISTED BELOW. Questions, requests for assistance
and requests for additional copies of this prospectus or the letter of
transmittal should be directed to the exchange agent at the address or telephone
number listed below.
Harris Trust and Savings Bank
311 West Monroe Street
12(th) Floor
Chicago, Illinois 60606
By Facsimile: (312) 416-7380
Confirm by Telephone: (312) 765-8012
Originals of all documents sent by facsimile should be promptly sent to the
exchange agent by registered or certified mail, by hand, or by overnight
delivery service.
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DESCRIPTION OF THE NOTES
The exchange notes will be issued under the Indenture. The Company entered
into the Indenture on May 5, 1999 with the Guarantors and Harris Trust and
Savings Bank, as Trustee. The terms of the exchange notes include those stated
in the Indenture and those made a part of the Indenture by reference to the
Trust Indenture Act of 1939.
The company will issue the exchange notes in fully registered form only,
without coupons, in $1,000 increments. The trustee under the indenture will act
as the paying agent and registrar for the exchange notes. Noteholders may
present notes for registration of transfer at the offices of the registrar,
which initially will be the trustee's corporate trust office. No service charge
will be made for any registration of transfer of the exchange notes. However,
the company may require payment of a sum sufficient to cover any transfer tax or
other similar charge payable in connection with any such transfer.
The exchange notes and any of the outstanding notes that are not tendered
into the exchange offer will be treated as a single class of securities under
the indenture. Accordingly, references in this section of the prospectus to
"Notes" include the exchange notes and any of the outstanding notes that are not
tendered into the exchange offer, unless otherwise indicated. The following
description is a summary of the material provisions of the Indenture. It does
not restate the indenture in its entirety. Section references in parentheticals
refer to specific sections of the indenture. We will make available a copy of
the form of indenture to holders of the outstanding or exchange notes upon
request to the Company. For definitions of capitalized terms used in the
following summary, see "--Certain Definitions."
MATURITY, PRINCIPAL AND INTEREST
The Notes will mature on May 1, 2007, will be limited to $150,000,000
aggregate principal amount, and will be unsecured senior subordinated
obligations of the Company. Each Note will bear interest at the rate described
on the cover page from May 5, 1999 or from the most recent interest payment date
on which interest has been paid, payable semiannually in arrears on May 1 and
November 1 in each year, commencing November 1, 1999.
The Company will pay interest to the Person in whose name the Note (or any
predecessor Note) is registered at the close of business on the April 15 or
October 15 immediately preceding the relevant interest payment date. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. (Sections 202, 301 and 309)
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Company in The City of New York maintained for such purposes (which
initially will be the corporate trust office of the Trustee). Payment of
interest also may be made at the option of the Company by check mailed to the
Person entitled thereto as shown on the security register. (Sections 301, 305
and 1002)
The Notes will be issued only in fully registered form without coupons, in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer, exchange or redemption of Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith. (Sections 302 and 305)
Settlement for the Notes will be made in same day funds. All payments of
principal and interest will be made by the Company in same day funds. The Notes
will trade in the Same-Day Funds Settlement System of The Depository Trust
Company (the "Depositary" or "DTC") until maturity, and secondary market trading
activity for the Notes will therefore settle in same day funds.
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GUARANTEES
Payment of the Notes is guaranteed by the Guarantors jointly and severally,
fully and unconditionally, on a senior subordinated basis. The Guarantors are
comprised of all of the direct and indirect Wholly Owned Restricted Subsidiaries
of the Company. In addition, if any Restricted Subsidiary of the Company becomes
a guarantor or obligor in respect of any other Indebtedness of the Company or
any of the Restricted Subsidiaries, the Company shall cause such Restricted
Subsidiary to enter into a supplemental indenture pursuant to which such
Restricted Subsidiary shall agree to guarantee the Company's obligations under
the Notes.
If the Company defaults in payment of the principal of, premium, if any, or
interest on the Notes, each of the Guarantors will be unconditionally, jointly
and severally obligated to duly and punctually pay the principal of, premium, if
any, and interest on the Notes.
The obligations of each Guarantor under its Guarantee are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor, and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations of
such Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under Federal or state law. Each Guarantor that makes a
payment or distribution under its Guarantee shall be entitled to a contribution
from any other Guarantor in a pro rata amount based on the net assets of each
Guarantor determined in accordance with GAAP.
Notwithstanding the foregoing, in certain circumstances a Guarantee of a
Guarantor may be released pursuant to the provisions of subsection (c) under
"--Certain Covenants--LIMITATION ON ISSUANCES OF GUARANTEES OF AND PLEDGES FOR
INDEBTEDNESS." The Company also may, at any time, cause a Restricted Subsidiary
to become a Guarantor by executing and delivering a supplemental indenture
providing for the guarantee of payment of the Notes by such Restricted
Subsidiary on the basis provided in the Indenture.
OPTIONAL REDEMPTION
After May 1, 2003, the Company may redeem all or a portion of the Notes, on
not less than 30 nor more than 60 days' prior notice, in amounts of $1,000 or an
integral multiple thereof at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning May 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ----------------------------------------------------------------------- -----------
<S> <C>
2003................................................................... 105.188%
2004................................................................... 102.594%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
In addition, at any time prior to May 1, 2002, the Company, at its option,
may use the net proceeds of one or more Public Equity Offerings to redeem up to
an aggregate of 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price equal to 110.375% of the aggregate
principal amount of the Notes redeemed, plus accrued and unpaid interest
thereon, if any, to the redemption date (subject to the rights of holders of
record on relevant record dates to receive interest due on an interest payment
date). At least 65% of the initial aggregate principal amount of Notes must
remain outstanding immediately after the occurrence of such redemption. In order
to effect this redemption, the Company must mail a notice of redemption no later
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than 30 days after the closing of the related Public Equity Offering and must
complete such redemption within 60 days of the closing of the Public Equity
Offering.
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes to be redeemed in compliance with the requirements of the principal
national security exchange, if any, on which the Notes are listed, or if the
Notes are not so listed, on a pro rata basis, by lot or by any other method the
Trustee shall deem fair and reasonable. Notes redeemed in part must be redeemed
only in integral multiples of $1,000. Redemption pursuant to the provisions
relating to a Public Equity Offering must be made on a pro rata basis or on as
nearly a pro rata basis as practicable (subject to the procedures of DTC or any
other depositary). (Sections 203, 1101, 1105 and 1107)
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
If a Change of Control occurs, each holder of Notes will have the right to
require that the Company purchase all or any part (in integral multiples of
$1,000) of such holder's Notes pursuant to a Change of Control Offer. In the
Change of Control Offer, the Company will offer to purchase all of the Notes, at
a purchase price (the "Change of Control Purchase Price") in cash in an amount
equal to 101% of the principal amount of such Notes, plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Purchase
Date") (subject to the rights of holders of record on relevant record dates to
receive interest due on an interest payment date).
Within 30 days of any Change of Control or, at the Company's option, prior
to such Change of Control but after it is publicly announced, the Company must
notify the Trustee and give written notice of the Change of Control to each
holder of Notes, by first-class mail, postage prepaid, at his address appearing
in the security register. The notice must state, among other things:
- that a Change of Control has occurred and the date of such event;
- the circumstances and relevant facts regarding such Change of Control,
including information with respect to pro forma historical income, cash
flow and capitalization after giving effect to such Change of Control;
- the purchase price and the purchase date which shall be fixed by the
Company on a business day no earlier than 30 days nor later than 60 days
from the date the notice is mailed, or such later date as is necessary to
comply with requirements under the Exchange Act;
- that any Note not tendered will continue to accrue interest; that, unless
the Company defaults in the payment of the Change of Control Purchase
Price, any Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Purchase
Date; and
- other procedures that a holder of Notes must follow to accept a Change of
Control Offer or to withdraw acceptance of the Change of Control Offer.
(Section 1015)
If a Change of Control Offer is made, the Company may not have available
funds sufficient to pay the Change of Control Purchase Price for all of the
Notes that might be delivered by holders of the Notes seeking to accept the
Change of Control Offer. The failure of the Company to make or consummate the
Change of Control Offer or pay the Change of Control Purchase Price when due
will give the Trustee and the holders of the Notes the rights described under
"--Events of Default."
Under the Credit Facility, if a change of control occurs all Indebtedness
under the Credit Facility will be subject to mandatory prepayment in full. A
"change of control" under the Credit Facility will occur if, among other things,
any Person or group, other than current officers and directors of the
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Company, acquires more than 33% on a fully diluted basis of the economic or
voting interest in the Company's Capital Stock.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company. The term "all or substantially all" as used in the
definition of "Change of Control" has not been interpreted under New York law
(which is the governing law of the Indenture) to represent a specific
quantitative test. Therefore, if holders of the Notes elected to exercise their
rights under the Indenture and the Company elected to contest such election, it
is not clear how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Company to repurchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The provisions of the Indenture will not afford holders of the Notes the
right to require the Company to repurchase the Notes in the event of a highly
leveraged transaction or certain transactions with the Company's management or
its Affiliates, including a reorganization, restructuring, merger or similar
transaction (including, in certain circumstances, an acquisition of the Company
by management or its affiliates) involving the Company that may adversely affect
holders of the Notes, if such transaction is not a transaction defined as a
Change of Control. A transaction involving the Company's management or its
Affiliates, or a transaction involving a recapitalization of the Company, will
result in a Change of Control if it is the type of transaction specified by such
definition.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements described
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
RANKING
The payment of the principal of, premium, if any, and interest on, the Notes
will rank junior to and be subordinated, as described in the Indenture, in right
of payment, to the prior payment in full of all Senior Indebtedness. The Notes
will be senior subordinated indebtedness of the Company ranking equal to all
other existing and future senior subordinated indebtedness of the Company and
senior to all existing and future Subordinated Indebtedness of the Company.
Upon the occurrence of any default in the payment of any Designated Senior
Indebtedness beyond any applicable grace period and after the receipt by the
Trustee from a representative of holders of any Designated Senior Indebtedness
(collectively, a "Senior Representative") of written notice of such default, no
payment (other than payments previously made pursuant to the provisions
described under "--Defeasance or Covenant Defeasance of Indenture") or
distribution of any assets of the Company of any kind or character (excluding
certain permitted equity interests or subordinated securities) may be made on
account of the principal of, premium, if any, or interest on, the Notes or on
account of the purchase, redemption, defeasance or other acquisition of or in
respect of, the Notes unless and until such default shall have been cured or
waived or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full after which the Company shall resume
making any and all required payments in respect of the Notes, including any
missed payments.
Upon the occurrence and during the continuance of any non-payment default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated
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immediately (a "Non-payment Default") and after the receipt by the Trustee and
the Company from a Senior Representative of written notice of such Non-Payment
Default, no payment (other than payments previously made pursuant to the
provisions described under "--Defeasance or Covenant Defeasance of Indenture")
or distribution of any assets of the Company of any kind or character (excluding
certain permitted equity interests or subordinated securities) may be made by
the Company on account of the principal of, premium, if any, or interest on, the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of, or in respect of, the Notes for the period specified below (the "Payment
Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of the
Non-payment Default by the Trustee and the Company from a Senior Representative
and shall end on the earliest of
(1) the 179th day after such commencement,
(2) the date on which such Non-payment Default (and all other Non-payment
Defaults as to which notice is given after such Payment Blockage Period
is initiated) is cured, waived or ceases to exist or on which such
Designated Senior Indebtedness is discharged or paid in full or
(3) the date on which such Payment Blockage Period (and all Non-payment
Defaults as to which notice is given after such Payment Blockage Period
is initiated) shall have been terminated by written notice to the Company
or the Trustee from the Senior Representative initiating such Payment
Blockage Period.
When the Payment Blockage Period ends, the Company will promptly resume
making any and all required payments in respect of the Notes, including any
missed payments. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt by the Company or the Trustee of the notice
initiating such Payment Blockage Period (such 179-day period referred to as the
"Initial Period"). Any number of notices of Non-payment Defaults may be given
during the Initial Period. However, during any period of 365 consecutive days
only one Payment Blockage Period, during which payment of principal of, or
interest on, the Notes may not be made, may commence and the duration of such
period may not exceed 179 days and there must be a 186 consecutive day period in
any 365 day period during which no Payment Blockage Period is in effect. No
Non-payment Default with respect to Designated Senior Indebtedness that existed
or was continuing on the date of the commencement of any Payment Blockage Period
will be, or can be, made the basis for the commencement of a second Payment
Blockage Period, whether or not within a period of 365 consecutive days, unless
such default has been cured or waived for a period of not less than 90
consecutive days subsequent to the commencement of such initial Payment Blockage
Period. (Section 1303)
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the holders of the Notes to accelerate the
maturity thereof. See "--Events of Default."
The Indenture will provide that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding, relative to the Company or its assets, or any
liquidation, dissolution or other winding up of the Company, whether voluntary
or involuntary, or any assignment for the benefit of creditors or other
marshalling of assets or liabilities of the Company (except in connection with
the consolidation or merger of the Company or its liquidation or dissolution
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety upon the terms and conditions described under
"Consolidation, Merger, Sale of Assets"), all Senior Indebtedness must be paid
in full before any payment or distribution (excluding distributions of certain
permitted equity interests or subordinated securities) is made on account of the
principal of, premium, if any, or interest on the Notes or on account of the
purchase, redemption, defeasance or other acquisition of or in respect of the
Notes (other than payments
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previously made pursuant to the provisions described under "--Defeasance or
Covenant Defeasance of Indenture"). (Section 1302)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and funds which would be otherwise
payable to the holders of the Notes will be paid to the holders of the Senior
Indebtedness to the extent necessary to pay the Senior Indebtedness in full and
the Company may be unable to meet its obligations fully with respect to the
Notes.
The Indenture will limit, but not prohibit, the incurrence by the Company
and its Subsidiaries of additional Indebtedness, and the Indenture will prohibit
the incurrence by the Company of Indebtedness that is subordinated in right of
payment to any Senior Indebtedness of the Company and senior in right of payment
to the Notes.
Each Guarantee of a Guarantor will be an unsecured senior subordinated
obligation of such Guarantor, ranking senior in right of payment to, all other
existing and future Indebtedness of such Guarantor that is expressly
subordinated to Senior Guarantor Indebtedness. The Indebtedness evidenced by the
Guarantees will be subordinated to Senior Guarantor Indebtedness to
substantially the same extent as the Notes are subordinated to Senior
Indebtedness. During any period when payment on the Notes is blocked by
Designated Senior Indebtedness, payment on the Guarantees will be similarly
blocked.
As of January 30, 1999, on a PRO FORMA basis after giving effect to the sale
of the Notes and the application of the estimated net proceeds of the offering
of the Notes, the aggregate amount of Senior Indebtedness outstanding would have
been approximately $39.5 million, the Guarantors would have had no Senior
Guarantor Indebtedness outstanding (other than their Guarantees under the Credit
Facility and the Notes) and no Subordinated Indebtedness or Pari Passu
Indebtedness would have been outstanding. See "Risk Factors--Our substantial
indebtedness could restrict our operations, make us more vulnerable to adverse
economic conditions and make it more difficult for us to make payments on the
exchange notes" and "Capitalization."
"SENIOR INDEBTEDNESS" means the principal of, premium, if any, and interest
(including interest, to the extent allowable, accruing after the filing of a
petition initiating any proceeding under any state, federal or foreign
bankruptcy law) on any Indebtedness of the Company (other than as otherwise
provided in this definition), whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, and whether at any time owing,
actually or contingent, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(1) Indebtedness evidenced by the Notes,
(2) Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of the Company,
(3) 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,
(4) Indebtedness which is represented by Redeemable Capital Stock,
(5) any liability for foreign, federal, state, local or other taxes owed or
owing by the Company to the extent such liability constitutes
Indebtedness,
(6) Indebtedness of the Company to a Subsidiary or any other Affiliate of
the Company or any of such Affiliate's Subsidiaries,
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(7) to the extent it might constitute Indebtedness, amounts owing for goods,
materials or services purchased in the ordinary course of business or
consisting of trade accounts payable owed or owing by the Company, and
amounts owed by the Company for compensation to employees or services
rendered to the Company,
(8) that portion of any Indebtedness which at the time of issuance is issued
in violation of the Indenture and
(9) Indebtedness evidenced by any guarantee of any Subordinated Indebtedness
or Pari Passu Indebtedness.
"DESIGNATED SENIOR INDEBTEDNESS" means (1) all Senior Indebtedness under the
Credit Facility and (2) any other Senior Indebtedness which at the time of
determination has an aggregate principal amount outstanding of at least $25
million and which is specifically designated in the instrument evidencing such
Senior Indebtedness or the agreement under which such Senior Indebtedness arises
as "Designated Senior Indebtedness" by the Company.
"SENIOR GUARANTOR INDEBTEDNESS" means the principal of, premium, if any, and
interest (including interest, to the extent allowable, accruing after the filing
of a petition initiating any proceeding under any state, federal or foreign
bankruptcy law) on any Indebtedness of any Guarantor (other than as otherwise
provided in this definition), whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, and whether at any time owing,
actually or contingent, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to any Guarantee.
Notwithstanding the foregoing, "Senior Guarantor Indebtedness" shall not
include
(1) Indebtedness evidenced by the Guarantees,
(2) Indebtedness that is subordinated or junior in right of payment to any
Indebtedness of any Guarantor,
(3) Indebtedness which when incurred and without respect to any election
under Section 1111(b) of Title 11 United States Code, is without
recourse to any Guarantor,
(4) Indebtedness which is represented by Redeemable Capital Stock,
(5) any liability for foreign, federal, state, local or other taxes owed or
owing by any Guarantor to the extent such liability constitutes
Indebtedness,
(6) Indebtedness of any Guarantor to a Subsidiary or any other Affiliate of
the Company or any of such Affiliate's Subsidiaries,
(7) to the extent it might constitute Indebtedness, amounts owing for goods,
materials or services purchased in the ordinary course of business or
consisting of trade accounts payable owed or owing by such Guarantor,
and amounts owed by such Guarantor for compensation to employees or
services rendered to such Guarantor,
(8) that portion of any Indebtedness which at the time of issuance is issued
in violation of the Indenture and
(9) Indebtedness evidenced by any guarantee of any Subordinated Indebtedness
or Pari Passu Indebtedness.
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CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS. The Company will not, and will not cause or
permit any of its Restricted Subsidiaries to, create, issue, incur, assume,
guarantee or otherwise in any manner become directly or indirectly liable for
the payment of or otherwise incur, contingently or otherwise (collectively,
"incur"), any Indebtedness (including any Acquired Indebtedness), unless such
Indebtedness is incurred by the Company or any Guarantor or constitutes Acquired
Indebtedness of a Restricted Subsidiary and, in each case, the Company's
Consolidated Fixed Charge Coverage Ratio for the most recent four full fiscal
quarters for which financial statements are available immediately preceding the
incurrence of such Indebtedness taken as one period is at least equal to or
greater than 2.0:1.
Notwithstanding the foregoing, the Company and, to the extent specifically
set forth below, the Restricted Subsidiaries may incur each and all of the
following (collectively, the "Permitted Indebtedness"):
(1) Indebtedness of the Company (and guarantees thereof by Restricted
Subsidiaries) under the Credit Facility in an aggregate principal
amount at any one time outstanding not to exceed $300 million
(including up to $30 million of other credit lines) under any revolving
credit facility thereunder or in respect of letters of credit
thereunder minus the amount by which any commitments thereunder are
permanently reduced and minus the aggregate amount of Net Cash Proceeds
of Asset Sales applied to permanently reduce the commitments with
respect to such Indebtedness pursuant to the "RESTRICTION ON ASSET
SALES" covenant;
(2) Indebtedness of the Company pursuant to the Notes and Indebtedness of
any Guarantor pursuant to a Guarantee of the Notes;
(3) Indebtedness of the Company or any Restricted Subsidiary outstanding on
the date of the Indenture, listed on a schedule thereto and not
otherwise referred to in this definition of "Permitted Indebtedness;"
(4) Indebtedness of the Company owing to a Restricted Subsidiary;
- PROVIDED that any Indebtedness of the Company owing to a Restricted
Subsidiary that is not a Guarantor is made pursuant to an intercompany
note in the form attached to the Indenture and is unsecured and is
subordinated in right of payment from and after such time as the Notes
shall become due and payable (whether at Stated Maturity, acceleration
or otherwise) to the payment and performance of the Company's
obligations under the Notes;
- PROVIDED, FURTHER, that any disposition, pledge or transfer of any
such Indebtedness to a Person (other than a disposition, pledge or
transfer to a Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the Company or other obligor not
permitted by this clause (4);
(5) Indebtedness of a Wholly Owned Restricted Subsidiary owing to the
Company or another Wholly Owned Restricted Subsidiary;
- PROVIDED that any such Indebtedness is made pursuant to an
intercompany note in the form attached to the Indenture;
- PROVIDED, FURTHER, that (a) any disposition, pledge or transfer of any
such Indebtedness to a Person (other than a disposition, pledge or
transfer to the Company or a Wholly Owned Restricted Subsidiary) shall
be deemed to be an incurrence of such Indebtedness by the obligor not
permitted by this clause (5), and (b) any transaction pursuant to
which any Wholly Owned Restricted Subsidiary, which has Indebtedness
owing to the Company or
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any other Wholly Owned Restricted Subsidiary, ceases to be a Wholly
Owned Restricted Subsidiary shall be deemed to be the incurrence of
Indebtedness by such Wholly Owned Restricted Subsidiary that is not
permitted by this clause (5);
(6) guarantees of any Restricted Subsidiary made in accordance with the
provisions of "--LIMITATION ON ISSUANCES OF GUARANTEES OF AND PLEDGES
FOR INDEBTEDNESS;"
(7) obligations of the Company or any Guarantor entered into in the
ordinary course of business
(a) pursuant to Interest Rate Agreements designed to protect the Company
or any Restricted Subsidiary against fluctuations in interest rates
in respect of Indebtedness of the Company or any Restricted
Subsidiary as long as such obligations do not exceed the aggregate
principal amount of such Indebtedness then outstanding,
(b) under any Currency Hedging Agreements, relating to (1) Indebtedness
of the Company or any Restricted Subsidiary and/or (2) obligations to
purchase or sell assets or properties, in each case, incurred in the
ordinary course of business of the Company or any Restricted
Subsidiary; provided, however, that such Currency Hedging Agreements
do not increase the Indebtedness or other obligations of the Company
or any Restricted Subsidiary outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder or
(c) under any Commodity Price Protection Agreements which do not increase
the amount of Indebtedness or other obligations of the Company or any
Restricted Subsidiary outstanding other than as a result of
fluctuations in commodity prices or by reason of fees, indemnities
and compensation payable thereunder;
(8) Indebtedness of the Company or any Guarantor represented by Capital
Lease Obligations or Purchase Money Obligations or other Indebtedness
incurred or assumed in connection with the acquisition or development
of real or personal, movable or immovable, property in each case
incurred for the purpose of financing or refinancing all or any part of
the purchase price or cost of construction or improvement of property
used in the business of the Company, in an aggregate principal amount
pursuant to this clause (8) not to exceed 10% of Consolidated Net
Tangible Assets of the Company outstanding at any time; PROVIDED that
the principal amount of any Indebtedness permitted under this clause
(8) did not in each case at the time of incurrence exceed the Fair
Market Value, as determined by the Company in good faith, of the
acquired or constructed asset or improvement so financed;
(9) any renewals, extensions, substitutions, refundings, refinancings or
replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (2) and (3) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the
borrower under such refinancing is the Company or, if not the Company,
the same as the borrower of the Indebtedness being refinanced and the
aggregate principal amount of Indebtedness represented thereby (or if
such Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof, the original issue price of such Indebtedness plus
any accreted value attributable thereto since the original issuance of
such Indebtedness) is not increased by such refinancing plus the lesser
of (a) the stated amount of any premium or other payment required to be
paid in connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (b) the amount of premium or other
payment actually paid at such time to refinance the Indebtedness, plus,
in either case, the amount of expenses of the Company incurred in
connection with such refinancing and (1) in the case of any refinancing
of Indebtedness that is Subordinated Indebtedness, such new
Indebtedness is made subordinated to the Notes at least to the same
extent as the Indebtedness being refinanced and (2) in the case of Pari
Passu Indebtedness or Subordinated Indebtedness, as the case may be,
such refinancing does not reduce the Average Life to Stated Maturity or
the Stated Maturity of such Indebtedness; and
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(10) Indebtedness of the Company or any Guarantor in addition to that
described in clauses (1) through (9) above, and any renewals,
extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount of all such
Indebtedness shall not exceed $10 million outstanding at any one time
in the aggregate.
For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness permitted by this
covenant, the Company in its sole discretion shall classify such item of
Indebtedness and only be required to include the amount of such Indebtedness as
one of such types. (Section 1008)
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not
cause or permit any Restricted Subsidiary to, directly or indirectly:
(1) declare or pay any dividend on, or make any distribution to holders of,
any shares of the Company's Capital Stock (other than dividends or
distributions payable solely in shares of its Qualified Capital Stock or
in options, warrants or other rights to acquire shares of such Qualified
Capital Stock);
(2) purchase, redeem, defease or otherwise acquire or retire for value,
directly or indirectly, the Company's Capital Stock or any Capital Stock
of any Affiliate of the Company (other than Capital Stock of any Wholly
Owned Restricted Subsidiary of the Company) or options, warrants or other
rights to acquire such Capital Stock;
(3) make any principal payment on, or repurchase, redeem, defease, retire or
otherwise acquire for value, prior to any scheduled principal payment,
sinking fund payment or maturity, any Subordinated Indebtedness;
(4) declare or pay any dividend or distribution on any Capital Stock of any
Restricted Subsidiary to any Person (other than (a) to the Company or any
of its Wholly Owned Restricted Subsidiaries or (b) dividends or
distributions made by a Restricted Subsidiary on a pro rata basis to all
stockholders of such Restricted Subsidiary); or
(5) make any Investment in any Person (other than any Permitted Investments)
(any of the foregoing actions described in clauses (1) through (5) above, other
than any such action that is a Permitted Payment (as defined below),
collectively, "Restricted Payments") (the amount of any such Restricted Payment,
if other than cash, shall be the Fair Market Value of the assets proposed to be
transferred, as determined by the board of directors of the Company, whose
determination shall be conclusive and evidenced by a board resolution), unless:
(1) immediately before and immediately after giving effect to such proposed
Restricted Payment on a PRO FORMA basis, no Default or Event of Default
shall have occurred and be continuing and such Restricted Payment shall
not be an event which is, or after notice or lapse of time or both, would
be, an "event of default" under the terms of any Indebtedness of the
Company or its Restricted Subsidiaries;
(2) immediately before and immediately after giving effect to such
Restricted Payment on a PRO FORMA basis, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the
provisions described under "--LIMITATION ON INDEBTEDNESS;" and
(3) after giving effect to the proposed Restricted Payment, the aggregate
amount of all such Restricted Payments declared or made after the date of
the Indenture and all Designation Amounts does not exceed the sum of:
(A) 50% of the aggregate Consolidated Net Income of the Company accrued
on a cumulative basis during the period beginning on May 2, 1999 and
ending on the last day of the Company's last fiscal quarter ending
prior to the date of the Restricted Payment (or, for
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each fiscal quarter of the Company beginning with the third quarter
of the Company's fiscal year ending January 29, 2000, if such
aggregate cumulative Consolidated Net Income shall be a loss, minus
100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company either (1) as capital contributions in the
form of common equity to the Company or (2) from the issuance or sale
(other than to any of its Subsidiaries) of Qualified Capital Stock of
the Company or any options, warrants or rights to purchase such
Qualified Capital Stock of the Company (except, in each case, to the
extent such proceeds are used to purchase, redeem or otherwise retire
Capital Stock or Subordinated Indebtedness as set forth below in
clause (2) or (3) of paragraph (b) below) (and excluding the Net Cash
Proceeds from the issuance of Qualified Capital Stock financed,
directly or indirectly, using funds borrowed from the Company or any
Subsidiary until and to the extent such borrowing is repaid);
(C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Subsidiaries)
upon the exercise of any options, warrants or rights to purchase
Qualified Capital Stock of the Company (and excluding the Net Cash
Proceeds from the exercise of any options, warrants or rights to
purchase Qualified Capital Stock financed, directly or indirectly,
using funds borrowed from the Company or any Subsidiary until and to
the extent such borrowing is repaid);
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company from the conversion or exchange, if any, of
debt securities or Redeemable Capital Stock of the Company or its
Restricted Subsidiaries into or for Qualified Capital Stock of the
Company plus, to the extent such debt securities or Redeemable
Capital Stock were issued after the date of the Indenture, the
aggregate of Net Cash Proceeds from their original issuance (and
excluding the Net Cash Proceeds from the conversion or exchange of
debt securities or Redeemable Capital Stock financed, directly or
indirectly, using funds borrowed from the Company or any Subsidiary
until and to the extent such borrowing is repaid);
(E) (a) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the date of the
Indenture, an amount (to the extent not included in Consolidated
Net Income) equal to the lesser of the return of capital with
respect to such Investment and the initial amount of such
Investment, in either case, less the cost of the disposition of
such Investment and net of taxes, and
(b) in the case of the designation of an Unrestricted Subsidiary as a
Restricted Subsidiary (as long as the designation of such
Subsidiary as an Unrestricted Subsidiary was deemed a Restricted
Payment), the Fair Market Value of the Company's interest in such
Subsidiary provided that such amount shall not in any case exceed
the amount of the Restricted Payment deemed made at the time the
Subsidiary was designated as an Unrestricted Subsidiary; and
(F) $10 million.
(b) Notwithstanding the foregoing, and in the case of clauses (2) through
(5) below, so long as no Default or Event of Default is continuing or would
arise therefrom, the foregoing provisions shall not prohibit the following
actions (each of clauses (1) through (4) being referred to as a "Permitted
Payment"):
(1) the payment of any dividend within 60 days after the date of declaration
thereof, if at such date of declaration such payment was permitted by the
provisions of paragraph (a) of this section and such payment shall have
been deemed to have been paid on such date of
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declaration and shall not have been deemed a "Permitted Payment" for
purposes of the calculation required by paragraph (a) of this section;
(2) the repurchase, redemption, or other acquisition or retirement for value
of any shares of any class of Capital Stock of the Company in exchange
for (including any such exchange pursuant to the exercise of a conversion
right or privilege in connection with which cash is paid in lieu of the
issuance of fractional shares or scrip), or out of the Net Cash Proceeds
of a substantially concurrent issuance and sale for cash (other than to a
Subsidiary) of, other shares of Qualified Capital Stock of the Company;
PROVIDED that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of paragraph (a)
of this section;
(3) the repurchase, redemption, defeasance, retirement or acquisition for
value or payment of principal of any Subordinated Indebtedness in
exchange for, or in an amount not in excess of the Net Cash Proceeds of,
a substantially concurrent issuance and sale for cash (other than to any
Subsidiary of the Company) of any Qualified Capital Stock of the Company,
provided that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of paragraph (a)
of this section; and
(4) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing")
through the substantially concurrent issuance of new Subordinated
Indebtedness of the Company, provided that any such new Subordinated
Indebtedness
(a) shall be in a principal amount that does not exceed the principal
amount so refinanced (or, if such Subordinated Indebtedness provides
for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, then such lesser
amount as of the date of determination), plus the lesser of (1) the
stated amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (2) the amount of premium or other
payment actually paid at such time to refinance the Indebtedness,
plus, in either case, the amount of expenses of the Company incurred
in connection with such refinancing;
(b) has an Average Life to Stated Maturity greater than the remaining
Average Life to Stated Maturity of the Notes;
(c) has a Stated Maturity for its final scheduled principal payment later
than the Stated Maturity for the final scheduled principal payment of
the Notes; and
(d) is expressly subordinated in right of payment to the Notes at least
to the same extent as the Subordinated Indebtedness to be refinanced.
(Section 1009)
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into any transaction or series of related transactions
(including, without limitation, the sale, purchase, exchange or lease of assets,
property or services) with or for the benefit of any Affiliate of the Company
(other than the Company or a Wholly Owned Restricted Subsidiary) unless such
transaction or series of related transactions is entered into in good faith and
in writing and
(1) such transaction or series of related transactions is on terms that are
not substantially less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those that would be available in a
comparable transaction in arm's-length dealings with an unrelated third
party,
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(2) with respect to any transaction or series of related transactions
involving aggregate value in excess of $5 million, such transaction or
series of related transactions has been approved by a majority of the
Disinterested Directors of the board of directors of the Company, or in
the event there is only one Disinterested Director, by such Disinterested
Director, and
(3) with respect to any transaction or series of related transactions
involving aggregate value in excess of $10 million, the Company delivers
to the Trustee a written opinion of an investment banking firm of
national standing or other recognized independent expert with experience
appraising the terms and conditions of the type of transaction or series
of related transactions for which an opinion is required stating that the
transaction or series of related transactions is fair to the Company or
such Restricted Subsidiary from a financial point of view;
PROVIDED, HOWEVER, that this provision shall not apply to (1) employment
agreements and employee benefit arrangements with any officer or director of the
Company, including under any stock option or stock incentive plans, entered into
in the ordinary course of business and consistent with the past practices of the
Company or such Restricted Subsidiary and (2) transactions pursuant to
agreements in effect on the date of the Indenture, including amendments thereto
entered into after that date, provided that the terms of any such amendment are
not less favorable to the Company or such Restricted Subsidiary than the terms
of such agreement prior to such amendment. (Section 1010)
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, create, incur or affirm any
Lien of any kind securing any Pari Passu Indebtedness or Subordinated
Indebtedness (including any assumption, guarantee or other liability with
respect thereto by any Restricted Subsidiary) upon any property or assets
(including any intercompany notes) of the Company or any Restricted Subsidiary
owned on the date of the Indenture or acquired after the date of the Indenture,
or assign or convey any right to receive any income or profits therefrom, unless
the Notes (or a Guarantee in the case of Liens of a Guarantor) are directly
secured equally and ratably with (or, in the case of Subordinated Indebtedness,
prior or senior thereto, with the same relative priority as the Notes shall have
with respect to such Subordinated Indebtedness) the obligation or liability
secured by such Lien except for Liens
(A) securing any Indebtedness which became Indebtedness pursuant to a
transaction permitted under "--Consolidation, Merger, Sale of Assets" or
securing Acquired Indebtedness which in each case was created prior to
(and not created in connection with, or in contemplation of) the
incurrence of such Pari Passu Indebtedness or Subordinated Indebtedness
(including any assumption, guarantee or other liability with respect
thereto by any Restricted Subsidiary) and which Indebtedness is permitted
under the provisions of "--LIMITATION ON INDEBTEDNESS" or
(B) securing any Indebtedness incurred in connection with any refinancing,
renewal, substitutions or replacements of any such Indebtedness described
in clause (A), so long as the aggregate principal amount of Indebtedness
represented thereby (or if such Indebtedness provides for an amount less
than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness plus any accreted value attributable thereto
since the original issuance of such Indebtedness) is not increased by
such refinancing by an amount greater than the lesser of (1) the stated
amount of any premium or other payment required to be paid in connection
with such a refinancing pursuant to the terms of the Indebtedness being
refinanced or (2) the amount of premium or other payment actually paid at
such time to refinance the Indebtedness, plus, in either case, the amount
of expenses of the Company incurred in connection with such refinancing,
PROVIDED, HOWEVER, that in the case of clauses (A) and (B), any such Lien only
extends to the assets that were subject to such Lien securing such Indebtedness
prior to the related acquisition by the Company or its Restricted Subsidiaries.
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Notwithstanding the foregoing, any Lien securing the Notes granted pursuant
to this covenant shall be automatically and unconditionally released and
discharged upon the release by the holders of the Pari Passu Indebtedness or
Subordinated Indebtedness described above of their Lien on the property or
assets of the Company or any Restricted Subsidiary (including any deemed release
upon payment in full of all obligations under such Indebtedness), at such time
as the holders of all such Pari Passu Indebtedness or Subordinated Indebtedness
also release their Lien on the property or assets of the Company or such
Restricted Subsidiary, or upon any sale, exchange or transfer to any Person not
an Affiliate of the Company of the property or assets secured by such Lien, or
of all of the Capital Stock held by the Company or any Restricted Subsidiary in,
or all or substantially all the assets of, any Restricted Subsidiary creating
such Lien. (Section 1011)
LIMITATION ON SALE OF ASSETS. (a) The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly,
consummate an Asset Sale unless (1) at least 75% of the consideration from such
Asset Sale is received in cash and (2) the Company or such Restricted Subsidiary
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the shares or assets subject to such Asset Sale (as determined
by the board of directors of the Company and evidenced in a board resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness or Senior
Guarantor Indebtedness then outstanding as required by the terms thereof, or the
Company determines not to apply such Net Cash Proceeds to the permanent
prepayment of such Senior Indebtedness or Senior Guarantor Indebtedness, or if
no such Senior Indebtedness or Senior Guarantor Indebtedness is then
outstanding, then the Company or a Restricted Subsidiary may within 360 days of
the Asset Sale invest the Net Cash Proceeds in properties and other assets that
(as determined by the board of directors of the Company) replace the properties
and assets that were the subject of the Asset Sale or in properties and assets
that will be used in the businesses of the Company or its Restricted
Subsidiaries existing on the date of the Indenture or in businesses reasonably
related thereto. The amount of such Net Cash Proceeds not used or invested
within 360 days of the Asset Sale as set forth in this paragraph constitutes
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million or
more, the Company will apply the Excess Proceeds to the repayment of the Notes
and any other Pari Passu Indebtedness outstanding with similar provisions
requiring the Company to make an offer to purchase such Indebtedness with the
proceeds from any Asset Sale as follows:
(A) the Company will make an offer to purchase (an "Offer") from all holders
of the Notes in accordance with the procedures set forth in the Indenture
in the maximum principal amount (expressed as a multiple of $1,000) of
Notes that may be purchased out of an amount (the "Note Amount") equal to
the product of such Excess Proceeds multiplied by a fraction, the
numerator of which is the outstanding principal amount of the Notes, and
the denominator of which is the sum of the outstanding principal amount
(or accreted value in the case of Indebtedness issued with original issue
discount) of the Notes and such Pari Passu Indebtedness (subject to
proration in the event such amount is less than the aggregate Offered
Price (as defined herein) of all Notes tendered) and
(B) to the extent required by such Pari Passu Indebtedness to permanently
reduce the principal amount of such Pari Passu Indebtedness (or accreted
value in the case of Indebtedness issued with original issue discount),
the Company will make an offer to purchase or otherwise repurchase or
redeem Pari Passu Indebtedness (a "Pari Passu Offer") in an amount (the
"Pari Passu Debt Amount") equal to the excess of the Excess Proceeds over
the Note Amount; PROVIDED that in no event will the Company be required
to make a Pari Passu Offer in a Pari Passu Debt Amount exceeding the
principal amount (or accreted value) of such Pari Passu
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Indebtedness plus the amount of any premium required to be paid to
repurchase such Pari Passu Indebtedness.
The offer price for the Notes will be payable in cash in an amount equal to 100%
of the principal amount of the Notes plus accrued and unpaid interest, if any,
to the date (the "Offer Date") such Offer is consummated (the "Offered Price"),
in accordance with the procedures set forth in the Indenture. To the extent that
the aggregate Offered Price of the Notes tendered pursuant to the Offer is less
than the Note Amount relating thereto or the aggregate amount of Pari Passu
Indebtedness that is purchased in a Pari Passu Offer is less than the Pari Passu
Debt Amount, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes and Pari Passu
Indebtedness surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Upon the completion of the purchase of all the Notes tendered pursuant to
an Offer and the completion of a Pari Passu Offer, the amount of Excess
Proceeds, if any, shall be reset at zero.
(d) If the Company becomes obligated to make an Offer pursuant to clause (c)
above, the Notes and the Pari Passu Indebtedness shall be purchased by the
Company, at the option of the holders thereof, in whole or in part in integral
multiples of $1,000, on a date that is not earlier than 30 days and not later
than 60 days from the date the notice of the Offer is given to holders, or such
later date as may be necessary for the Company to comply with the requirements
under the Exchange Act.
(e) In the event that the Company is required to make an Offer but is
restricted from making an Offer pursuant to clause (c) above under the terms of
any of its outstanding Senior Indebtedness, then the Company need not make such
an Offer pursuant to clause (c) above and shall not be deemed to be in default
in the performance of such covenant by virtue of not making such an Offer,
provided that in any such event (1) the Company shall use all or a portion of
the Net Cash Proceeds of any Asset Sale to repay permanently any Senior
Indebtedness or Senior Guarantor Indebtedness then outstanding as required by
the terms thereof or (2) the Company or a Restricted Subsidiary shall within 360
days of the Asset Sale invest the Net Cash Proceeds in properties and other
assets that (as determined by the board of directors of the Company) replace the
properties and assets that were the subject of the Asset Sale or in properties
and assets that will be used in the businesses of the Company or its Restricted
Subsidiaries existing on the date of the Indenture or in businesses reasonably
related thereto.
(f) The Indenture will provide that the Company will comply with the
applicable tender offer rules, including Rule 14e-1 under the Exchange Act, and
any other applicable securities laws or regulations in connection with an Offer.
(Section 1012)
LIMITATION ON ISSUANCES OF GUARANTEES OF AND PLEDGES FOR INDEBTEDNESS. (a)
The Company will not cause or permit any Restricted Subsidiary, other than a
Guarantor, directly or indirectly, to secure the payment of any Senior
Indebtedness of the Company and the Company will not, and will not permit any
Restricted Subsidiary to, pledge any intercompany notes representing obligations
of any Restricted Subsidiary (other than a Guarantor) to secure the payment of
any Senior Indebtedness unless in each case such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a guarantee of payment of the Notes by such Restricted Subsidiary,
which guarantee shall be on the same terms as the guarantee of the Senior
Indebtedness (if a guarantee of Senior Indebtedness is granted by any such
Restricted Subsidiary) except that the guarantee of the Notes need not be
secured and shall be subordinated to the claims against such Restricted
Subsidiary in respect of Senior Indebtedness to the same extent as the Notes are
subordinated to Senior Indebtedness of the Company under the Indenture.
(b) The Company will not cause or permit any Restricted Subsidiary (which is
not a Guarantor), directly or indirectly, to guarantee, assume or in any other
manner become liable with respect to any Indebtedness of the Company or any
Restricted Subsidiary unless such Restricted Subsidiary
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simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of the Notes on the same terms as the guarantee of
such Indebtedness except that
(A) such guarantee need not be secured unless required pursuant to
"--LIMITATION ON LIENS,"
(B) if such Indebtedness is by its terms Senior Indebtedness, any such
assumption, guarantee or other liability of such Restricted Subsidiary
with respect to such Indebtedness shall be senior to such Restricted
Subsidiary's Guarantee of the Notes to the same extent as such Senior
Indebtedness is senior to the Notes and
(C) if such Indebtedness is by its terms expressly subordinated to the
Notes, any such assumption, guarantee or other liability of such
Restricted Subsidiary with respect to such Indebtedness shall be
subordinated to such Restricted Subsidiary's Guarantee of the Notes at
least to the same extent as such Indebtedness is subordinated to the
Notes.
(c) Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary
of the Notes shall provide by its terms that it (and all Liens securing the
same) shall be automatically and unconditionally released and discharged upon
(1) 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
transaction is in compliance with the terms of the Indenture and such
Restricted Subsidiary is released from all guarantees, if any, by it of
other Indebtedness of the Company or any Restricted Subsidiaries and
(2) with respect to any Guarantees created after the date of the Indenture,
the release by the holders of the Indebtedness of the Company described
in clauses (a) and (b) above of their security interest or their
guarantee by such Restricted Subsidiary (including any deemed release
upon payment in full of all obligations under such Indebtedness), at such
time as (A) no other Indebtedness of the Company has been secured or
guaranteed by such Restricted Subsidiary, as the case may be, or (B) the
holders of all such other Indebtedness which is secured or guaranteed by
such Restricted Subsidiary also release their security interest in or
guarantee by such Restricted Subsidiary (including any deemed release
upon payment in full of all obligations under such Indebtedness).
(Section 1013)
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The Company will not, and
will not permit or cause any Guarantor to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to or otherwise permit to exist any
Indebtedness that is subordinate in right of payment to any Indebtedness of the
Company or such Guarantor, as the case may be, unless such Indebtedness is also
PARI PASSU with the Notes or the Guarantee of such Guarantor or subordinated in
right of payment to the Notes or such Guarantee at least to the same extent as
the Notes or such Guarantee are subordinated in right of payment to Senior
Indebtedness or Senior Indebtedness of such Guarantor, as the case may be, as
set forth in the Indenture. (Section 1014)
LIMITATION ON SUBSIDIARY CAPITAL STOCK. (a) The Company will not permit any
Restricted Subsidiary of the Company to issue, sell or transfer any Capital
Stock, except for (1) Capital Stock issued or sold to, held by or transferred to
the Company or a Wholly Owned Restricted Subsidiary, and (2) Capital Stock
issued by a Person prior to the time (A) such Person becomes a Restricted
Subsidiary, (B) such Person merges with or into a Restricted Subsidiary or (C) a
Restricted Subsidiary merges with or into such Person; PROVIDED that such
Capital Stock was not issued or incurred by such Person in anticipation of the
type of transaction contemplated by subclause (A), (B) or (C). This clause (a)
shall not apply upon the acquisition of all the outstanding Capital Stock of
such Restricted Subsidiary in accordance with the terms of the Indenture.
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(b) The Company will not permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary) to acquire Capital Stock of any Restricted
Subsidiary from the Company or any Restricted Subsidiary, except upon the
acquisition of all the outstanding Capital Stock of such Restricted Subsidiary
in accordance with the terms of the Indenture. (Section 1016)
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to
(1) pay dividends or make any other distribution on its Capital Stock or any
other interest or participation in or measured by its profits,
(2) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary,
(3) make any Investment in the Company or any other Restricted Subsidiary or
(4) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary.
However, this covenant will not prohibit any encumbrance or restriction (1)
pursuant to an agreement in effect on the date of the Indenture and listed on a
schedule to the Indenture; (2) with respect to a Restricted Subsidiary that is
not a Restricted Subsidiary of the Company on the date of the Indenture, in
existence at the time such Person becomes a Restricted Subsidiary of the Company
and not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary, provided that such encumbrances and
restrictions are not applicable to the Company or any Restricted Subsidiary or
the properties or assets of the Company or any Restricted Subsidiary other than
such Subsidiary which is becoming a Restricted Subsidiary; and (3) under any
agreement that extends, renews, refinances or replaces the agreements containing
the encumbrances or restrictions in the foregoing clauses (1) and (2), or in
this clause (3), PROVIDED that the terms and conditions of any such encumbrances
or restrictions are no more restrictive in any material respect than those under
or pursuant to the agreement evidencing the Indebtedness so extended, renewed,
refinanced or replaced. (Section 1017)
LIMITATION ON UNRESTRICTED SUBSIDIARIES. The Company may designate after
the Issue Date any Subsidiary (other than a Guarantor) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or after
giving effect to such Designation;
(b) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"--LIMITATION ON RESTRICTED PAYMENTS" above in an amount (the
"Designation Amount") equal to the greater of (1) the net book value of
the Company's interest in such Subsidiary calculated in accordance with
GAAP or (2) the Fair Market Value of the Company's interest in such
Subsidiary as determined in good faith by the Company's board of
directors;
(c) the Company would be permitted under the Indenture to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "--LIMITATION ON INDEBTEDNESS" at the time
of such Designation (assuming the effectiveness of such Designation);
(d) such Unrestricted Subsidiary does not own any Capital Stock in any
Restricted Subsidiary of the Company which is not simultaneously being
designated an Unrestricted Subsidiary;
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(e) such Unrestricted Subsidiary is not liable, directly or indirectly, with
respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness, provided that an Unrestricted Subsidiary may provide a
Guarantee for the Notes; and
(f) such Unrestricted Subsidiary is not a party to any agreement, contract,
arrangement or understanding at such time with the Company or any
Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company or, in the event such
condition is not satisfied, the value of such agreement, contract,
arrangement or understanding to such Unrestricted Subsidiary shall be
deemed a Restricted Payment.
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"--LIMITATION ON RESTRICTED PAYMENTS" for all purposes of the Indenture equal to
the Designation Amount.
The Indenture will also provide that the Company shall not and shall not
cause or permit any Restricted Subsidiary to at any time
(a) provide credit support for, guarantee or subject any of its property or
assets (other than the Capital Stock of any Unrestricted Subsidiary) to
the satisfaction of, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) (other than Permitted Investments in Unrestricted
Subsidiaries) or
(b) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary. For purposes of the foregoing, the Designation
of a Subsidiary of the Company as an Unrestricted Subsidiary shall be
deemed to be the Designation of all of the Subsidiaries of such
Subsidiary as Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation;
(b) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if incurred at such time,
have been permitted to be incurred for all purposes of the Indenture; and
(c) unless such redesignated Subsidiary shall not have any Indebtedness
outstanding (other than Indebtedness that would be Permitted
Indebtedness), immediately after giving effect to such proposed
Revocation, and after giving pro forma effect to the incurrence of any
such Indebtedness of such redesignated Subsidiary as if such Indebtedness
was incurred on the date of the Revocation, the Company could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant
to the covenant described under "--Limitation on Indebtedness."
All Designations and Revocations must be evidenced by a resolution of the
board of directors of the Company delivered to the Trustee certifying compliance
with the foregoing provisions. (Section 1018)
PROVISION OF FINANCIAL STATEMENTS. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, the Company and any Guarantor will,
to the extent permitted under the Exchange Act, file with the Commission the
annual reports, quarterly reports and other documents which the Company and such
Guarantor would have been required to file with the Commission pursuant to
Sections 13(a) or 15(d) if the Company or such Guarantor were so subject, such
documents
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to be filed with the Commission on or prior to the date (the "Required Filing
Date") by which the Company and such Guarantor would have been required so to
file such documents if the Company and such Guarantor were so subject.
The Company and any Guarantor will also in any event (a) within 15 days of
each Required Filing Date (1) transmit by mail to all holders, as their names
and addresses appear in the security register, without cost to such holders and
(2) file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company and such Guarantor would have been required to
file with the Commission pursuant to Sections 13(a) or 15(d) of the Exchange Act
if the Company and such Guarantor were subject to either of such Sections and
(b) if filing such documents by the Company and such Guarantor with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder at the Company's cost.
If any Guarantor's financial statements would be required to be included in
the financial statements filed or delivered pursuant to the Indenture if the
Company were subject to Section 13(a) or 15(d) of the Exchange Act, the Company
shall include such Guarantor's financial statements in any filing or delivery
pursuant to the Indenture.
In addition, so long as any of the Notes remain outstanding, the Company
will make available to any prospective purchaser of Notes or beneficial owner of
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act, until such time as the Company has either
exchanged the Notes for securities identical in all material respects which have
been registered under the Securities Act or until such time as the holders
thereof have disposed of such Notes pursuant to an effective registration
statement under the Securities Act. (Section 1019)
ADDITIONAL COVENANTS. The Indenture also contains covenants with respect to
the following matters: (1) payment of principal, premium and interest; (2)
maintenance of an office or agency in The City of New York; (3) arrangements
regarding the handling of money held in trust; (4) maintenance of corporate
existence; (5) payment of taxes and other claims; (6) maintenance of properties;
and (7) maintenance of insurance.
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company will not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any Person or group of Persons, or permit any of
its Restricted Subsidiaries to enter into any such transaction or series of
transactions, if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or disposition
of all or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a Consolidated basis to any other Person or group of
Persons, unless at the time and after giving effect thereto
(1) either (a) the Company will be the continuing corporation or (b) the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by sale,
assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a Consolidated basis (the "Surviving Entity")
will be a corporation duly organized and validly existing under the laws
of the United States of America, any state thereof or the District of
Columbia and such Person expressly assumes, by a supplemental indenture,
in a form reasonably satisfactory to the Trustee, all the obligations of
the Company under the Notes and the Indenture and the Registration Rights
Agreement, as the case may be, and the Notes and the Indenture and the
Registration Rights Agreement will remain in full force and effect as so
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supplemented (and any Guarantees will be confirmed as applying to such
Surviving Entity's obligations);
(2) immediately before and immediately after giving effect to such
transaction on a PRO FORMA basis (and treating any Indebtedness not
previously an obligation of the Company or any of its Restricted
Subsidiaries which becomes the obligation of the Company or any of its
Restricted Subsidiaries as a result of such transaction as having been
incurred at the time of such transaction), no Default or Event of Default
will have occurred and be continuing;
(3) immediately before and immediately after giving effect to such
transaction on a PRO FORMA basis (on the assumption that the transaction
occurred on the first day of the four-quarter period for which financial
statements are available ending immediately prior to the consummation of
such transaction with the appropriate adjustments with respect to the
transaction being included in such PRO FORMA calculation), the Company
(or the Surviving Entity if the Company is not the continuing obligor
under the Indenture) could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the provisions of "--Certain
Covenants--LIMITATION ON INDEBTEDNESS;"
(4) at the time of the transaction each Guarantor, if any, unless it is the
other party to the transactions described above, will have by
supplemental indenture confirmed that its Guarantee shall apply to such
Person's obligations under the Indenture and the Notes;
(5) at the time of the transaction if any of the property or assets of the
Company or any of its Restricted Subsidiaries would thereupon become
subject to any Lien, the provisions of "--Certain Covenants--LIMITATION
ON LIENS" are complied with; and
(6) at the time of the transaction the Company or the Surviving Entity will
have delivered, or caused to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, transfer,
lease or other transaction and the supplemental indenture in respect
thereof comply with the Indenture and that all conditions precedent
therein provided for relating to such transaction have been complied
with. (Section 801)
Each Guarantor will not, and the Company will not permit a Guarantor to, in
a single transaction or through a series of related transactions, consolidate
with or merge with or into any other Person (other than the Company or any
Guarantor) or sell, assign, convey, transfer, lease or otherwise dispose of all
or substantially all of its properties and assets to any Person or group of
Persons (other than the Company or any Guarantor) or permit any of its
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or disposition
of all or substantially all of the properties and assets of the Guarantor and
its Restricted Subsidiaries on a Consolidated basis to any other Person or group
of Persons (other than the Company or any Guarantor), unless at the time and
after giving effect thereto
(1) either (a) the Guarantor will be the continuing corporation or a limited
liability company in the case of a consolidation or merger involving the
Guarantor or (b) the Person (if other than the Guarantor) formed by such
consolidation or into which such Guarantor is merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or disposition
all or substantially all of the properties and assets of the Guarantor
and its Restricted Subsidiaries on a Consolidated basis (the "Surviving
Guarantor Entity") will be a corporation or a limited liability company
duly organized and validly existing under the laws of the United States
of America, any state thereof or the District of Columbia and such Person
expressly assumes, by a supplemental indenture, in a form reasonably
satisfactory to the Trustee, all the obligations
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of such Guarantor under its Guarantee of the Notes and the Indenture and
the Registration Rights Agreement and such Guarantee, Indenture and
Registration Rights Agreement will remain in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction on a PRO FORMA basis, no Default or Event of Default will
have occurred and be continuing; and
(3) at the time of the transaction such Guarantor or the Surviving Guarantor
Entity will have delivered, or caused to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an officers'
certificate and an opinion of counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, lease or
other transaction and the supplemental indenture in respect thereof
comply with the Indenture and that all conditions precedent therein
provided for relating to such transaction have been complied with;
PROVIDED, HOWEVER, that this paragraph shall not apply to any Guarantor
whose Guarantee of the Notes is unconditionally released and discharged
in accordance with paragraph (c) under the provisions of "Certain
Covenants--LIMITATION ON ISSUANCES OF GUARANTEES OF AND PLEDGES FOR
INDEBTEDNESS." (Section 801)
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the two immediately preceding paragraphs
in which the Company or any Guarantor, as the case may be, is not the Successor
Person, the Successor Person formed or remaining or to which such transfer is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company or such Guarantor, as the case may be, and the Company or
any Guarantor, as the case may be, would be discharged (other than in a
transaction that results in the transfer of assets constituting or accounting
for less than 95% of the Consolidated assets (as of the last balance sheet date
available to the Company) of the Company or the Consolidated revenue of the
Company (as of the last 12-month period for which financial statements are
available)) from all obligations and covenants under the Indenture and the Notes
or its Guarantee, as the case may be, and the Registration Rights Agreement.
(Section 802)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(1) there shall be a default in the payment of any interest on any Note when
it becomes due and payable, and such default shall continue for a period
of 30 days (whether or not prohibited by the subordination provisions of
the Indenture);
(2) there shall be a default in the payment of the principal of (or premium,
if any, on) any Note at its Maturity (upon acceleration, optional or
mandatory redemption, if any, required repurchase or otherwise) (whether
or not prohibited by the subordination provisions of the Indenture);
(3) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture
or any Guarantee (other than a default in the performance, or breach, of
a covenant or agreement which is specifically dealt with in clause (1),
(2) or in clause (b), (c) or (d) of this clause (3)) and such default or
breach shall continue for a period of 30 days after written notice has
been given, by certified mail, (1) to the Company by the Trustee or (2)
to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Notes; (b) there shall be a
default in the performance or breach of the provisions described in
"--Consolidation, Merger, Sale of Assets;" (c) the Company shall have
failed to make or consummate an Offer in accordance with the provisions
of "--Certain Covenants--LIMITATION ON SALE OF ASSETS;" or (d) the
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Company shall have failed to make or consummate a Change of Control Offer
in accordance with the provisions of "--Purchase of Notes Upon a Change
of Control;"
(4) one or more defaults shall have occurred under any of the agreements,
indentures or instruments under which the Company, any Guarantor or any
Restricted Subsidiary then has outstanding Indebtedness in excess of $10
million, individually or in the aggregate, and either (a) such default
results from the failure to pay such Indebtedness at its stated final
maturity or (b) such default or defaults have resulted in the
acceleration of the maturity of such Indebtedness.
(5) any Guarantee shall for any reason cease to be, or shall for any reason
be asserted in writing by any Guarantor or the Company not to be, in full
force and effect and enforceable in accordance with its terms, except to
the extent contemplated by the Indenture and any such Guarantee;
(6) one or more judgments, orders or decrees of any court or regulatory or
administrative agency for the payment of money in excess of $10 million,
either individually or in the aggregate, shall be rendered against the
Company, any Guarantor or any Restricted Subsidiary or any of their
respective properties and shall not be discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such
judgment, order or decree or (b) there shall have been a period of 60
consecutive days during which a stay of enforcement of such judgment or
order, by reason of an appeal or otherwise, shall not be in effect;
(7) any holder or holders of at least $10 million in aggregate principal
amount of Indebtedness of the Company, any Guarantor or any Restricted
Subsidiary after a default under such Indebtedness shall notify the
Trustee of the intended sale or disposition of any assets of the Company,
any Guarantor or any Restricted Subsidiary that have been pledged to or
for the benefit of such holder or holders to secure such Indebtedness or
shall commence proceedings, or take any action (including by way of
set-off), to retain in satisfaction of such Indebtedness or to collect
on, seize, dispose of or apply in satisfaction of Indebtedness, assets of
the Company, any Guarantor or any Restricted Subsidiary (including funds
on deposit or held pursuant to lock-box and other similar arrangements);
(8) there shall have been the entry by a court of competent jurisdiction of
(a) a decree or order for relief in respect of the Company, any Guarantor
or any Restricted Subsidiary in an involuntary case or proceeding under
any applicable Bankruptcy Law or (b) a decree or order adjudging the
Company, any Guarantor or any Restricted Subsidiary bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Guarantor or any
Restricted Subsidiary under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company, any Guarantor or
any Restricted Subsidiary or of any substantial part of their respective
properties, or ordering the winding up or liquidation of their affairs,
and any such decree or order for relief shall continue to be in effect,
or any such other decree or order shall be unstayed and in effect, for a
period of 60 consecutive days; or
(9) (a) the Company, any Guarantor or any Restricted Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or
any other case or proceeding to be adjudicated bankrupt or
insolvent,
(b) the Company, any Guarantor or any Restricted Subsidiary consents to
the entry of a decree or order for relief in respect of the Company,
such Guarantor or such Restricted Subsidiary in an involuntary case
or proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding
against it,
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(c) the Company, any Guarantor or any Restricted Subsidiary files a
petition or answer or consent seeking reorganization or relief under
any applicable federal or state law,
(d) the Company, any Guarantor or any Restricted Subsidiary (1) consents
to the filing of such petition or the appointment of, or taking
possession by, a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company, any Guarantor or
such Restricted Subsidiary or of any substantial part of their
respective properties, (2) makes an assignment for the benefit of
creditors or (3) admits in writing its inability to pay its debts
generally as they become due or
(e) the Company, any Guarantor or any Restricted Subsidiary takes any
corporate action in furtherance of any such actions in this paragraph
(9). (Section 501)
If an Event of Default (other than as specified in clauses (8) and (9) of
the prior paragraph) shall occur and be continuing with respect to the
Indenture, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders shall, declare all unpaid principal of, premium, if any,
and accrued interest on all Notes to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by the holders of the
Notes) and upon any such declaration, such principal, premium, if any, and
interest shall become due and payable immediately. If an Event of Default
specified in clause (8) or (9) of the prior paragraph occurs and is continuing,
then all the Notes shall IPSO FACTO become and be due and payable immediately in
an amount equal to the principal amount of the Notes, together with accrued and
unpaid interest, if any, to the date the Notes become due and payable, without
any declaration or other act on the part of the Trustee or any holder.
Thereupon, the Trustee may, at its discretion, proceed to protect and enforce
the rights of the holders of Notes by appropriate judicial proceedings.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding by written notice to
the Company and the Trustee, may rescind and annul such declaration and its
consequences if
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay (1) all sums paid or advanced by the Trustee under the Indenture and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, (2) all overdue interest on all Notes
then outstanding, (3) the principal of, and premium, if any, on any Notes
then outstanding which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate borne by the Notes and
(4) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes;
(b) the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction; and
(c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the Notes which have become due solely
by such declaration of acceleration, have been cured or waived as
provided in the Indenture.
No such rescission shall affect any subsequent default or impair any right
consequent thereon. (Section 502)
The holders of not less than a majority in aggregate principal amount of the
Notes outstanding may on behalf of the holders of all outstanding Notes waive
any past default under the Indenture and its consequences, except a default (1)
in the payment of the principal of, premium, if any, or interest on any Note
(which may only be waived with the consent of each holder of Notes effected) or
(2) in respect of a covenant or provision which under the Indenture cannot be
modified or amended without
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the consent of the holders of 66 2/3% in aggregate principal amount of the Notes
outstanding or the consent of the holder of each Note affected by such
modification or amendment. (Section 513)
No holder of any of the Notes has any right to institute any proceedings
with respect to the Indenture or any remedy thereunder, unless such holder has
previously given written notice to the Trustee of a Continuing Event of Default
and the holders of at least 25% in aggregate principal amount of the outstanding
Notes have made written request, and offered reasonable indemnity, to the
Trustee to institute such proceeding as Trustee under the Notes and the
Indenture, the Trustee has failed to institute such proceeding within 15 days
after receipt of such notice and the Trustee, within such 15-day period, has not
received directions inconsistent with such written request by holders of a
majority in aggregate principal amount of the outstanding Notes. Such
limitations do not, however, apply to a suit instituted by a holder of a Note
for the enforcement of the payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note. (Sections 507, 508)
The Company is required to notify the Trustee within five business days of
the occurrence of any Default. The Company is required to deliver to the
Trustee, on or before a date not more than 60 days after the end of each fiscal
quarter and not more than 120 days after the end of each fiscal year, a written
statement as to compliance with the Indenture, including whether or not any
Default has occurred. (Section 1020) The Trustee is under no obligation to
exercise any of the rights or powers vested in it by the Indenture at the
request or direction of any of the holders of the Notes unless such holders
offer to the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred thereby. (Section
603)
The Trust Indenture Act contains limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, if any, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions, but if it acquires any conflicting
interest it must eliminate such conflict upon the occurrence of an Event of
Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company, any Guarantor and any other obligor upon the Notes
discharged with respect to the outstanding Notes ("defeasance"). Such defeasance
means that the Company, any such Guarantor and any other obligor under the
Indenture shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, except for
(1) the rights of holders of such outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest on such Notes
when such payments are due,
(2) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, and the maintenance of an office or agency for payment and
money for security payments held in trust,
(3) the rights, powers, trusts, duties and immunities of the Trustee and
(4) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and any Guarantor released with respect to
certain covenants that are described in the Indenture ("covenant defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or an Event of Default with respect to the Notes. In the event
covenant defeasance occurs, certain events (not including non-payment,
bankruptcy and insolvency events)
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described under "--Events of Default" will no longer constitute an Event of
Default with respect to the Notes. (Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance,
(a) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Notes cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants or a
nationally recognized investment banking firm, to pay and discharge the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity (or on any date after May 1, 2003 (such date being
referred to as the "Defeasance Redemption Date"), if at or prior to
electing either defeasance or covenant defeasance, the Company has
delivered to the Trustee an irrevocable notice to redeem all of the
outstanding Notes on the Defeasance Redemption Date);
(b) in the case of defeasance, the Company shall have delivered to the
Trustee an opinion of independent counsel in the United States stating
that (A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
independent counsel in the United States shall confirm that, the holders
of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred;
(c) in the case of covenant defeasance, the Company shall have delivered to
the Trustee an opinion of independent counsel in the United States to the
effect that the holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as clauses (8) or (9) under the first
paragraph under "--Events of Default" are concerned, at any time during
the period ending on the 91st day after the date of deposit;
(e) such defeasance or covenant defeasance shall not cause the Trustee for
the Notes to have a conflicting interest as defined in the Indenture and
for purposes of the Trust Indenture Act with respect to any securities of
the Company or any Guarantor;
(f) such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a Default under, the Indenture or any other
material agreement or instrument to which the Company, any Guarantor or
any Restricted Subsidiary is a party or by which it is bound;
(g) such defeasance or covenant defeasance shall not result in the trust
arising from such deposit constituting an investment company within the
meaning of the Investment Company Act of 1940, as amended, unless such
trust shall be registered under such Act or exempt from registration
thereunder;
(h) the Company will have delivered to the Trustee an opinion of independent
counsel in the United States to the effect that after the 91st day
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;
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(i) the Company shall have delivered to the Trustee an officers' certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of the Notes or any Guarantee over the other
creditors of the Company or any Guarantor with the intent of defeating,
hindering, delaying or defrauding creditors of the Company, any Guarantor
or others;
(j) no event or condition shall exist that would prevent the Company from
making payments of the principal of, premium, if any, and interest on the
Notes on the date of such deposit or at any time ending on the 91st day
after the date of such deposit; and
(k) the Company will have delivered to the Trustee an officers' certificate
and an opinion of independent counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with. (Section 404)
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes as expressly provided for in the Indenture) as to all outstanding Notes
under the Indenture when
(a) either
(1) all such Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid or Notes
whose payment has been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust as provided for in the Indenture) have
been delivered to the Trustee for cancellation or
(2) all Notes not theretofore delivered to the Trustee for cancellation
(a) have become due and payable, (b) will become due and payable at
their Stated Maturity within one year, or (c) are to be 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;
(b) the Company or any Guarantor has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust an amount in United
States dollars sufficient to pay and discharge the entire indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation,
including principal of, premium, if any, and accrued interest at such
Maturity, Stated Maturity or redemption date;
(c) the Company or any Guarantor has paid or caused to be paid all other
sums payable under the Indenture by the Company and any Guarantor; and
(d) the Company has delivered to the Trustee an officers' certificate and an
opinion of independent counsel each stating that (1) all conditions
precedent under the Indenture relating to the satisfaction and discharge
of such Indenture have been complied with and (2) such satisfaction and
discharge will not result in a breach or violation of, or constitute a
default under, the Indenture or any other material agreement or
instrument to which the Company, any Guarantor or any Subsidiary is a
party or by which the Company, any Guarantor or any Subsidiary is bound.
(Section 1201)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the holders of at
least a majority in aggregate principal
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amount of the Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for Notes); PROVIDED, HOWEVER, that no
such modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby:
(1) change the Stated Maturity of the principal of, or any installment of
interest on, or change to an earlier date any redemption date of, or
waive a default in the payment of the principal of, premium, if any, or
interest on, any such Note or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which the principal of any
such Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment after
the Stated Maturity thereof (or, in the case of redemption, on or after
the redemption date);
(2) amend, change or modify the obligation of the Company to make and
consummate an Offer with respect to any Asset Sale or Asset Sales in
accordance with "--Certain Covenants-- Limitation on Sale of Assets" or
the obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control in accordance with "--Purchase
of Notes Upon a Change of Control," including, in each case, amending,
changing or modifying any definitions related thereto;
(3) reduce the percentage in principal amount of such outstanding Notes, the
consent of whose holders is required for any such supplemental indenture,
or the consent of whose holders is required for any waiver or compliance
with certain provisions of the Indenture;
(4) modify any of the provisions relating to supplemental indentures
requiring the consent of holders or relating to the waiver of past
defaults or relating to the waiver of certain covenants, except to
increase the percentage of such outstanding Notes required for such
actions or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the holder of each
such Note affected thereby;
(5) except as otherwise permitted under "--Consolidation, Merger, Sale of
Assets," consent to the assignment or transfer by the Company or any
Guarantor of any of its rights and obligations under the Indenture; or
(6) amend or modify any of the provisions of the Indenture relating to the
subordination of the Notes or any Guarantee in any manner adverse to the
holders of the Notes or any Guarantee. (Section 902)
Notwithstanding the foregoing, without the consent of any holders of the
Notes, the Company, any Guarantor, any other obligor under the Notes and the
Trustee may modify or amend the Indenture:
(1) to evidence the succession of another Person to the Company or a
Guarantor, and the assumption by any such successor of the covenants of
the Company or such Guarantor in the Indenture and in the Notes and in
any Guarantee in accordance with "--Consolidation, Merger, Sale of
Assets;"
(2) to add to the covenants of the Company, any Guarantor or any other
obligor upon the Notes for the benefit of the holders of the Notes or to
surrender any right or power conferred upon the Company or any Guarantor
or any other obligor upon the Notes, as applicable, in the Indenture, in
the Notes or in any Guarantee;
(3) to cure any ambiguity, or to correct or supplement any provision in the
Indenture, the Notes or any Guarantee which may be defective or
inconsistent with any other provision in the Indenture, the Notes or any
Guarantee or make any other provisions with respect to matters or
questions arising under the Indenture, the Notes or any Guarantee;
PROVIDED that, in each case, such provisions shall not adversely affect
the interest of the holders of the Notes;
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(4) to comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act;
(5) to add a Guarantor under the Indenture;
(6) to evidence and provide the acceptance of the appointment of a successor
Trustee under the Indenture; or
(7) to mortgage, pledge, hypothecate or grant a security interest in favor
of the Trustee for the benefit of the holders of the Notes as additional
security for the payment and performance of the Company's and any
Guarantor's obligations under the Indenture, in any property, or assets,
including any of which are required to be mortgaged, pledged or
hypothecated, or in which a security interest is required to be granted
to the Trustee pursuant to the Indenture or otherwise. (Section 901)
Notwithstanding the foregoing, no modification or amendment may, without the
consent of the holders of 66 2/3% in aggregate principal amount of the then
outstanding Notes, release the obligations of a Guarantor under its Guarantee of
the Notes. (Section 902)
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1021)
GOVERNING LAW
The Indenture, the Notes and any Guarantee will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
as Trustee with such conflict or resign as Trustee. (Sections 608 and 613)
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (which has not been cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any holder of Notes unless such holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense. (Section 512, 601, 603)
CERTAIN DEFINITIONS
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (1) existing at the
time such Person becomes a Restricted Subsidiary or (2) assumed in connection
with the acquisition of assets from such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition, as the case may be.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"AFFILIATE" means, with respect to any specified Person: (1) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person;
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(2) any other Person that owns, directly or indirectly, 5% or more of any class
or series of such specified Person's (or any of such Person's direct or indirect
parent's) Capital Stock or any officer or director of any such specified Person
or other Person or, with respect to any natural Person, any person having a
relationship with such Person by blood, marriage or adoption not more remote
than first cousin; or (3) any other Person 5% or more of the Voting Stock of
which is beneficially owned or held directly or indirectly by such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of:
(1) any Capital Stock of any Restricted Subsidiary;
(2) all or substantially all of the properties and assets of any division or
line of business of the Company or any Restricted Subsidiary; or
(3) any other properties or assets of the Company or any Restricted
Subsidiary other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" shall not include
any transfer of properties and assets
(A) that is governed by the provisions described under "--Consolidation,
Merger, Sale of Assets,"
(B) that is by the Company to any Wholly Owned Restricted Subsidiary, or by
any Restricted Subsidiary to the Company or any Wholly Owned Restricted
Subsidiary in accordance with the terms of the Indenture,
(C) that is of obsolete equipment in the ordinary course of business, or
(D) the Fair Market Value of which in the aggregate does not exceed
$5,000,000 in any transaction or series of related transactions.
"AVERAGE LIFE TO STATED MATURITY" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (1) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (2)
the sum of all such principal payments.
"BANKRUPTCY LAW" means Title 11, United States Bankruptcy Code of 1978, or
any similar United States federal or state law 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.
"CAPITAL LEASE OBLIGATION" of any Person means any obligation of such Person
and its Restricted Subsidiaries on a Consolidated basis under any capital lease
of (or other agreement conveying the right to use) real or personal property
which, in accordance with GAAP, is required to be recorded as a capitalized
lease obligation.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations, rights in or other equivalents (however designated) of such
Person's capital stock, other equity interests whether now outstanding or issued
after the date of the Indenture, partnership interests (whether general or
limited), limited liability company interests, any other interest or
participation that confers on a Person that right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person,
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including any Preferred Stock, and any rights (other than debt securities
convertible into Capital Stock), warrants or options exchangeable for or
convertible into such Capital Stock.
"CHANGE OF CONTROL" means the occurrence of any of the following events:
(1) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have beneficial ownership of all shares that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of more than 35% of the total outstanding Voting Stock of the Company;
(2) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of the
Company (together with any new directors whose election to such board or
whose nomination for election by the stockholders of the Company was
approved by a vote of 66 2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election
or nomination for election was previously so approved), cease for any
reason to constitute a majority of such board of directors then in
office;
(3) the Company consolidates with or merges with or into any Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all
or substantially all of its assets to any Person, or any Person
consolidates with or merges into or with the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other
property, other than any such transaction where
(A) the outstanding Voting Stock of the Company is changed into or
exchanged for (1) Voting Stock of the surviving corporation which is
not Redeemable Capital Stock or (2) cash, securities and other
property (other than Capital Stock of the surviving corporation) in
an amount which could be paid by the Company as a Restricted Payment
as described under "--Certain Covenants--LIMITATION ON RESTRICTED
PAYMENTS" (and such amount shall be treated as a Restricted Payment
subject to the provisions in the Indenture described under "--Certain
Covenants--LIMITATION ON RESTRICTED PAYMENTS") and
(B) immediately after such transaction, no "person" or "group," is the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have beneficial
ownership of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the
total outstanding Voting Stock of the surviving corporation; or
(4) the Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution other than in a transaction which complies with the
provisions described under "--Consolidation, Merger, Sale of Assets."
For purposes of this definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring voting stock of the Company will be
deemed to be a transfer of such portion of such voting stock as corresponds to
the portion of the equity of such entity that has been so transferred.
"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 the Indenture such Commission is not existing and performing the
duties now assigned to it under the Securities Act, Exchange Act and Trust
Indenture Act then the body performing such duties at such time.
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"COMMODITY PRICE PROTECTION AGREEMENT" means any forward contract, commodity
swap, commodity option or other similar financial agreement or arrangement
relating to, or the value of which is dependent upon, fluctuations in commodity
prices.
"COMPANY" means Jo-Ann Stores, Inc., a corporation incorporated under the
laws of Ohio, until a successor Person shall have become such pursuant to the
applicable provisions of the Indenture, and thereafter "Company" shall mean such
successor Person.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" of any Person means, for any
period, the ratio of
(a) the sum of Consolidated Net Income (Loss), and in each case to the
extent deducted in computing Consolidated Net Income (Loss) for such
period, Consolidated Interest Expense, Consolidated Income Tax Expense,
Consolidated Non-cash Charges and one third of Consolidated Rental
Payments for such period, of such Person and its Restricted Subsidiaries
on a Consolidated basis, all determined in accordance with GAAP, less all
noncash items increasing Consolidated Net Income for such period and less
all cash payments during such period relating to noncash charges that
were added back to Consolidated Net Income in determining the
Consolidated Fixed Charge Coverage Ratio in any prior period to
(b) the sum of Consolidated Interest Expense for such period, plus one third
of Consolidated Rental Payments during such period, plus cash and noncash
dividends paid on any Redeemable Capital Stock or Preferred Stock of such
Person and its Restricted Subsidiaries during such period,
in each case after giving PRO FORMA effect (as calculated in accordance with
Article 11 of Regulation S-X under the Securities Act of 1933 or any successor
provision) to
(1) the incurrence of the Indebtedness giving rise to the need to make such
calculation and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such
Indebtedness was incurred, and the application of such proceeds occurred,
on the first day of such period;
(2) the incurrence, repayment or retirement of any other Indebtedness by the
Company and its Restricted Subsidiaries since the first day of such
period as if such Indebtedness was incurred, repaid or retired at the
beginning of such period (except that, in making such computation, the
amount of Indebtedness under any revolving credit facility shall be
computed based upon the average daily balance of such Indebtedness during
such period);
(3) in the case of Acquired Indebtedness or any acquisition occurring at the
time of the incurrence of such Indebtedness, the related acquisition,
assuming such acquisition had been consummated on the first day of such
period; and
(4) any acquisition or disposition by the Company and its Restricted
Subsidiaries of any company or any business or any assets out of the
ordinary course of business, whether by merger, stock purchase or sale or
asset purchase or sale, or any related repayment of Indebtedness, in each
case since the first day of such period, assuming such acquisition or
disposition had been consummated on the first day of such period;
PROVIDED that
(1) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a PRO FORMA
basis and (A) bearing a floating interest rate shall be computed as if
the rate in effect on the date of computation had been the applicable
rate for the entire period and (B) which was not outstanding during the
period for which the computation is being made but which bears, at the
option of such Person, a fixed or floating
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rate of interest, shall be computed by applying at the option of such
Person either the fixed or floating rate and
(2) in making such computation, the Consolidated Interest Expense of such
Person attributable to 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.
"CONSOLIDATED INCOME TAX EXPENSE" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" of any Person means, without duplication,
for any period, the sum of
(a) the interest expense of such Person and its Restricted Subsidiaries for
such period, on a Consolidated basis, including, without limitation,
(1) amortization of debt discount,
(2) the net costs associated with Interest Rate Agreements, Currency
Hedging Agreements and Commodity Price Protection Agreements
(including amortization of discounts),
(3) the interest portion of any deferred payment obligation,
(4) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers acceptance financing and
(5) accrued interest, plus
(b) (1) the interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period and
(2) all capitalized interest of such Person and its Restricted
Subsidiaries plus
(c) the interest expense under any Guaranteed Debt of such Person and any
Restricted Subsidiary to the extent not included under clause (a)(4)
above, whether or not paid by such Person or its Restricted Subsidiaries.
"CONSOLIDATED NET INCOME (LOSS)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a Consolidated basis as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (or loss), by
excluding, without duplication,
(1) all extraordinary gains or losses net of taxes (less all fees and
expenses relating thereto),
(2) the portion of net income (or loss) of such Person and its Restricted
Subsidiaries on a Consolidated basis allocable to minority interests in
unconsolidated Persons or Unrestricted Subsidiaries to the extent that
cash dividends or distributions have not actually been received by such
Person or one of its Consolidated Restricted Subsidiaries,
(3) net income (or loss) of any Person combined with such Person or any of
its Restricted Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination,
(4) any gain or loss, net of taxes, realized upon the termination of any
employee pension benefit plan,
(5) gains or losses, net of taxes (less all fees and expenses relating
thereto), in respect of dispositions of assets other than in the ordinary
course of business,
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(6) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders,
(7) any restoration to net income of any contingency reserve, except to the
extent provision for such reserve was made out of income accrued at any
time following the date of the Indenture, or
(8) any net gain arising from the acquisition of any securities or
extinguishment, under GAAP, of any Indebtedness of such Person.
"CONSOLIDATED NET TANGIBLE ASSETS" of any Person means, as of any date of
determination, the total assets, less goodwill and other intangibles and less
deferred tax assets, in each case as shown on the balance sheet of the Company
and its Restricted Subsidiaries for the most recently ended fiscal quarter for
which financial statements are available, determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NON-CASH CHARGES" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Restricted Subsidiaries on a Consolidated basis for such period, as
determined in accordance with GAAP (excluding any non-cash charge which requires
an accrual or reserve for cash charges for any future period).
"CONSOLIDATED RENTAL PAYMENTS" of any Person means, for any period, the
aggregate rental obligations of such Person and its Restricted Subsidiaries on a
Consolidated basis, as determined in accordance with GAAP, payable in respect of
such period under leases of real or personal property, not including taxes,
insurance, maintenance and similar expenses that the lessee is obligated to pay
under the terms of the relevant leases (net of income from subleases thereof,
not including taxes, insurance, maintenance and similar expenses that the
sublessee is obligated to pay under the terms of such sublease), whether or not
such obligations are reflected as liabilities or commitments on a consolidated
balance sheet of such Person and its Restricted Subsidiaries or in the notes
thereto, excluding, however, in any such calculation, (a) that portion of
Consolidated Interest Expense of such Person representing payments by such
Person or any of its consolidated Restricted Subsidiaries in respect of Capital
Lease Obligations (net of payments to such Person or any of its consolidated
Subsidiaries under subleases qualifying as capitalized lease subleases to the
extent that such payments would be deducted in determining Consolidated Interest
Expense) and (b) the aggregate amount of amortization of obligations of such
Person and its consolidated Restricted Subsidiaries in respect of such Capital
Lease Obligations for such period (net of payments to such Person or any of its
consolidated Restricted Subsidiaries under subleases qualifying as capitalized
lease subleases to the extent that such payments would be deducted in
determining such amortization amount).
"CONSOLIDATION" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its Subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"CREDIT FACILITY" means the Credit Agreement, dated as of the closing date,
among the Company, the lending institutions named therein and the Issuing Bank
and Administrative Agent, as such agreement, in whole or in part, may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing) (including the addition of one or more lenders to an existing
facility or the replacement of one or more lenders in a new facility).
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"CURRENCY HEDGING AGREEMENTS" means one or more of the following agreements
which shall be entered into by one or more financial institutions: foreign
exchange contracts, currency swap agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values.
"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"DISINTERESTED DIRECTOR" means, with respect to any transaction or series of
related transactions, a member of the board of directors of the Company who does
not have any material direct or indirect financial interest in or with respect
to such transaction or series of related transactions.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, or any successor
statute, and the rules and regulations promulgated by the Commission thereunder.
"FAIR MARKET VALUE" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length free market transaction between
an informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Fair Market Value shall be determined
by the board of directors of the Company acting in good faith and shall be
evidenced by a resolution of the board of directors.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of the Indenture.
"GUARANTEE" means the guarantee by any Guarantor of the Company's Indenture
Obligations.
"GUARANTEED DEBT" of any Person means, without duplication, all Indebtedness
of any other Person referred to in the definition of Indebtedness below
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement
(1) to pay or purchase such Indebtedness or to advance or supply funds for
the payment or purchase of such Indebtedness,
(2) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of
such Indebtedness against loss,
(3) to supply funds to, or in any other manner invest in, the debtor
(including any agreement to pay for property or services without
requiring that such property be received or such services be rendered),
(4) to maintain working capital or equity capital of the debtor, or
otherwise to maintain the net worth, solvency or other financial
condition of the debtor or to cause such debtor to achieve certain levels
of financial performance or
(5) otherwise to assure a creditor against loss;
PROVIDED that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"GUARANTOR" means any Subsidiary which is a guarantor of the Notes,
including any Person that is required after the date of the Indenture to execute
a guarantee of the Notes pursuant to the "Limitation on Liens" covenant or the
"Limitation on Issuance of Guarantees of and Pledges for Indebtedness" covenant
until a successor replaces such party pursuant to the applicable provisions of
the Indenture and, thereafter, shall mean such successor.
"INDEBTEDNESS" means, with respect to any Person, without duplication,
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(1) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and
other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent
or otherwise, of such Person in connection with any letters of credit
issued under letter of credit facilities, acceptance facilities or other
similar facilities,
(2) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments,
(3) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person (even if the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or
sale of such property), but excluding trade payables arising in the
ordinary course of business,
(4) all obligations under Interest Rate Agreements, Currency Hedging
Agreements or Commodity Price Protection Agreements of such Person,
(5) all Capital Lease Obligations of such Person,
(6) all Indebtedness referred to in clauses (1) through (5) above of other
Persons and all dividends of other Persons, the payment of which is
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien, upon or with
respect to property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness,
(7) all Guaranteed Debt of such Person,
(8) all Redeemable Capital Stock issued by such Person valued at the greater
of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends,
(9) Preferred Stock of any Restricted Subsidiary of the Company or any
Guarantor and
(10) any amendment, supplement, modification, deferral, renewal, extension,
refunding or refinancing of any liability of the types referred to in
clauses (1) through (9) above.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value to be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"INDENTURE OBLIGATIONS" means the obligations of the Company and any other
obligor under the Indenture or under the Notes, including any Guarantor, to pay
principal of, premium, if any, and interest when due and payable, and all other
amounts due or to become due under or in connection with the Indenture, the
Notes and the performance of all other obligations to the Trustee and the
holders under the Indenture and the Notes, according to the respective terms
thereof.
"INTEREST RATE AGREEMENTS" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
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"INVESTMENT" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP. Investments shall exclude extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices.
"ISSUE DATE" means the original issue date of the Notes under the Indenture.
"LIEN" means any mortgage or deed of trust, charge, pledge, lien (statutory
or otherwise), privilege, security interest, assignment, deposit, arrangement,
easement, hypothecation, claim, preference, priority or other encumbrance upon
or with respect to any property of any kind (including any conditional sale,
capital lease or other title retention agreement, any leases in the nature
thereof, and any agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired. A Person will be deemed
to own subject to a Lien any property which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement, Capital
Lease Obligation or other title retention agreement.
"MATURITY" means, when used with respect to the Notes, the date on which the
principal of the Notes becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control Offer in respect of a Change of Control, call
for redemption or otherwise.
"NET CASH PROCEEDS" means
(a) with respect to any Asset Sale by any Person, the proceeds thereof
(without duplication in respect of all Asset Sales) in the form of cash
or Temporary Cash Investments including payments in respect of deferred
payment obligations when received in the form of, or stock or other
assets when disposed of for, cash or Temporary Cash Investments (except
to the extent that such obligations are financed or sold with recourse to
the Company or any Restricted Subsidiary) net of
(1) brokerage commissions and other reasonable fees and expenses
(including fees and expenses of counsel and investment bankers)
related to such Asset Sale,
(2) provisions for all taxes payable as a result of such Asset Sale,
(3) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties the subject of
such Asset Sale,
(4) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets
subject to the Asset Sale and
(5) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and
retained by the Company or any Restricted Subsidiary, as the case may
be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an
officers' certificate delivered to the Trustee and
(b) with respect to any issuance or sale of Capital Stock or options,
warrants or rights to purchase Capital Stock, or debt securities or
Capital Stock that have been converted into or exchanged for Capital
Stock as referred to under "--Certain Covenants--LIMITATION ON RESTRICTED
PAYMENTS," the proceeds of such issuance or sale in the form of cash or
Temporary Cash
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Investments including payments in respect of deferred payment obligations
when received in the form of, or stock or other assets when disposed of
for, cash or Temporary Cash Investments (except to the extent that such
obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary), net of attorney's fees, accountant's fees and
brokerage, consultation, underwriting and other fees and expenses
actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"PARI PASSU INDEBTEDNESS" means (a) any Indebtedness of the Company that is
equal in right of payment to the Notes and (b) with respect to any Guarantee,
Indebtedness which ranks equal in right of payment to such Guarantee.
"PERMITTED INVESTMENT" means
(1) Investments in any Wholly Owned Restricted Subsidiary or any Person
which, as a result of such Investment, (a) becomes a Wholly Owned
Restricted Subsidiary or (b) is merged or consolidated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or any Wholly Owned Restricted Subsidiary;
(2) Indebtedness of the Company or a Restricted Subsidiary described under
clauses (4), (5) and (6) of the definition of "Permitted Indebtedness;"
(3) Investments in any of the Notes;
(4) Temporary Cash Investments;
(5) Investments acquired by the Company or any Restricted Subsidiary in
connection with an Asset Sale permitted under "--Certain
Covenants--LIMITATION ON SALE OF ASSETS" to the extent such Investments
are non-cash proceeds as permitted under such covenant;
(6) Investments in existence on the date of the Indenture; and
(7) other Investments which in the aggregate outstanding at any one time do
not total more than $20 million.
In connection with any assets or property contributed or transferred to any
Person as an Investment, such property and assets shall be equal to the Fair
Market Value (as determined by the Company's Board of Directors) at the time of
Investment.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PREFERRED STOCK" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of common
stock (other than Redeemable Capital Stock) of the Company with gross proceeds
to the Company of at least $35 million pursuant to a registration statement that
has been declared effective by the Commission pursuant to the Securities Act
(other than a registration statement on Form S-4 (or any successor form covering
substantially the same transactions), Form S-8 (or any successor form covering
substantially the same transactions) or otherwise relating to equity securities
issuable under any employee benefit plan of the Company).
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"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on
assets related to the business of the Company and any additions and accessions
thereto, which are purchased by the Company at any time after the Notes are
issued; PROVIDED that
(1) the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created
(collectively a "Purchase Money Security Agreement") shall be entered
into within 90 days after the purchase or substantial completion of the
construction of such assets and shall at all times be confined solely to
the assets so purchased or acquired, any additions and accessions thereto
and any proceeds therefrom,
(2) at no time shall the aggregate principal amount of the outstanding
Indebtedness secured thereby be increased, except in connection with the
purchase of additions and accessions thereto and except in respect of
fees and other obligations in respect of such Indebtedness and
(3) (A) the aggregate outstanding principal amount of Indebtedness secured
thereby (determined on a per asset basis in the case of any additions and
accessions) shall not at the time such Purchase Money Security Agreement
is entered into exceed 100% of the purchase price to the Company of the
assets subject thereto or (B) the Indebtedness secured thereby shall be
with recourse solely to the assets so purchased or acquired, any
additions and accessions thereto and any proceeds therefrom.
"QUALIFIED CAPITAL STOCK" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"REDEEMABLE CAPITAL STOCK" means any Capital Stock that, either by its terms
or by the terms of any security into which it is convertible or exchangeable or
otherwise, is or upon the happening of an event or passage of time would be,
required to be redeemed prior to the final Stated Maturity of the principal of
the Notes or is redeemable at the option of the holder thereof at any time prior
to such final Stated Maturity (other than upon a change of control of or sale of
assets by the Company in circumstances where the holders of the Notes would have
similar rights), or is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity at the option of the holder
thereof.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not
been designated by the board of directors of the Company by a board resolution
delivered to the Trustee as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "--Certain Covenants-- LIMITATION
ON UNRESTRICTED SUBSIDIARIES."
"SECURITIES ACT" means the Securities Act of 1933, or any successor statute,
and the rules and regulations promulgated by the Commission thereunder.
"STATED MATURITY" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such installment of
interest, as the case may be, is due and payable.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a Guarantor
subordinated in right of payment to the Notes or a Guarantee, as the case may
be.
"SUBSIDIARY" of a Person means
(1) any corporation more than 50% of the outstanding voting power of the
Voting Stock of which is owned or controlled, directly or indirectly, by
such Person or by one or more other Subsidiaries of such Person, or by
such Person and one or more other Subsidiaries thereof, or
(2) any limited partnership of which such Person or any Subsidiary of such
Person is a general partner, or
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(3) any other Person in which such Person, or one or more other Subsidiaries
of such Person, or such Person and one or more other Subsidiaries,
directly or indirectly, has more than 50% of the outstanding partnership
or similar interests or has the power, by contract or otherwise, to
direct or cause the direction of the policies, management and affairs
thereof.
"TEMPORARY CASH INVESTMENTS" means
(1) any evidence of Indebtedness, maturing not more than one year after the
date of acquisition, issued by the United States of America, or an
instrumentality or agency thereof, and guaranteed fully as to principal,
premium, if any, and interest by the full faith and credit of the United
States of America,
(2) any certificate of deposit, maturing not more than one year after the
date of acquisition, issued by, or time deposit of, a commercial banking
institution that is a member of the Federal Reserve System and that has
combined capital and surplus and undivided profits of not less than $500
million, whose debt has a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's Investors
Service, Inc. ("Moody's") or any successor rating agency or "A-1" (or
higher) according to Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. ("S&P") or any successor rating agency,
(3) commercial paper, maturing not more than one year after the date of
acquisition, issued by a corporation (other than an Affiliate or
Subsidiary of the Company) organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia
with a rating, at the time as of which any investment therein is made, of
"P-1" (or higher) according to Moody's or "A-1" (or higher) according to
S&P and
(4) any money market deposit accounts issued or offered by a domestic
commercial bank having capital and surplus in excess of $500 million;
PROVIDED that the short term debt of such commercial bank has a rating,
at the time of investment, of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, or any
successor statute.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company (other than a
Guarantor) designated as such pursuant to and in compliance with the covenant
described under "--Certain Covenants--Limitation on Unrestricted Subsidiaries."
"UNRESTRICTED SUBSIDIARY INDEBTEDNESS" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary
(1) as to which neither the Company nor any Restricted Subsidiary is
directly or indirectly liable (by virtue of the Company or any such
Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), except Guaranteed
Debt of the Company or any Restricted Subsidiary to any Affiliate, in
which case (unless the incurrence of such Guaranteed Debt resulted in a
Restricted Payment at the time of incurrence) the Company shall be deemed
to have made a Restricted Payment equal to the principal amount of any
such Indebtedness to the extent guaranteed at the time such Affiliate is
designated an Unrestricted Subsidiary and
(2) which, upon the occurrence of a default with respect thereto, does not
result in, or permit any holder of any Indebtedness of the Company or any
Subsidiary to declare, a default on such Indebtedness of the Company or
any Subsidiary or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity; provided that notwithstanding the foregoing
any Unrestricted Subsidiary may guarantee the Notes.
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"VOTING STOCK" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time Capital Stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency).
"WHOLLY OWNED RESTRICTED SUBSIDIARY" means a Restricted Subsidiary all the
Capital Stock of which is owned by the Company or another Wholly Owned
Restricted Subsidiary.
BOOK-ENTRY DELIVERY AND FORM
DEPOSIT OF THE NOTES WITH DTC. The company will issue the exchange notes in
the form of one or more registered notes in global form without coupons. The
company will deposit each global note with, or on behalf of, the Depository
Trust Company, and the global notes will be registered in the name of a nominee
of DTC.
DTC has advised the company that it is a:
- limited purpose trust company organized under New York law;
- member of the Federal Reserve System;
- "clearing corporation" under the Uniform Commercial Code; and
- "clearing agency" registered under Section 17A of the Securities Exchange
Act of 1934.
DTC holds securities for its participants and facilitates the clearance and
settlement of securities transactions between participants through electronic
book entry changes to the accounts of its participants. DTC's system therefore
eliminates the need for physical movement of certificates. DTC's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations. Other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant have indirect access to DTC's system.
Upon deposit of the global notes, DTC will credit on its internal system the
principal amount of the exchange notes to the accounts of participants with an
interest in the global notes. Records maintained by DTC, participants and
indirect participants will show the ownership of the exchange notes. Transfers
of the exchange notes will be affected only through those records. Some state
laws require some persons to take physical delivery in definitive form of
securities that they own. In addition, some states provide that security
interests in negotiable instruments can only be perfected by delivery of the
certificates representing the instruments. As a result, the ability of persons
in such states to transfer the exchange notes or to pledge the exchange notes as
collateral will be limited to this extent.
DTC AS REGISTERED OWNER OF THE NOTES; EXERCISE OF RIGHTS BY THE
NOTEHOLDERS. So long as DTC or its nominee is the registered owner of the
global notes, DTC or such nominee will be considered the sole owner of the notes
represented by such global notes. Except as provided below or in the next
section, owners of beneficial interests in a global note will not be:
- entitled to have notes represented by such global note registered in their
names;
- entitled to receive physical delivery of certificated securities; or
- considered the owners of the offered notes under the indenture for any
purpose, including with respect to the giving of any direction,
instruction or approval to the trustee.
As a result, the ability of a person having a beneficial interest in any of the
notes to pledge such interest to persons or entities that do not participate in
DTC's system or to otherwise take action with respect to such interest may be
affected by the lack of a physical certificate evidencing such interest.
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To exercise any right of a noteholder under the indenture, each holder of a
beneficial interest in a global note must rely on the procedures of DTC. If such
noteholder is not a participant or an indirect participant of DTC, the
noteholder must rely on the procedures of the participant through which the
noteholder owns its interest. The company understands that under existing
industry practice:
- if the company requests any action of the noteholders, DTC and DTC's
participants would act upon the instructions of the noteholders; and
- if a noteholder desires to take any action that DTC is entitled to take,
as the holder of the global note, DTC would authorize DTC's participants
to take such action and the participants would authorize the noteholders
owning through such participants to take such action.
Neither the company nor the trustee under the indenture will have any
responsibility or liability for any aspect of the records relating to, or
payments made on, the exchange notes by DTC.
PAYMENTS MADE THROUGH DTC. The trustee under the indenture will make all
payments on any exchange notes represented by a global note to DTC or its
nominee, as the holder of the global notes. Under the indenture, the company and
the trustee may treat the holder of the global notes as the owner of such notes
for the purpose of receiving payment on the notes. As a result, neither the
company nor the trustee will have any responsibility to make payments to the
beneficial owners of the exchange notes, or to credit the accounts of DTC
participants with such payments. Payments by DTC's participants and indirect
participants to the beneficial owners of the exchange notes will be governed by
customary practice and will be the responsibility of the participants and
indirect participants.
CERTIFICATED SECURITIES
Securities in registered definitive form, without coupons, will be issued to
each beneficial owner of notes represented by the global notes if:
- DTC is no longer willing or able to act as the depository for the notes
and the company is unable to locate a qualified successor within 90 days;
or
- the company elects to cause the issuance of notes in definitive form under
the indenture.
In addition, any person having a beneficial interest in a global note may, upon
request to the trustee, exchange such beneficial interest for securities in
registered definitive form. In such case, the trustee is required to register
such notes in the name of the requesting person or his/her nominee and deliver
the notes to such persons.
Neither the company nor the trustee will be liable for any delay by DTC or
any of DTC's participants or indirect participants in identifying the beneficial
owners of the exchange notes. The company and the trustee will be protected in
relying upon instructions from DTC for all purposes, including with respect to
the registration and delivery of notes to be issued and the principal amounts of
any such notes.
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FEDERAL TAX CONSEQUENCES
The following is a summary of all material federal income tax consequences
of the exchange of the outstanding notes for the exchange notes and the federal
income tax consequences (and, in the case of non-U.S. holders, certain federal
estate tax consequences) of the acquisition, ownership and disposition of the
exchange notes. This summary is based upon the provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations, and administrative
and judicial interpretations of the Internal Revenue Code, all as now in effect
and all of which are subject to change or possible differing interpretations.
Consequently, the Internal Revenue Service may disagree with certain aspects of
the discussion below. The statutory provisions, Treasury Regulations, and
interpretations on which this discussion is based are subject to change, and
such a change could apply retroactively. No ruling on any of the issues
discussed below will be sought from the Internal Revenue Service.
THIS SUMMARY DOES NOT DISCUSS ALL OF THE ASPECTS OF FEDERAL INCOME AND
ESTATE TAXATION WHICH MAY BE RELEVANT TO INVESTORS IN LIGHT OF THEIR PARTICULAR
INVESTMENT OR OTHER CIRCUMSTANCES. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS
ANY STATE OR LOCAL INCOME OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES. THE
DISCUSSION BELOW DEALS ONLY WITH INVESTORS WHO WILL HOLD EXCHANGE NOTES AS
CAPITAL ASSETS (GENERALLY, PROPERTY HELD FOR INVESTMENT) AND DOES NOT ADDRESS
SUBSEQUENT PURCHASERS OF THE EXCHANGE NOTES OR HOLDERS OF EXCHANGE NOTES THAT
MAY BE SUBJECT TO SPECIAL RULES (INCLUDING, WITHOUT LIMITATION, CERTAIN U.S.
EXPATRIATES, FINANCIAL INSTITUTIONS, INSURANCE COMPANIES, TAX-EXEMPT ENTITIES,
DEALERS IN SECURITIES OR CURRENCIES, TRADERS IN SECURITIES, PERSONS THAT ACQUIRE
THE NOTES FOR A PRICE OTHER THAN THEIR ISSUE PRICE, AND PERSONS THAT HOLD THE
NOTES AS PART OF A STRADDLE, HEDGE, CONVERSION OR OTHER INTEGRATED TRANSACTION).
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
PARTICULAR U.S. FEDERAL, STATE AND LOCAL AND FOREIGN INCOME AND OTHER TAX
CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF THE EXCHANGE NOTES THAT MAY
BE APPLICABLE TO THEM.
EXCHANGE OFFER
The exchange of an outstanding note for an exchange note pursuant to the
exchange offer will not constitute a "significant modification" of the
outstanding note for federal income tax purposes. Accordingly, the exchange will
be disregarded and the exchange note received will be treated as a continuation
of the outstanding note in the hands of each holder of an exchange note. As a
result, there will be no federal income tax consequences to a holder who
exchanges an outstanding note for an exchange note pursuant to the exchange
offer. Each such holder will have the same adjusted tax basis and holding period
in the exchange note as such holder had in the outstanding note immediately
before the exchange.
FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
For purposes of the following discussion, a U.S. holder is a beneficial
owner of a note that is, for U.S. federal income tax purposes,
(1) an individual citizen or resident of the United States;
(2) a corporation or partnership (unless the Internal Revenue Service
provides otherwise by Treasury Regulation) created or organized in or under
the laws of the United States or any of its political subdivisions;
(3) an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
(4) a trust if, in general, the trust is subject to the supervision of a
court within the United States and the control of one or more United States
persons as described in Section 7701(a)(30) of the Internal Revenue Code.
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INTEREST. In general, interest on a note will be included in the gross
income of a U.S. holder as ordinary interest income at the time it is received
or accrued in accordance with the U.S. holder's regular method of accounting for
U.S. federal income tax purposes.
ORIGINAL ISSUE DISCOUNT
OVERVIEW OF ORIGINAL ISSUE DISCOUNT. Notes issued at a price less than
their stated principal amount, i.e., discount notes, will be issued with
"original issue discount" within the meaning of Section 1273(a) of the Internal
Revenue Code. Such original issue discount will equal the difference between the
"stated redemption price at maturity" (generally, its principal amount) and its
issue price. The issue price of discount notes that are issued for cash will be
the first price at which a substantial amount of the discount notes in such
issue are sold to the public (ignoring sales to bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement
agents, or wholesalers). Original issue discount is treated as ordinary interest
income, and holders of notes with original issue discount must include the
amount of original issue discount in income on an accrual basis in advance of
the receipt of the cash to which it relates. Any amounts included in income as
original issue discount with respect to a discount note will increase a holder's
adjusted tax basis in the discount note.
COMPUTATION OF ORIGINAL ISSUE DISCOUNT. The amount of original issue
discount on a note equals the excess, if any, of the note's stated redemption
price at maturity over its issue price. Under the Treasury Regulations for
original issue discount, a debt instrument's stated redemption price at maturity
is the sum of all payments provided by the instrument other than "qualified
stated interest", i.e., deemed principal payments. Qualified stated interest, in
general, is stated interest that is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually at (1) a single
fixed rate or (2) a variable rate that meets certain requirements in the
Treasury Regulations for original issue discount. Thus, in the case of any note
providing for such stated interest, the stated redemption price at maturity
generally will equal the total amount of all deemed principal payments due on
that note.
DE MINIMIS RULE. Under a de minimis rule, a note will be considered to have
no original issue discount if the amount of the original issue discount is less
than 0.25% of the note's stated redemption price at maturity multiplied by the
number of complete years to maturity. A holder will include de minimis original
issue discount in income on a pro rata basis as stated principal payments on the
note are received or, if earlier, upon disposition of the note, unless the
holder makes the election described below in "--ALL ORIGINAL ISSUE DISCOUNT
ELECTION." Any amount of de minimis original issue discount that has not been
included in income prior to sale, exchange or retirement of a note generally
will be treated as capital gain.
EXAMPLE. The outstanding notes were issued in the May 1999 private
placement with a de minimis amount of original issue discount. An outstanding
note with a stated redemption price at maturity of $100,000 was issued for
$98,500 in the private placement. Unless the U.S. holder makes the election
described below in "--ALL ORIGINAL ISSUE DISCOUNT ELECTION," the U.S. holder
will include a portion of the de minimis original discount amount of $1,500
($100,000--$98,500) in income on a pro rata basis as each stated principal
payment on the exchange note is received or, if earlier, upon disposition of the
exchange note. If, for example, the U.S. holder were to receive a stated
principal
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payment of $10,000 during a taxable year as the result of an optional
redemption, the U.S. holder would include $150 in income for that taxable year
as shown by the following computation:
<TABLE>
<S> <C> <C> <C> <C>
Stated Principal Amount Received $ 10,000
= = 10%
- ------------------------------------------- -------
Total Stated Principal Amount of Exchange
Note $ 100,000
De Minimis Original Discount Amount $ 1,500
X 10%
---------
Portion of De Minimis Original
Issue Discount Amount Included in Income $ 150
---------
---------
</TABLE>
COMPUTATIONS OF DAILY PORTIONS OF ORIGINAL ISSUE DISCOUNT. The amount of
original issue discount includible in income by a holder of a discount note is
the sum of the daily portions of original issue discount with respect to such
discount note for each day during the taxable year or portion of taxable year in
which the holder holds such discount note. The daily portion is determined by
allocating to each day in any accrual period a pro rata portion of the original
issue discount allocable to that accrual period. Accrual periods with respect to
a note may be any length selected by the holder and may vary in length over the
term of the note as long as no accrual period is longer than one year and each
scheduled payment of interest or principal on the note occurs either on the
final or first day of an accrual period.
The amount of original issue discount allocable to an accrual period equals
the excess of
(1) the product of the discount note's adjusted issue price at the beginning
of the accrual period and such note's yield to maturity (determined on
the basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period) over
(2) the sum of the payments of qualified stated interest on the note
allocable to the accrual period.
The "adjusted issue price" of a discount note at the beginning of any
accrual period is (a) the sum of the issue price of such note and the accrued
original issue discount for each prior accrual period less (b) any prior
payments on the note that were not qualified stated interest payments.
OPTIONAL REDEMPTION. The exchange notes are subject to optional redemption
by the issuer before maturity. Under the Treasury Regulations for original issue
discount, an issuer will be presumed to exercise its option to redeem for
purposes of computing the accrual of original issued discount if, and only if,
by using the optional redemption date as the maturity date and the optional
redemption price as the stated redemption price at maturity, the yield to
maturity of the notes is lower than it would be if the notes were not redeemed
early. If an issuer is presumed to exercise its option to redeem the notes,
original issue discount on such notes will be calculated as if the redemption
date were the maturity date and the optional redemption price were the stated
redemption price at maturity. In cases (such as with the outstanding notes) in
which all of the notes are issued at par or at a discount, an issuer will not be
presumed to exercise its option to redeem the notes because a redemption by the
issuer would not lower the yield to maturity of the notes. If, however, notes
were issued at a premium, an issuer may be able to lower the yield to maturity
of the notes by exercising its redemption option.
ALL ORIGINAL ISSUE DISCOUNT ELECTION. The Treasury Regulations for original
issue discount provide that a holder may make an election to include in gross
income all stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount
that accrues on the note, and unstated interest under the constant yield method
used to account for
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original issue discount. To make such an election, the holder of the note must
attach a statement to its timely filed federal income tax return for the taxable
year in which the holder acquired the note. The statement must identify the
instrument to which the election applies. An election is irrevocable unless the
holder obtains the consent of the Internal Revenue Service.
IN VIEW OF THE COMPLEXITIES AS TO THE MANNER OF INCLUSION IN INCOME OF
ORIGINAL ISSUE DISCOUNT ON THE NOTES, IT IS SUGGESTED THAT POTENTIAL INVESTORS
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE APPROPRIATE AMOUNT AND METHOD OF
INCLUSION IN INCOME OF ORIGINAL ISSUE DISCOUNT ON THE NOTES FOR FEDERAL INCOME
TAX PURPOSES.
DISPOSITIONS. Upon the sale, exchange, retirement, redemption or other
taxable disposition of an exchange note, a U.S. holder generally will recognize
taxable gain or loss in an amount equal to the difference, if any, between the
amount realized on the disposition (excluding any amount received that is
attributable to accrued but unpaid interest) and the U.S. holder's adjusted tax
basis in the exchange note. A U.S. holder's adjusted tax basis in an exchange
note generally will equal the U.S. holder's cost of the exchange note. Gain or
loss recognized by a U.S. holder on the taxable disposition of an exchange note
generally will be capital gain or loss. The capital gain or loss will be
long-term capital gain or loss if the exchange note has been held for more than
one year at the time of the disposition. Long-term capital gain recognized by a
non-corporate U.S. holder generally will be subject to a maximum tax rate of
20%. Subject to certain limited exceptions, capital losses cannot be used to
offset ordinary income.
BACKUP WITHHOLDING. In general, "backup withholding" at a rate of 31% may
apply to payments of principal and interest made on an exchange note, and to
payment of the proceeds of a sale or exchange of an exchange note before
maturity, that are made to a non-corporate U.S. holder if the holder fails to
provide a correct taxpayer identification number or otherwise comply with
applicable requirements of the backup withholding rules. The backup withholding
tax is not an additional tax and may be credited against a U.S. holder's federal
income tax liability, provided that correct information is provided to the
Internal Revenue Service.
FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS
For purposes of the following discussion, a non-U.S. holder is a beneficial
owner of an exchange note that is not, for federal income tax purposes, a U.S.
holder. An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States on at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to federal tax as if they were citizens.
Under present federal income and estate tax law and subject to the
discussion of backup withholding below:
(a) payments of principal, premium (if any) and interest on an exchange note
by us or any of our agents to any non-U.S. holder will not be subject to
withholding of federal income tax, provided that in the case of interest
(1) the non-U.S. holder does not directly or indirectly, actually or
constructively, own ten percent or more of the total combined voting power
of all classes of our stock entitled to vote,
(2) the non-U.S. holder is not (x) a controlled foreign corporation that
is related to us through sufficient stock ownership, or (y) a bank receiving
interest described in Section 881(c)(3)(A) of the Internal Revenue Code, and
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(3) either (A) the beneficial owner of the note certifies to us or our
agent, under penalties of perjury, that it is not a "United States person"
under the meaning of the Internal Revenue Code and provides its name and
address, or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business and holds the note on behalf of the beneficial owner
certifies to us or our agent under penalties of perjury that it, or the
financial institution between it and the beneficial owner, has received from
the beneficial owner a statement, under penalties of perjury, that it is not
a "United States person" and provides the payor with a copy of this
statement;
(b) a non-U.S. holder will not be subject to federal income tax on any gain
or income realized on the sale, exchange, redemption, retirement at maturity or
other disposition of an exchange note (provided that, in the case of proceeds
representing accrued interest, the conditions described in paragraph (a) above
are met) unless
(1) the non-U.S. holder is an individual who is present in the United
States for 183 days or more during the taxable year and some other
conditions are met, or
(2) the gain is effectively connected with the conduct of a U.S. trade
or business by the non-U.S. holder, or if an income tax treaty applies, is
generally attributable to a U.S. "permanent establishment" maintained by the
non-U.S. holder; and
(c) a note held by an individual who at the time of death is not a citizen
or resident of the United States will not be subject to U.S. federal estate tax
as a result of the individual's death if, at the time of the individual's death,
(1) the individual did not directly or indirectly, actually or
constructively, own ten percent or more of the total combined voting power
of all classes of our stock entitled to vote, and
(2) the income on the note would not have been effectively connected
with the conduct of a trade or business by the individual in the United
States.
EFFECTIVELY CONNECTED INTEREST INCOME. If a non-U.S. holder is engaged in a
trade or business in the United States and interest on the note is effectively
connected with the conduct of this trade or business (or, if an income tax
treaty applies, and the non-U.S. holder maintains a U.S. "permanent
establishment" to which the interest is generally attributable), the non-U.S.
holder, although exempt from the withholding tax discussed in the preceding
paragraph (a) (provided that the holder furnishes a properly executed Internal
Revenue Service Form W-8ECI or successor form on or before any payment date to
claim the exemption), may be subject to federal income tax on such interest on a
net basis in the same manner as if it were a U.S. holder.
BRANCH PROFITS TAX. In addition, a foreign corporation that is a non-U.S.
holder of a note may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to some
adjustments, unless it qualifies for a lower rate under an applicable income tax
treaty. For this purpose, interest on a note or gain recognized on the
disposition of a note will be included in earnings and profits if the interest
or gain is effectively connected with the conduct by the foreign corporation of
a trade or business in the United States.
NEW WITHHOLDING TAX REGULATIONS. In 1997, Treasury Regulations were issued
generally effective for payments made after December 31, 2000 that provide
alternative methods for satisfying the certification requirement described in
paragraph (a)(3) above and will require
- a non-U.S. holder that provides an Internal Revenue Service Form W-8ECI or
successor form (as discussed above) also to provide its U.S. taxpayer
identification number and
- a non-U.S. holder claiming the benefit of an income tax treaty also to
provide its U.S. taxpayer identification number.
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These Treasury Regulations generally also will require, in the case of a note
held by a foreign partnership, that (x) the certification described in paragraph
(a)(3) above be provided by the partners and (y) the partnership provide certain
information, including a U.S. taxpayer identification number. A look-through
rule will apply in the case of tiered partnerships.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under current Treasury
Regulations, backup withholding and information reporting will not apply to
payments made by us or any of our agents (in their capacities as agents) to a
non-U.S. holder of an exchange note if the holder has provided the required
certification that it is not a United States person as set forth in paragraph
(a) above, provided that neither we nor our agent has actual knowledge that the
exchange holder is a United States person. We or our agent may, however, report
payments of interest on the exchange notes.
Payments of the proceeds from a disposition by a non-U.S. holder of an
exchange note made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that information
reporting may apply to those payments if the broker is
(1) a United States person,
(2) a controlled foreign corporation for federal income tax purposes,
(3) a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year
period, or
(4) with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year, one or more of its
partners are U.S. persons (as defined in Treasury Regulations) who in the
aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, the foreign
partnership is engaged in a U.S. trade or business.
Payments of the proceeds from a disposition by a non-U.S. holder of a note made
to or through the U.S. office of a broker is subject to information reporting
and backup withholding unless the holder or beneficial owner certifies as to its
U.S. taxpayer identification number or otherwise establishes an exemption from
information reporting and backup withholding.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder would be allowed as a refund or a credit against the holder's
federal income tax liability, provided the required information is furnished to
the Internal Revenue Service.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes acquired by the broker-dealer as a result of
market-making or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of the exchange notes. This
prospectus, as it may be amended, may be used by a broker-dealer in connection
with such resales.
The company will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange notes or a combination of such methods of resale.
Such resales may be made at market prices prevailing at the time of resale, at
prices related to prevailing market prices or negotiated prices. Such resales
may also be made directly to purchasers or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer on the purchases of any such exchange notes.
Any broker-dealer that resells the exchange notes that were received by it
for its own account in the exchange offer and any broker-dealer that
participates in a distribution of such exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and must therefore
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of the exchange notes. Any profit on any such resale
of exchange notes and any commissions or concessions received by any such
broker-dealer may be deemed to be underwriting compensation under the Securities
Act. Such broker-dealers must acknowledge, by signing the letter of transmittal,
that they will deliver a letter of transmittal stating that by acknowledging
that it will deliver, and by delivering, a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
Any broker-dealer that holds any outstanding notes that it acquired directly
from the company in the initial offering and not as a result of market-making or
other trading activities cannot rely on this interpretation by the Commission
and, in the absence of an exemption, must comply with the registration and
prospectus delivery requirements of the Securities Act. However, since the
initial purchasers that purchased all of the outstanding notes directly from the
company immediately resold all of the outstanding notes purchased by them, no
such broker-dealer exists.
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LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Thompson
Hine & Flory LLP, Cleveland, Ohio.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of Jo-Ann Stores, Inc. as of January
30, 1999, and for the three fiscal years then ended, appearing in this
prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report appearing herein.
WHERE YOU CAN FIND MORE INFORMATION ABOUT JO-ANN STORES
We are subject to the periodic reporting requirements of the Securities and
Exchange Commission and file periodic reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected at the public reference facilities of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The phone number of the Commission's public reference facilities is
1-800-SEC-0330. Such information may also be obtained on the Internet at the
Commission's web site located at http://www.sec.gov. In addition, our common
stock is traded on the New York Stock Exchange and as a result periodic reports
and proxy statements can be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
Pursuant to the indenture, we have agreed that, whether or not we are
required to do so by the rules and regulations of the Commission, for so long as
any of the notes remain outstanding, we will furnish to the holders of the notes
and file with the Commission (1) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if our company were required to file such forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by our company's certified independent accountants, (2) all reports that would
be required to be filed with the Commission on Form 8-K if we were required to
file such reports and (3) any other information, documents and other reports
which we would be required to file with the Commission if we were subject to
Section 13 or 15(d) of the Exchange Act. In addition, whether or not required by
the rules and regulations of the Commission, we will also agree to file a copy
of all such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
JO-ANN STORES, INC.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets as of January 30, 1999 and January 31, 1998.................................... F-3
Consolidated Statements of Income for each of the three fiscal years in the period ended January 30,
1999....................................................................................................... F-4
Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended January 30,
1999....................................................................................................... F-5
Consolidated Statements of Shareholders' Equity for each of the three fiscal years in the period ended
January 30, 1999........................................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of Jo-Ann Stores, Inc.
We have audited the accompanying consolidated balance sheets of Jo-Ann
Stores, Inc. (an Ohio corporation) and subsidiaries as of January 30, 1999 and
January 31, 1998, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 30, 1999. These financial statements are the responsibility
of the Company's 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Jo-Ann Stores, Inc. and
subsidiaries as of January 30, 1999 and January 31, 1998 and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 30, 1999 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Cleveland, Ohio,
April 14, 1999.
F-2
<PAGE>
CONSOLIDATED BALANCE SHEETS
JO-ANN STORES, INC.
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 31,
1999 1998
------------- -------------
(MILLIONS OF DOLLARS,
EXCEPT SHARE AND PER SHARE
DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments................................................................. $ 20.4 $ 14.8
Inventories......................................................................................... 420.2 294.7
Deferred income taxes............................................................................... 24.8 --
Prepaid expenses and other current assets........................................................... 24.7 12.6
------ ------
Total current assets.................................................................................. 490.1 322.1
Property and equipment, at cost:
Land................................................................................................ 2.2 1.7
Buildings........................................................................................... 24.7 22.8
Furniture, fixtures and equipment................................................................... 172.7 121.7
Leasehold improvements.............................................................................. 57.3 46.8
Construction in progress............................................................................ 13.2 2.6
------ ------
270.1 195.6
Less accumulated depreciation and amortization...................................................... 106.1 85.6
------ ------
164.0 110.0
Goodwill, net......................................................................................... 37.2 --
Other assets.......................................................................................... 10.1 15.7
------ ------
Total assets.......................................................................................... $ 701.4 $ 447.8
------ ------
------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................................... $ 150.4 $ 120.6
Accrued expenses.................................................................................... 58.4 32.5
Accrued income taxes................................................................................ 0.4 10.4
Deferred income taxes............................................................................... -- 1.3
------ ------
Total current liabilities............................................................................. 209.2 164.8
Long-term debt........................................................................................ 182.5 24.7
Deferred income taxes................................................................................. 25.2 14.2
Other long-term liabilities........................................................................... 25.5 3.2
Shareholders' equity:
Common stock:
Class A, par value $0.05 per share; issued and outstanding 9,530,330 and 9,463,915,
respectively.................................................................................... 0.5 0.5
Class B, par value $0.05 per share; issued and outstanding 9,481,244 and 9,302,746,
respectively.................................................................................... 0.5 0.5
Additional paid-in capital.......................................................................... 94.4 88.9
Unamortized restricted stock awards................................................................. (2.9) (3.1)
Retained earnings................................................................................... 185.8 172.2
------ ------
278.3 259.0
Treasury stock, at cost............................................................................. (19.3) (18.1)
------ ------
Total shareholders' equity............................................................................ 259.0 240.9
------ ------
Total liabilities and shareholders' equity............................................................ $ 701.4 $ 447.8
------ ------
------ ------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
JO-ANN STORES, INC.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
----------- ----------- -----------
(MILLIONS OF DOLLARS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net sales................................................................ $ 1,242.9 $ 975.0 $ 929.0
Cost of sales............................................................ 678.5 533.2 516.9
Selling, general and administrative expenses............................. 476.7 363.1 340.9
Depreciation and amortization............................................ 27.7 21.7 21.2
Non-recurring charge..................................................... 25.1 -- --
----------- ----------- -----------
Operating profit......................................................... 34.9 57.0 50.0
Interest expense......................................................... 12.5 5.9 10.6
----------- ----------- -----------
Income before income taxes and extraordinary item........................ 22.4 51.1 39.4
Income tax provision..................................................... 8.8 19.2 14.8
----------- ----------- -----------
Net income before extraordinary item..................................... 13.6 31.9 24.6
Extraordinary item, loss related to early retirement of debt,
net of tax benefit of $0.7 million....................................... -- (1.1) --
----------- ----------- -----------
Net income............................................................... $ 13.6 $ 30.8 $ 24.6
----------- ----------- -----------
----------- ----------- -----------
Net income per common share--basic:
Net income before extraordinary item................................... $ 0.72 $ 1.74 $ 1.37
Extraordinary item..................................................... -- (0.06) --
----------- ----------- -----------
Net income per common share.............................................. $ 0.72 $ 1.68 $ 1.37
----------- ----------- -----------
----------- ----------- -----------
Net income per common share--diluted:
Net income before extraordinary item................................... $ 0.69 $ 1.60 $ 1.26
Extraordinary item..................................................... -- (0.06) --
----------- ----------- -----------
Net income per common share.............................................. $ 0.69 $ 1.54 $ 1.26
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
JO-ANN STORES, INC.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
JANUARY 30, JANUARY 31, FEBRUARY 1,
1999 1998 1997
----------- ------------- -----------
<S> <C> <C> <C>
(MILLIONS OF DOLLARS)
Net cash flows from operating activities:
Net income............................................................... $ 13.6 $ 30.8 $ 24.6
Adjustments to reconcile net income to net cash (used for) provided by
operating activities:
Depreciation and amortization.......................................... 27.7 21.7 21.2
Non-cash portion of non-recurring charge............................... 9.2 -- --
Deferred income taxes.................................................. 8.5 -- (1.3)
Loss on disposal of fixed assets....................................... 2.2 0.9 1.1
Extraordinary loss on debt prepayment.................................. -- 1.1 --
Changes in operating assets and liabilities:
(Increase) decrease in inventories..................................... (96.0) 1.4 41.9
(Increase) decrease in prepaid expenses and other current assets....... 19.2 (3.0) 2.3
Increase (decrease) in accounts payable................................ 14.6 21.2 (5.0)
Increase (decrease) in accrued expenses................................ (4.3) 3.6 8.8
Increase (decrease) in accrued income taxes............................ (10.0) 0.4 10.3
----------- ----- -----------
Net cash (used for) provided by operating activities....................... (15.3) 78.1 103.9
Net cash flows from investing activities:
Capital expenditures..................................................... (75.1) (36.6) (13.2)
House of Fabrics acquisition, net of cash acquired....................... (23.5) -- --
Other, net............................................................... 4.3 (0.5) (1.1)
----------- ----- -----------
Net cash used for investing activities..................................... (94.3) (37.1) (14.3)
Net cash flows from financing activities:
Proceeds from long-term debt............................................. 159.8 87.3 13.1
Repayment of long-term debt.............................................. (48.5) (77.7) (96.5)
Redemption of debentures................................................. -- (57.0) --
Proceeds and tax benefit from exercise of stock options.................. 4.4 8.4 2.2
Issuance of treasury shares.............................................. 1.0 0.8 --
Purchase of common stock................................................. (1.5) -- (9.0)
Other, net............................................................... -- (0.6) 1.6
----------- ----- -----------
Net cash provided by (used for) financing activities....................... 115.2 (38.8) (88.6)
Net increase in cash....................................................... 5.6 2.2 1.0
Cash and temporary cash investments at beginning of year................... 14.8 12.6 11.6
----------- ----- -----------
Cash and temporary cash investments at end of year....................... $ 20.4 $ 14.8 $ 12.6
----------- ----- -----------
----------- ----- -----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................................... $ 12.5 $ 7.5 $ 11.1
Income taxes........................................................... $ 14.6 $ 15.6 $ 5.7
Acquisition of House of Fabrics, Inc.:
Fair value of assets acquired, net of cash............................. $ (138.1)
Fair value of liabilities assumed...................................... 116.8
-----------
Net cash payment to date................................................. (21.3)
Amount payable for shares not yet tendered............................... (2.2)
-----------
Total.................................................................... $ (23.5)
-----------
-----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
JO-ANN STORES, INC.
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL UNAMORTIZED
COMMON COMMON PAID-IN RESTRICTED RETAINED TREASURY
STOCK STOCK CAPITAL STOCK AWARDS EARNINGS STOCK
----------- ----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(MILLIONS OF DOLLARS)
Balance, January 27, 1996............... $ 0.5 $ 0.5 $ 74.2 $ (1.7) $ 116.8 $ (9.4)
Net income............................ -- -- -- -- 24.6 --
Exercise of stock options............. -- -- 1.8 -- -- --
Tax benefit on options exercised...... -- -- 0.4 -- -- --
Issuance of restricted stock awards... -- -- 0.4 (0.4) -- --
Cancellation of restricted stock
awards.............................. -- -- (0.2) 0.1 -- --
Amortization of restricted stock
awards.............................. -- -- -- 0.8 -- --
Purchase of common stock.............. -- -- -- -- -- (9.0)
--- --- ----- ----- ----------- -----------
Balance, February 1, 1997............... 0.5 0.5 76.6 (1.2) 141.4 (18.4)
Net income............................ -- -- -- -- 30.8 --
Exercise of stock options............. -- -- 5.2 -- -- --
Tax benefit on options exercised...... -- -- 3.2 -- -- --
Issuance of restricted stock awards... -- -- 2.8 (2.8) -- --
Cancellation of restricted stock
awards.............................. -- -- (0.4) 0.3 -- --
Amortization of restricted stock
awards.............................. -- -- -- 0.6 -- --
Issuance of treasury shares........... -- -- 0.5 -- -- 0.3
Issuance of common stock upon
conversion of debentures............ -- -- 1.0 -- -- --
--- --- ----- ----- ----------- -----------
Balance, January 31, 1998............... 0.5 0.5 88.9 (3.1) 172.2 (18.1)
Net income............................ -- -- -- -- 13.6 --
Exercise of stock options............. -- -- 2.7 -- -- --
Tax benefit on options exercised...... -- -- 1.7 -- -- --
Issuance of restricted stock awards... -- -- 1.3 (1.3) -- --
Cancellation of restricted stock
awards.............................. -- -- (0.9) 0.4 -- --
Amortization of restricted stock
awards.............................. -- -- -- 1.1 -- --
Purchase of common stock.............. -- -- -- -- -- (1.5)
Issuance of treasury shares........... -- -- 0.7 -- -- 0.3
--- --- ----- ----- ----------- -----------
Balance, January 30, 1999............. $ 0.5 $ 0.5 $ 94.4 $ (2.9) $ 185.8 $ (19.3)
--- --- ----- ----- ----------- -----------
--- --- ----- ----- ----------- -----------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
-------------
<S> <C>
Balance, January 27, 1996............... $ 180.9
Net income............................ 24.6
Exercise of stock options............. 1.8
Tax benefit on options exercised...... 0.4
Issuance of restricted stock awards... --
Cancellation of restricted stock
awards.............................. (0.1)
Amortization of restricted stock
awards.............................. 0.8
Purchase of common stock.............. (9.0)
------
Balance, February 1, 1997............... 199.4
Net income............................ 30.8
Exercise of stock options............. 5.2
Tax benefit on options exercised...... 3.2
Issuance of restricted stock awards... --
Cancellation of restricted stock
awards.............................. (0.1)
Amortization of restricted stock
awards.............................. 0.6
Issuance of treasury shares........... 0.8
Issuance of common stock upon
conversion of debentures............ 1.0
------
Balance, January 31, 1998............... 240.9
Net income............................ 13.6
Exercise of stock options............. 2.7
Tax benefit on options exercised...... 1.7
Issuance of restricted stock awards... --
Cancellation of restricted stock
awards.............................. (0.5)
Amortization of restricted stock
awards.............................. 1.1
Purchase of common stock.............. (1.5)
Issuance of treasury shares........... 1.0
------
Balance, January 30, 1999............. $ 259.0
------
------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JO-ANN STORES, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Jo-Ann Stores, Inc. (the "Company"), an Ohio corporation, is a fabric and
craft retailer with 1,058 retail stores in 49 states at January 30, 1999. The
1,034 traditional and 24 superstores feature a broad line of apparel, quilting
and craft fabrics and sewing-related products, home decorating fabrics, floral,
craft and seasonal products. Effective September 1, 1998, the Company changed
its name to Jo-Ann Stores, Inc. from Fabri-Centers of America, Inc.
The significant accounting policies applied in preparing the accompanying
consolidated financial statements of the Company are summarized below:
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated. Certain amounts in the fiscal 1998 and fiscal 1997
financial statements have been reclassified in order to conform with the current
year presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Since actual results may differ from those
estimates, the Company revises its estimates and assumptions as new information
becomes available.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31. The
fiscal year refers to the year in which the period ends (e.g., fiscal 1999 ended
January 30, 1999). Fiscal years generally consist of 52 weeks, with the
exception of fiscal 1997 which contains 53 weeks.
CASH AND TEMPORARY CASH INVESTMENTS
Temporary cash investments are all highly liquid investments with original
maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. Substantially all
inventories were valued using the last-in, first-out ("LIFO") method. The value
of inventories stated on the LIFO method at January 30, 1999 and January 31,
1998 are not materially different from their current cost.
PROPERTY AND EQUIPMENT
Depreciation and amortization is provided principally by the straight-line
method. The major classes of assets and ranges of estimated useful lives are:
buildings from 10 to 40 years; furniture, fixtures and equipment from 2 to 10
years; and leasehold improvements for 10 years or the remainder of the lease,
whichever is shorter.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation and amortization expense amounted to $25.4 million, $19.9
million and $18.9 million in fiscal 1999, 1998 and 1997, respectively.
Maintenance and repair expenditures are charged to expense as incurred and
improvements and major renewals are capitalized.
SOFTWARE DEVELOPMENT
The AICPA issued its Statement of Position No. 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" ("SOP No.
98-1") which requires companies to capitalize payroll and other internal costs
as well as any external costs related to software development. The Company
adopted SOP No. 98-1 in fiscal 1998, and the impact of adoption was not
material. The Company capitalized $12.3 million and $2.8 million in fiscal 1999
and fiscal 1998, respectively, for internal use software. The capitalized
amounts are included in property and equipment and are being amortized on a
straight-line basis over periods ranging from 2 to 5 years at the time the
software becomes operational.
GOODWILL
Goodwill represents the excess of purchase price and related costs over the
value assigned to the net tangible assets acquired from House of Fabrics, Inc.
Goodwill is amortized on a straight-line basis over 40 years. This amortization
is a non-deductible expense for tax purposes. The Company periodically reviews
the recoverability of goodwill. The measurement of possible impairment is based
primarily on the ability to recover the balance of the goodwill from expected
future operating cash flows on an undiscounted basis. In management's opinion,
no material impairment exists on January 30, 1999. Amortization expense was $0.9
million for fiscal 1999.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets when indicators
of impairment are present and the estimated undiscounted cash flows to be
generated by those assets are less than the assets' net book value. There were
no long-lived assets that required recognition of an impairment loss at January
30, 1999 or January 31, 1998.
FINANCIAL INSTRUMENTS
All financial instruments are considered to have a fair value which
approximates carrying value at January 30, 1999 and January 31, 1998, unless
otherwise specified. The Company has entered into interest rate swap agreements
to hedge against interest rate risk. The interest differentials from these swaps
are recorded as interest expense as incurred.
STORE OPENING EXPENSES
Store opening expenses are charged to operations as incurred.
ADVERTISING COSTS
The Company expenses production costs of advertising the first time the
advertising takes place. Advertising expense was $32.5 million, $24.4 million
and $20.3 million for fiscal 1999, 1998 and 1997, respectively.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting on Comprehensive Income."
This statement became effective for the Company in the first quarter of fiscal
1999. This statement establishes standards for reporting and display of
comprehensive income and its components. The Company currently has no items that
qualify as comprehensive income under the definitions of this statement, and the
presentation of previously reported results is not affected.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information," was
issued. Based on the information utilized by the Company's operating decision
makers to manage the business, the Company currently has no segments which
require disclosure under the quantitative thresholds defined by the statement.
In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued. The
statement must be adopted by the Company in fiscal 2000. Under provisions of
this statement, the Company will be required to record all derivatives on the
balance sheet at fair value and establish special accounting rules for the
different types of hedges. Implementation of this standard is not expected to
have a material impact on the Company's financial position or results of
operations.
NOTE 2--ACQUISITION OF HOUSE OF FABRICS, INC.
On March 9, 1998, the Company acquired, through a cash tender offer, 77.2
percent of the outstanding common stock of House of Fabrics, Inc. ("HOF") for
$4.25 per share (the "Acquisition"). On April 21, 1998, the merger of HOF with a
wholly owned subsidiary of the Company was approved at a special meeting of the
shareholders of HOF. As a result, HOF became a wholly owned subsidiary of the
Company, and all shares of HOF common stock not already owned by the Company
were canceled and converted into the right to receive $4.25 in cash. The total
value of the transaction was approximately $97.1 million, including the
assumption of debt and other long-term liabilities aggregating $73.6 million.
The funds used to acquire HOF were provided by borrowings under the Credit
Facility.
HOF had annual revenues of approximately $240.0 million and operated 261
fabric and craft stores in 27 states at the time of the Acquisition. Of the 261
stores acquired, management identified 60 HOF stores and 30 Jo-Ann Fabrics and
Crafts stores for closing, due to the geographic overlap that existed between
the two companies. Certain HOF stores, identified for closing, were liquidated
with the assistance of an outside firm, and the Company actively settled leases
with landlords. The operations of the liquidated HOF stores have been excluded
from the Company's reported results of operations since the date of the
Acquisition. Operating results of the continuing HOF stores have been included
in our results of operations since the date of the Acquisition.
The Acquisition was recorded as a purchase business combination using
Accounting Principles Board Opinion No. 16, "Business Combinations."
Accordingly, the carrying values of HOF's net assets, including the
establishment of reserves for severance and costs associated with the HOF store
closings, have been adjusted to their estimated fair values. The excess of the
purchase price paid over the net
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 2--ACQUISITION OF HOUSE OF FABRICS, INC. (CONTINUED)
identifiable assets and liabilities totaled $38.1 million and is reported as
goodwill, which is being amortized on a straight-line basis over a 40-year life.
In accordance with Emerging Issues Task Force Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)," the Company
recorded a non-recurring charge of $25.1 million during the first three quarters
of 1999 for direct and other merger-related costs pertaining to the Acquisition.
Following is a summary of the significant components of the non-recurring
charge (millions of dollars):
<TABLE>
<CAPTION>
CASH NON-CASH TOTAL
--------- ------------- ---------
<S> <C> <C> <C>
Write-downs of previously owned assets............................ $ -- $ 9.2 $ 9.2
Costs of operating duplicate corporate facilities................. 5.4 -- 5.4
Store remerchandising costs....................................... 5.1 -- 5.1
Rental costs on closed stores and other costs..................... 5.4 -- 5.4
--------- --- ---------
$ 15.9 $ 9.2 $ 25.1
--------- --- ---------
--------- --- ---------
</TABLE>
The integration events were completed by the end of the third quarter of
fiscal 1999. At the end of fiscal 1999, the Company had a remaining accrual of
$1.3 million for future rental obligations on the closed stores.
Other long-term liabilities include a $22.5 million income tax contingency
assumed in the Acquisition. Prior to the Acquisition, HOF received refunds
totaling $22.5 million pursuant to carrybacks of certain net operating losses on
claims filed for refund with the Internal Revenue Service ("IRS") on Forms 1139.
The claims for refund have been examined by the IRS, and a deficiency notice has
been issued. HOF had appealed the deficiency assessment. To the extent that the
Company prevails, in whole or in part, with respect to the appeal, goodwill and
cash payments to the IRS will be reduced.
Summarized below are the unaudited pro forma combined results of operations
for fiscal 1998 of the Company and HOF as if the Acquisition had occurred as of
the beginning of fiscal 1998:
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
(UNAUDITED)
-----------
<S> <C>
(MILLIONS
OF DOLLARS,
EXCEPT PER
SHARE DATA)
Net sales........................................................................ $ 1,209.2
Net income before extraordinary item............................................. 25.2
Net income....................................................................... 24.1
Net income per common share before extraordinary item:
Basic.......................................................................... $ 1.37
Diluted........................................................................ 1.27
Net income per common share:
Basic.......................................................................... $ 1.31
Diluted........................................................................ 1.21
</TABLE>
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 2--ACQUISITION OF HOUSE OF FABRICS, INC. (CONTINUED)
The pro forma financial information presented is for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the Acquisition been consummated at the beginning of the period
presented. In addition, the information is not intended to be a projection of
future results and does not reflect synergies that may be achieved from combined
operations. The pro forma results presented do not include any impact on net
income of the non-recurring charge to integrate HOF.
NOTE 3--INCOME TAXES
The significant components of the income tax provision are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 1999 1998 1997
- --------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
(MILLIONS OF DOLLARS)
Current:
Federal............................................................ $ (1.2) $ 16.9 $ 14.6
State and local.................................................... 1.4 2.3 1.5
--------- --------- ---------
0.2 19.2 16.1
Deferred............................................................. 8.6 -- (1.3)
--------- --------- ---------
Income tax provision................................................. $ 8.8 $ 19.2 $ 14.8
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reconciliation of income tax at the statutory rate to the income tax
provision is as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 1999 1998 1997
- --------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
(MILLIONS OF DOLLARS)
Federal income tax at the statutory rate............................. $ 7.8 $ 17.9 $ 13.8
Effect of:
State and local taxes.............................................. 0.9 1.5 1.0
Goodwill and other, net............................................ 0.1 (0.2) --
--------- --------- ---------
Income tax provision................................................. $ 8.8 $ 19.2 $ 14.8
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 3--INCOME TAXES (CONTINUED)
The significant components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
ASSET/(LIABILITY)
--------------------
<S> <C> <C>
FISCAL YEAR 1999 1998
- ----------------------------------------------------------------------------------------------- --------- ---------
<CAPTION>
(MILLIONS OF DOLLARS)
<S> <C> <C>
Current
Deferred tax assets:
Acquired tax assets.......................................................................... $ 11.5 $ --
Inventory items.............................................................................. 8.7 2.5
Employee benefits............................................................................ 2.3 1.6
Lease obligations............................................................................ 2.7 1.2
Other........................................................................................ 3.4 0.6
--------- ---------
28.6 5.9
Deferred tax liabilities:
Basis difference in net assets acquired...................................................... (3.1) (6.5)
Non-income taxes............................................................................. (0.7) (0.7)
--------- ---------
(3.8) (7.2)
--------- ---------
Net current deferred tax asset (liability)..................................................... $ 24.8 $ (1.3)
--------- ---------
--------- ---------
Non-current
Deferred tax assets:
Unearned compensation........................................................................ $ 0.2 $ 0.2
Other........................................................................................ 0.8 0.3
--------- ---------
1.0 0.5
Deferred tax liabilities:
Depreciation................................................................................. (21.1) (14.0)
Basis difference in net assets acquired...................................................... (5.0) (0.6)
Other........................................................................................ (0.1) (0.1)
--------- ---------
(26.2) (14.7)
--------- ---------
Net non-current deferred tax liability......................................................... $ (25.2) $ (14.2)
--------- ---------
--------- ---------
</TABLE>
In connection with the purchase of HOF, the Company recorded certain tax
assets, of which approximately $11.5 million is still available as of January
30, 1999 to offset future years' tax payments. The Company did not record any
valuation allowances against deferred tax assets as of January 30, 1999 or
January 31, 1998.
NOTE 4--FINANCING
The Company has an unsecured $250.0 million five-year revolving credit
agreement (the "Credit Facility") that expires January 31, 2003. The Company may
borrow up to a maximum of $280.0 million by utilizing funds available under the
Credit Facility and other lines of credit. An amendment on March 4, 1998
increased the Credit Facility to $250.0 million from $200.0 million and included
a provision allowing the Company to acquire HOF as discussed in Note 2. The
Credit Facility was
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 3--INCOME TAXES (CONTINUED)
amended for the period of September 4, 1998 through November 30, 1998 to allow
the Company to increase its borrowing capacity up to a maximum of $315.0
million.
The Company's weighted average interest rate and weighted average borrowings
under the Credit Facility and other bank borrowings were 6.23 percent and $157.1
million during fiscal 1999, 6.00 percent and $49.0 million during fiscal 1998
and 6.33 percent and $83.1 million during fiscal 1997, respectively.
The weighted average interest rate under the Credit Facility and other bank
borrowings was 5.82 percent at January 30, 1999. Interest on borrowings under
the Credit Facility is calculated at an applicable margin over prime, federal
funds or LIBOR rates, based on the achievement of specified ranges of certain
financial covenants. The Company pays a facility fee on the revolving commitment
amount which ranges from 10 basis points to 30 basis points based on the
achievement of specified ranges of certain financial covenants.
The Credit Facility contains financial covenants which require the Company
to, among other things, maintain a minimum tangible net worth and fixed charge
coverage and current funded indebtedness ratios as well as a financial covenant
which limits the Company's defined leverage ratio. The Company is in compliance
with all financial covenants contained in the Credit Facility.
On March 15, 1998, the Company entered into a five-year interest rate swap
agreement to hedge its interest rate exposure for a portion of the Credit
Facility. The notional amount of this interest rate swap agreement is $75.0
million, with a fixed LIBOR rate of 5.98 percent, reducing to $50.0 million on
March 15, 2001 for the remaining term of the agreement.
On June 30, 1997, the Company redeemed all of its outstanding 6 1/4%
Convertible Subordinated Debentures ("Debentures") due March 1, 2002 at a price
of 101.785 percent of principal. The holders of the Debentures had the option to
convert their Debentures into common shares at a conversion price of $24.375 per
share, or to accept redemption at the stated premium. Of the $57.0 million of
Debentures outstanding, $1.1 million were converted. The remaining $55.9 million
of Debentures were redeemed. The Company recorded an extraordinary loss, net of
taxes, of $1.1 million, or $0.06 per share, consisting of the redemption
premium, unamortized debenture issuance costs and other related expenses.
The Company is currently in the process of negotiating a new five-year
senior credit facility that will increase the total credit commitment, including
letters of credit and related acceptances, to $300.0 million, plus an additional
$30.0 million of outside bank lines. This will replace the existing Credit
Facility.
In addition, the Company expects to issue $150.0 million aggregate principal
amount of senior subordinated notes which will mature in 2009. It is anticipated
that these notes will be fully and unconditionally guaranteed by each of the
Company's restricted subsidiaries.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 3--INCOME TAXES (CONTINUED)
Summarized consolidating financial information of the Company (excluding its
subsidiaries) and the guarantor subsidiaries as of and for the year ended
January 30, 1999 is as follows:
<TABLE>
<CAPTION>
GUARANTOR
PARENT SUBSIDIARIES CONSOLIDATED
--------- ----------- ------------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Net sales................................................ $ 703.1 $ 539.8 $ 1,242.9
Gross profit............................................. 338.9 225.5 564.4
Operating profit......................................... 42.7 (7.8) 34.9
Net income............................................... 7.8 5.8 13.6
Current assets........................................... 223.5 266.6 490.1
Non-current assets....................................... 94.6 116.7 211.3
Intercompany receivable (payable)........................ 303.7 (303.7) --
Current liabilities...................................... 188.1 21.1 209.2
Non-current liabilities.................................. 197.5 35.7 233.2
</TABLE>
NOTE 5--CAPITAL STOCK
The following table details the common stock ($0.05 stated value) activity
for fiscal 1999 and fiscal 1998:
<TABLE>
<CAPTION>
COMMON SHARES
OUTSTANDING
NET OF TREASURY SHARES
---------------------- IN
CLASS A CLASS B TOTAL TREASURY
---------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
Balance at February 1, 1997........................ 9,021,157 8,899,484 17,920,641 2,279,161
Exercise of stock options........................ 299,134 371,664 670,798 --
Issuance of restricted stock awards.............. 132,500 -- 132,500 --
Cancellation of restricted stock awards.......... (30,000) (10,000) (40,000) --
Purchase of common stock......................... (423) (575) (998) 998
Issuance of treasury shares...................... 19,485 20,111 39,596 (39,596)
Issuance of common stock upon conversion of
debentures..................................... 22,062 22,062 44,124 --
---------- ---------- ---------------- ----------
Balance at January 31, 1998........................ 9,463,915 9,302,746 18,766,661 2,240,563
Exercise of stock options........................ 131,541 149,864 281,405 --
Issuance of restricted stock awards.............. 11,500 47,500 59,000 --
Cancellation of restricted stock awards.......... (60,000) (3,500) (63,500) --
Purchase of common stock......................... (40,233) (42,268) (82,501) 82,501
Issuance of treasury shares...................... 23,607 26,902 50,509 (50,509)
---------- ---------- ---------------- ----------
Balance at January 30, 1999........................ 9,530,330 9,481,244 19,011,574 2,272,555
---------- ---------- ---------------- ----------
---------- ---------- ---------------- ----------
</TABLE>
The Company's Class A Common Shares have voting rights while Class B Common
Shares have no voting rights. At January 30, 1999 and January 31, 1998, there
were 75,000,000 Class A Common Shares and 75,000,000 Class B Common Shares
authorized for issuance. At January 30, 1999 and January 31, 1998, there were
5,000,000 shares of serial preferred stock, without par value, authorized for
issuance, none of which are outstanding.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JO-ANN STORES, INC.
NOTE 5--CAPITAL STOCK (CONTINUED)
SHAREHOLDERS' RIGHTS PLAN
Under the Company's Shareholders' Rights Plan, as amended, one right is
issued for each Class A Common Share outstanding. The rights are exercisable
only if a person or group buys or announces a tender offer for 20 percent or
more of the outstanding Class A Common Shares or the Board of Directors declares
a person or group to be an "adverse person," as defined in the Plan. When
exercisable, each right initially entitles a holder to purchase one Class A
Common Share for $105.75. If at any time after the rights become exercisable,
the Company is acquired in a merger or certain other business transactions
occur, each right would then enable the holder thereof to purchase one common
share of the acquiring company, or under certain circumstances, one Class A
Common Share of the Company for $0.50. The rights, which do not have voting
privileges, expire in November 2000, but may be redeemed by the Board of
Directors prior to that time, under certain circumstances, for $0.005 per right.
Until the rights become exercisable, they have no effect on earnings per share.
RIGHT TO ACQUIRE SHARES
The Company is a party to an agreement with certain members of the two
founding families of the Company, whereby the Company has a right of first
refusal to acquire, at market prices, common shares disposed of by either of the
families. The total number of both Class A and Class B Common Shares owned by
the families, subject to this agreement, was approximately 2.8 million as of
January 30, 1999.
NOTE 6--EARNINGS PER SHARE
Basic and diluted earnings per share are calculated in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share." Basic
earnings per common share are computed by dividing net income by the weighted
average number of shares outstanding during the year. Diluted earnings per share
include the effect of the assumed exercise of dilutive stock options under the
treasury stock method and the assumed conversion of all of the Company's
Debentures on the first day of fiscal 1998 and 1997.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 6--EARNINGS PER SHARE (CONTINUED)
The following table presents information necessary to calculate basic and
diluted earnings per common share for the fiscal years presented:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 1999 1998 1997
- ------------------------------------------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
Basic earnings per common share:
Net income before extraordinary item.................................... $ 13.6 $ 31.9 $ 24.6
Extraordinary item...................................................... -- (1.1) --
------------ ------------ ------------
Net income.............................................................. $ 13.6 $ 30.8 $ 24.6
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares outstanding..................................... 18,964,082 18,393,827 17,930,367
------------ ------------ ------------
------------ ------------ ------------
DILUTED EARNINGS PER COMMON SHARE:
Net income before extraordinary item.................................... $ 13.6 $ 31.9 $ 24.6
Debenture interest, net of tax.......................................... -- 0.9 2.2
------------ ------------ ------------
Net income before extraordinary item and debenture interest............. 13.6 32.8 26.8
Extraordinary item...................................................... -- (1.1) --
------------ ------------ ------------
Net income before debenture interest.................................... $ 13.6 $ 31.7 $ 26.8
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares outstanding..................................... 18,964,082 18,393,827 17,930,367
Incremental shares from assumed exercise of stock options............... 939,517 1,223,985 947,749
Incremental shares from assumed conversion of debentures................ -- 974,068 2,337,764
------------ ------------ ------------
19,903,599 20,591,880 21,215,880
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
NOTE 7--STOCK-BASED COMPENSATION PLANS
1998 INCENTIVE COMPENSATION PLAN
During fiscal 1999, the shareholders approved the 1998 Incentive
Compensation Plan (the "1998 Plan"). The 1998 Plan includes a stock options
program, a restricted stock program and an employee stock purchase program. The
employee stock purchase program meets the requirements of Section 423 of the
Internal Revenue Code of 1986. Shares subject to awards under the 1998 Plan may
be Class A or Class B shares. The total number of shares subject to awards,
other than those granted under the employee stock purchase program, are limited
in any fiscal year to (1) four percent of the number of shares outstanding at
the beginning of the fiscal year, plus (2) for each of the two prior fiscal
years, the excess of four percent of the number of shares outstanding at the
beginning of each such fiscal year over the number of shares subject to awards
actually granted in each such fiscal year.
The stock options granted under the 1998 Plan become exercisable to the
extent of one-fourth of the optioned shares for each full year of continuous
employment following the date of grant and generally expire ten years after the
date of the grant. During fiscal 1999, 750,666 shares were available to be
issued as awards under the stock option and restricted stock programs. 431,600
non-qualified stock options and 57,500 restricted shares, net of cancellations,
were issued during fiscal 1999, with 261,566 shares available to be carried over
to fiscal 2000.
The vesting periods for the restricted shares granted under the 1998 Plan
are up to five years with all rights to such restricted stock terminating
without any payment of consideration by the Company
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 7--STOCK-BASED COMPENSATION PLANS (CONTINUED)
unless the grantee remains in the continuous employment of the Company
throughout the vesting period. Unearned compensation resulting from the issuance
of restricted shares is being amortized over the vesting periods, and the
unamortized portion has been reflected as a reduction of shareholders' equity.
During fiscal 1999, under the 1998 Plan, 11,500 Class A and 47,500 Class B
restricted shares were granted at weighted average market values of $21.92 and
$22.82, respectively.
With respect to the employee stock purchase program, the total number of
shares subject to stock purchase rights granted in any fiscal year may not
exceed 1,000,000 shares. No stock purchase rights were granted during fiscal
1999.
DIRECTORS PLAN
Under the 1996 Stock Option Plan for Non-Employee Directors (the "Directors
Plan"), stock options are automatically granted to each non-employee director
upon their election to the board and annually thereafter at prices not less than
the fair market value of the common stock at the date of the grant. The options
become exercisable to the extent of one-fourth of the optioned shares for each
full year of continuous service following the date of grant and generally expire
ten years after the date of the grant. There are 71,500 Class A Shares and
71,500 Class B Shares authorized for future option grants under the Directors
Plan at January 30, 1999.
OTHER PLANS
Nonqualified stock options have been granted to certain officers and key
employees under the 1998 Plan and the 1990 Employee Stock Option and Stock
Appreciation Rights Plan (the "1990 Plan") at prices not less than fair market
value of the common stock at the date of grant. The 1990 Plan also permits the
granting of stock appreciation rights (SAR's), with respect to all or part of
the common stock subject to any option granted under this plan. Vesting and
expiration periods are identical to options issued under the 1998 Plan. There
are 852,771 Class A Shares authorized for future option and stock appreciation
right grants under the 1990 Plan at January 30, 1999.
Restricted shares of the Company's common stock have been awarded to
executive officers, senior management and other key employees under the 1998
Plan and the 1994 Executive Incentive Plan (the "Executive Plan"). At January
30, 1999, 168,500 Class A and 49,000 Class B restricted shares were outstanding
under the Executive Plan and 331,500 Class A and 451,000 Class B Common Shares
are available for future awards. During fiscal 1998, under the Executive Plan,
132,500 Class A restricted shares were granted at a weighted average market
value of $20.96 and during fiscal 1997, 27,000 Class A and 2,000 Class B
restricted shares were granted at weighted average market values of $14.09 and
$11.75, respectively.
The Company applies the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations
in accounting for stock options granted under the 1998 Plan, the 1990 Plan and
the Directors Plan (collectively the "Plans") and, accordingly, no compensation
cost has been recognized for the Plans. Had compensation cost for the Plans been
determined based on the fair value at the grant dates for awards under these
Plans consistent with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation,"
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 7--STOCK-BASED COMPENSATION PLANS (CONTINUED)
the Company's net income and earnings per share would have been reduced to the
pro forma amounts shown in the table below (millions of dollars, except per
share data):
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 1999 1998 1997
- -------------------------------------------------------- ------------------------ ------------------------ -----------
<S> <C> <C> <C> <C> <C>
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED
----------- ----------- ----------- ----------- -----------
Net income.............................................. $ 13.6 $ 12.0 $ 30.8 $ 29.8 $ 24.6
Net income per common share:
Basic................................................. $ 0.72 $ 0.63 $ 1.68 $ 1.62 $ 1.37
Diluted............................................... 0.69 0.61 1.54 1.46 1.26
<CAPTION>
FISCAL YEARS ENDED
- --------------------------------------------------------
<S> <C>
PRO FORMA
-----------
Net income.............................................. $ 23.9
Net income per common share:
Basic................................................. $ 1.33
Diluted............................................... 1.24
</TABLE>
The pro forma disclosures presented are not representative of the future
effects on net income and net income per share because only awards granted after
fiscal 1996 are permitted to be included.
For purposes of computing the pro forma disclosures above, the fair values
of the options granted under the Plans were determined at the date of grant
separately for Class A and Class B option grants using the Black-Scholes option
pricing model. The significant assumptions used to calculate the fair value of
Class A and Class B option grants were: risk-free interest rates ranging from
5.3 to 6.3 percent for Class A and 4.6 to 6.3 percent for Class B, expected
volatility ranging from 34.5 to 38.9 percent for Class A and 31.7 to 34.6
percent for Class B, expected lives ranging from 2.9 to 5.8 years for Class A
and 3.3 to 6.5 years for Class B and no expected dividends for either class of
shares.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 7--STOCK-BASED COMPENSATION PLANS (CONTINUED)
The following is a summary of the Company's stock option activity for the
Plans:
<TABLE>
<CAPTION>
CLASS A OPTIONS CLASS B OPTIONS
---------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE CLASS A
NUMBER OF EXERCISE NUMBER OF EXERCISE AND CLASS
OPTIONS PRICES OPTIONS PRICES B OPTIONS
--------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Outstanding at January 27, 1996.......... 1,348,455 $ 9.10 1,712,191 $ 9.50 3,060,646
Granted................................ 81,500 14.62 345,100 14.73 426,600
Exercised.............................. (144,732) 4.34 (140,832) 4.90 (285,564)
Canceled............................... (78,744) 10.87 (105,356) 10.92 (184,100)
--------- --------- ---------
Outstanding at February 1, 1997.......... 1,206,479 9.70 1,811,103 10.66 3,017,582
Granted................................ 58,000 21.43 487,750 20.33 545,750
Exercised.............................. (299,134) 7.36 (371,664) 7.92 (670,798)
Canceled............................... (86,325) 12.65 (181,677) 12.73 (268,002)
--------- --------- ---------
Outstanding at January 31, 1998.......... 879,020 10.98 1,745,512 13.73 2,624,532
Granted................................ 13,650 25.82 459,500 15.94 473,150
Exercised.............................. (131,541) 9.28 (149,864) 9.74 (281,405)
Canceled............................... (10,550) 9.52 (65,551) 15.18 (76,101)
--------- --------- ---------
Outstanding at January 30, 1999.......... 750,579 $ 11.57 1,989,597 $ 14.49 2,740,176
--------- ----------- --------- ----------- ---------
--------- ----------- --------- ----------- ---------
Exercisable at:
January 30, 1999....................... 652,554 $ 10.52 1,010,720 $ 11.90 1,663,274
January 31, 1998....................... 703,120 10.02 892,862 10.53 1,595,982
February 1, 1997....................... 914,854 9.40 1,011,400 9.49 1,926,254
Weighted average fair value of options
granted during fiscal:
1999................................... $ 10.38 $ 6.20
1998................................... 8.22 8.05
1997................................... 5.45 5.58
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 7--STOCK-BASED COMPENSATION PLANS (CONTINUED)
The following table summarizes the status of stock options outstanding and
exercisable at January 30, 1999:
<TABLE>
<CAPTION>
CLASS A OPTIONS
CLASS A OPTIONS OUTSTANDING
- ------------------------------------------------------------ EXERCISABLE
WEIGHTED -----------------------
WEIGHTED AVERAGE WEIGHTED
RANGE OF AVERAGE REMAINING AVERAGE
NUMBER EXERCISE EXERCISE CONTRACTUAL NUMBER EXERCISE
OUTSTANDING PRICES PRICES LIFE EXERCISABLE PRICES
- ----------- --------------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
372,854 $ 2.38 to $ 8.56 $ 6.86 3.1 years 372,754 $ 6.86
357,225 $ 8.57 to $21.94 $ 15.70 1.9 years 277,300 $ 15.33
20,500 $21.95 to $29.06 $ 25.21 6.3 years 2,500 $ 23.44
- ----------- ----------
750,579 $2.38 to $29.06 $ 11.57 2.6 years 652,554 $ 10.52
- ----------- ----------
- ----------- ----------
<CAPTION>
CLASS B OPTIONS
CLASS B OPTIONS OUTSTANDING
- ------------------------------------------------------------ EXERCISABLE
WEIGHTED -----------------------
WEIGHTED AVERAGE WEIGHTED
RANGE OF AVERAGE REMAINING AVERAGE
NUMBER EXERCISE EXERCISE CONTRACTUAL NUMBER EXERCISE
OUTSTANDING PRICES PRICES LIFE EXERCISABLE PRICES
- ----------- --------------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
201,744 $ 2.38 to $ 7.58 $ 6.08 1.9 years 201,744 $ 6.08
1,117,803 $ 7.59 to $17.68 $ 12.37 7.1 years 566,143 $ 10.58
670,050 $17.69 to $26.66 $ 20.57 4.2 years 242,833 $ 19.82
- ----------- ----------
1,989,597 $ 2.38 to $26.66 $ 14.49 5.6 years 1,010,720 $ 11.90
- ----------- ----------
- ----------- ----------
</TABLE>
NOTE 8--EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN AND POSTRETIREMENT BENEFITS
The Company sponsors a tax-deferred savings plan (the "Savings Plan")
whereby eligible employees may elect quarterly to contribute up to the lesser of
10 percent of annual compensation or the statutory maximum. The Company makes a
50 percent matching contribution in the form of the Company's common stock, up
to a maximum employee contribution of 4 percent of the employee's annual
compensation. Employer contributions of the Company's common stock have been
made through the issuance of shares out of the treasury or by purchasing shares
on the open market. The amount of the Company's matching contribution in fiscal
1999, 1998 and 1997 was $1.0 million, $0.8 million and $0.9 million,
respectively. Plan assets included 429,108 shares of Class A Common Stock and
252,945 shares of Class B Common Stock at January 31, 1999. The Company does not
provide postretirement health care benefits for its employees.
NOTE 9--LEASES
Principally all of the Company's retail stores operate out of leased
facilities. All store leases are operating leases, generally for periods up to
10 years with renewal options for up to 20 years. Certain leases contain
escalation clauses and, in some cases, provide for contingent rents based on a
percent of sales in excess of defined minimums. In certain instances, the
Company is required to pay its pro rata share of real estate taxes and common
area maintenance expenses. The Company also leases certain store equipment,
generally under five-year lease terms.
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 9--LEASES (CONTINUED)
The following is a schedule of future minimum rental payments under
non-cancelable operating leases:
<TABLE>
<CAPTION>
MINIMUM
FISCAL YEARS ENDED RENTALS
- ------------------------------------------------------------------------------------------------------- -----------
<S> <C>
(MILLIONS OF DOLLARS)
2000................................................................................................... $ 101.4
2001................................................................................................... 95.2
2002................................................................................................... 85.6
2003................................................................................................... 67.5
2004................................................................................................... 48.3
Thereafter............................................................................................. 183.9
-----------
$ 581.9
-----------
-----------
</TABLE>
Rent expense was as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED 1999 1998 1997
- --------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
(MILLIONS OF DOLLARS)
Minimum rentals........................................................................ $ 103.4 $ 78.6 $ 73.7
Contingent rentals..................................................................... 1.8 1.8 1.4
Sublease rentals....................................................................... (2.8) (2.0) (1.9)
--------- --------- ---------
$ 102.4 $ 78.4 $ 73.2
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JO-ANN STORES, INC.
NOTE 10--QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized below are the unaudited results of operations by quarter for
fiscal 1999 and 1998:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1999 QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
Net sales.................................................................. $ 252.9 $ 251.6 $ 319.7 $ 418.7
Gross profit............................................................... 116.1 114.3 152.2 181.8
Net income (loss).......................................................... (4.4) (6.5) 3.4 21.1
Net income (loss) per common share:
Basic.................................................................... $ (0.23) $ (0.34) $ 0.18 $ 1.11
Diluted.................................................................. (0.23) (0.34) 0.17 1.08
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1998 QUARTER QUARTER QUARTER QUARTER
- --------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
Net sales.................................................................. $ 218.8 $ 197.5 $ 247.2 $ 311.5
Gross profit............................................................... 96.1 88.3 114.6 142.8
Net income (loss) before extraordinary item................................ 2.6 (1.0) 9.3 21.0
Extraordinary item, loss related to early retirement of debt, net of tax
benefit of $0.7 million.................................................. -- (1.1) -- --
----------- ----------- ----------- -----------
Net income (loss).......................................................... $ 2.6 $ (2.1) $ 9.3 $ 21.0
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per common share before extraordinary item:
Basic.................................................................... $ 0.14 $ (0.05) $ 0.50 $ 1.13
Diluted.................................................................. 0.14 (0.05) 0.47 1.07
Extraordinary item:
Basic.................................................................... $ -- $ (0.06) $ -- $ --
Diluted.................................................................. -- (0.06) -- --
Net income (loss) per common share:
Basic.................................................................... $ 0.14 $ (0.12) $ 0.50 $ 1.13
Diluted.................................................................. 0.14 (0.12) 0.47 1.07
</TABLE>
F-22
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers, employees, and agents within prescribed limits and must indemnify them
under certain circumstances. Ohio law does not provide statutory authorization
for a corporation to indemnify directors, officers, employees, and agents for
settlements, fines, or judgments in the context of derivative suits. However, it
provides that directors (but not officers, employees, and agents) are entitled
to mandatory advancement of expenses, including attorneys' fees, incurred in
defending any action, including derivative actions, brought against the
director, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that his act or failure to act was done with deliberate
intent to cause injury to the corporation or with reckless disregard for the
corporation's best interests.
Ohio law does not authorize payment of judgments to a director, officer,
employee, or agent after a finding of negligence or misconduct in a derivative
suit absent a court order. Indemnification is required, however, to the extent
such person succeeds on the merits. In all other cases, if a director, officer,
employee, or agent acting in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation,
indemnification is discretionary except as otherwise provided by a corporation's
articles, code of regulations, or by contract except with respect to the
advancement of expenses of directors.
Under Ohio law, a director is not liable for monetary damages unless it is
proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation. There is, however,
no comparable provision limiting the liability of officers, employees, or agents
of a corporation. The statutory right to indemnification is not exclusive in
Ohio, and Ohio corporations may, among other things, procure insurance for such
persons.
Jo-Ann's Code of Regulations, as amended, provides that Jo-Ann shall
indemnify, subject to certain limitations, any person (and the heirs, executors
and administrators of each such person) made or threatened to be made a party to
any action, suit, proceeding or claim by reason of the fact that he is or was a
director or officer of Jo-Ann or of another corporation for which he was serving
as a director or officer at the request of Jo-Ann for all expenses and
liabilities incurred by him in connection with the defense of any such action,
suit or proceeding or claim.
Under a directors' and officers' liability insurance policy, directors and
officers of Jo-Ann are insured against certain liabilities, including certain
liabilities under the Securities Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.1(a) Amended Articles of Incorporation of Fabri-Centers of America, Inc. (filed as an Exhibit to the
Registrant's Form 10-Q filed with the Commission on September 11, 1995 and incorporated herein by
reference)
3.1(b) Certificate of Amendment to the Amended Articles of Incorporation of Fabri-Centers of America, Inc.
(filed as an Exhibit to the Registrant's Form 10-K filed with the Commission on April 16, 1999 and
incorporated herein by reference)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.2 Regulations of Jo-Ann Stores, Inc., as amended (filed as an Exhibit to the Registrant's Form 8-K filed
with the Commission on December 1, 1993 and incorporated herein by reference)
4.1 Form of Second Amendment of Rights Agreement, dated August 2, 1995, between the Registrant and Society
National Bank, as successor by merger to Ameritrust Company National Association, as Rights Agent
(filed as an Exhibit to the Registrant's Form 10-Q filed with the Commission on September 11, 1995 and
incorporated herein by reference)
4.2 Indenture between the Registrant and FCA Financial, Inc., Fabri-Centers of South Dakota, Inc.,
Fabri-Centers of California, Inc., FCA of Ohio, Inc., and House of Fabrics, Inc., as guarantors, and
Harris Trust and Savings Bank, as trustee relating to the 10 3/8% Senior Subordinated Notes due 2007
4.3 Form of Certificate of the 10 3/8% Senior Subordinated Notes due 2007
4.4 Registration Rights Agreement among the Registrant, FCA Financial, Inc., Fabri-Centers of South Dakota,
Inc., Fabri-Centers of California, Inc., FCA of Ohio, Inc., and House of Fabrics, Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., and Banc One Capital Markets, Inc.
relating to the 10 3/8% Senior Subordinated Notes due 2007
5.1 Opinion and consent of Thompson Hine & Flory LLP as to legality of the 10 3/8% Senior Subordinated
Notes due 2007
10.1 Form of Split Dollar Life Insurance Agreement between the Registrant and certain of its officers (filed
as an Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and
incorporated herein by reference)*
10.2 Split Dollar Life Insurance Agreement and Assignment between the Registrant and Alma Zimmerman dated
September 22, 1984 (filed as an Exhibit to the Registrant's Form 8-K filed with the Commission on
December 1, 1993 and incorporated herein by reference)*
10.3 Split Dollar Life Insurance Agreements and Assignments between the Registrant and Betty Rosskamm dated
October 19, 1984 (filed as an Exhibit to the Registrant's Form 8-K filed with the Commission on
December 1, 1993 and incorporated herein by reference)*
10.4 Fabri-Centers of America, Inc. 1979 Supplemental Retirement Benefit Plan as amended (filed as an
Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and incorporated
herein by reference)*
10.5 Fabri-Centers of America, Inc. Executive Incentive Plan dated March 19, 1980, as amended (filed as an
Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and incorporated
herein by reference)*
10.6 Form of Employment Agreement between the Registrant and certain Executive Officers (filed as an Exhibit
to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and incorporated herein by
reference)*
10.7 Fabri-Centers of America, Inc. 1990 Employees Stock Option and Stock Appreciation Rights Plan, as
amended (filed as an Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993
and incorporated herein by reference)*
10.8 Fabri-Centers of America, Inc. 1996 Stock Option Plan for Non-Employee Directors (filed as Exhibit A to
the Registrant's Definitive Proxy Statement filed with the Commission on Schedule 14A on May 11, 1996
and incorporated herein by reference)*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.9 House of Fabrics, Inc. Non-Standardized 401(k) Plan (filed as Exhibit 10 to House of Fabrics, Inc.'s
(commission file number 1-7927) Form 10-K filed with the Commission on May 1, 1997 and incorporated
herein by reference)*
10.10 Fabri-Centers of America, Inc. 1998 Incentive Compensation Plan (filed as Exhibit A to the Registrant's
Definitive Proxy Statement filed with the Commission on Schedule 14A on May 8, 1998 and incorporated
herein by reference)*
10.11 Amended and Restated Agreement dated September 26, 1997 among Fabri-Centers of America, Inc., Betty
Rosskamm and Justin Zimmerman and Alma Zimmerman (filed as an Exhibit to the Registrant's Form 10-K
filed with the Commission on April 16, 1999 and incorporated herein by reference)
10.12 Credit Agreement dated as of May 5, 1999 among the Registrant, as borrower, the Lending Institutions
named therein, as Lenders, The First National Bank of Chicago, as Documentation Agent, Comerica Bank
and National City Bank, as Co-Agents, and KeyBank National Association, as a Lender, the Swing Line
Lender, the Issuing Bank and as Administrative Agent
12 Computation of ratio of earnings to fixed charges
21 Subsidiaries of Jo-Ann Stores, Inc. (filed as an Exhibit to the Registrant's Form 10-K filed with the
Commission on April 16, 1999 and incorporated herein by reference)
23.1 Consent of Thompson Hine & Flory LLP (included in Exhibit 5.1)
23.2 Consent of Independent Public Accountants
24 Power of Attorney
25 Form T-1 Statement of Eligibility of Harris Trust and Savings Bank to act as trustee under the
Indenture
</TABLE>
- ------------------------
* Indicates that the exhibit is a management contract or compensatory plan or
arrangement.
(b) Financial Statement Schedules
Schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions or
are inapplicable, and therefore have been omitted.
(c) Not applicable.
ITEM 22. UNDERTAKINGS
(a) (1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement 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.
(2) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or
II-3
<PAGE>
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a trustee, director, officer or
controlling person of the Registrants in the successful defense of any action,
suit or proceeding) is asserted by such trustee, director, officer or
controlling person in connection with the securities being registered, the
Registrants 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 Act and will be governed by the final adjudication of such
issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hudson, State of Ohio, on
the 16th day of June, 1999.
<TABLE>
<S> <C> <C>
JO-ANN STORES, INC.
By: /s/ ALAN ROSSKAMM
-----------------------------------------
Alan Rosskamm
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
--------------------------------------- -------------------------------------------------- ---------------
<S> <C> <C> <C>
By: /s/ ALAN ROSSKAMM
------------------------------- Chairman of the Board, Chief Executive Officer and June 16, 1999
Alan Rosskamm Director (Principal Executive Officer)
By: /s/ BRIAN P. CARNEY* Executive Vice President and Chief Financial
------------------------------- Officer (Principal Financial and Accounting June 16, 1999
Brian P. Carney Officer
By: /s/ BETTY ROSSKAMM*
------------------------------- Director June 16, 1999
Betty Rosskamm
By: /s/ ALMA ZIMMERMAN*
------------------------------- Director June 16, 1999
Alma Zimmerman
By: /s/ SCOTT COWEN*
------------------------------- Director June 16, 1999
Scott Cowen
By: /s/ FRANK NEWMAN*
------------------------------- Director June 16, 1999
Frank Newman
By: /s/ IRA GUMBERG*
------------------------------- Director June 16, 1999
Ira Gumberg
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
--------------------------------------- -------------------------------------------------- ---------------
<S> <C> <C> <C>
By: /s/ GREGG SEARLE*
------------------------------- Director June 16, 1999
Gregg Searle
By: /s/ DEBRA WALKER*
------------------------------- Director June 16, 1999
Debra Walker
</TABLE>
The undersigned, by signing his name hereto, does hereby sign this registration
statement on behalf of the above-named officers and directors of Jo-Ann Stores,
Inc., pursuant to powers of attorney executed on behalf of each of such officers
and directors.
<TABLE>
<S> <C> <C> <C>
*By: /s/ ALAN ROSSKAMM
-------------------------
Alan Rosskamm
ATTORNEY-IN-FACT FOR THE June 16, 1999
OFFICERS AND DIRECTORS
SIGNING IN THE CAPACITIES
INDICATED
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
3.1(a) Amended Articles of Incorporation of Fabri-Centers of America, Inc. (filed as an Exhibit to the
Registrant's Form 10-Q filed with the Commission on September 11, 1995 and incorporated herein by
reference)
3.1(b) Certificate of Amendment to the Amended Articles of Incorporation of Fabri-Centers of America, Inc.
(filed as an Exhibit to the Registrant's Form 10-K filed with the Commission on April 16, 1999 and
incorporated herein by reference)
3.2 Regulations of Jo-Ann Stores, Inc., as amended (filed as an Exhibit to the Registrant's Form 8-K filed
with the Commission on December 1, 1993 and incorporated herein by reference)
4.1 Form of Second Amendment of Rights Agreement, dated August 2, 1995, between the Registrant and Society
National Bank, as successor by merger to Ameritrust Company National Association, as Rights Agent
(filed as an Exhibit to the Registrant's Form 10-Q filed with the Commission on September 11, 1995 and
incorporated herein by reference)
4.2 Indenture between the Registrant and FCA Financial, Inc., Fabri-Centers of South Dakota, Inc.,
Fabri-Centers of California, Inc., FCA of Ohio, Inc., and House of Fabrics, Inc., as guarantors, and
Harris Trust and Savings Bank, as trustee relating to the 10 3/8% Senior Subordinated Notes due 2007
4.3 Form of Certificate of the 10 3/8% Senior Subordinated Notes due 2007
4.4 Registration Rights Agreement among the Registrant, FCA Financial, Inc., Fabri-Centers of South Dakota,
Inc., Fabri-Centers of California, Inc., FCA of Ohio, Inc., and House of Fabrics, Inc., and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., and Banc One Capital Markets, Inc.
relating to the 10 3/8% Senior Subordinated Notes due 2007
5.1 Opinion and consent of Thompson Hine & Flory LLP as to legality of the 10 3/8% Senior Subordinated
Notes due 2007
10.1 Form of Split Dollar Life Insurance Agreement between the Registrant and certain of its officers (filed
as an Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and
incorporated herein by reference)
10.2 Split Dollar Life Insurance Agreement and Assignment between the Registrant and Alma Zimmerman dated
September 22, 1984 (filed as an Exhibit to the Registrant's Form 8-K filed with the Commission on
December 1, 1993 and incorporated herein by reference)
10.3 Split Dollar Life Insurance Agreements and Assignments between the Registrant and Betty Rosskamm dated
October 19, 1984 (filed as an Exhibit to the Registrant's Form 8-K filed with the Commission on
December 1, 1993 and incorporated herein by reference)
10.4 Fabri-Centers of America, Inc. 1979 Supplemental Retirement Benefit Plan as amended (filed as an
Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and incorporated
herein by reference)
10.5 Fabri-Centers of America, Inc. Executive Incentive Plan dated March 19, 1980, as amended (filed as an
Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and incorporated
herein by reference)
10.6 Form of Employment Agreement between the Registrant and certain Executive Officers (filed as an Exhibit
to the Registrant's Form 8-K filed with the Commission on December 1, 1993 and incorporated herein by
reference)
10.7 Fabri-Centers of America, Inc. 1990 Employees Stock Option and Stock Appreciation Rights Plan, as
amended (filed as an Exhibit to the Registrant's Form 8-K filed with the Commission on December 1, 1993
and incorporated herein by reference)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.8 Fabri-Centers of America, Inc. 1996 Stock Option Plan for Non-Employee Directors (filed as Exhibit A to
the Registrant's Definitive Proxy Statement filed with the Commission on Schedule 14A on May 11, 1996
and incorporated herein by reference)
10.9 House of Fabrics, Inc. Non-Standardized 401(k) Plan (filed as Exhibit 10 to House of Fabrics, Inc.'s
(commission file number 1-7927) Form 10-K filed with the Commission on May 1, 1997 and incorporated
herein by reference)
10.10 Fabri-Centers of America, Inc. 1998 Incentive Compensation Plan (filed as Exhibit A to the Registrant's
Definitive Proxy Statement filed with the Commission on Schedule 14A on May 8, 1998 and incorporated
herein by reference)
10.11 Amended and Restated Agreement dated September 26, 1997 among Fabri-Centers of America, Inc., Betty
Rosskamm and Justin Zimmerman and Alma Zimmerman (filed as an Exhibit to the Registrant's Form 10-K
filed with the Commission on April 16, 1999 and incorporated herein by reference)
10.12 Credit Agreement dated as of May 5, 1999 among the Registrant, as borrower, the Lending Institutions
named therein, as Lenders, The First National Bank of Chicago, as Documentation Agent, Comerica Bank
and National City Bank, as Co-Agents, and KeyBank National Association, as a Lender, the Swing Line
Lender, the Issuing Bank and as Administrative Agent
12 Computation of ratio of earnings to fixed charges
21 Subsidiaries of Jo-Ann Stores, Inc. (filed as an Exhibit to the Registrant's Form 10-K filed with the
Commission on April 16, 1999 and incorporated herein by reference)
23.1 Consent of Thompson Hine & Flory LLP (included in Exhibit 5.1)
23.2 Consent of Independent Public Accountants
24 Power of Attorney
25 Form T-1 Statement of Eligibility of Harris Trust and Savings Bank to act as trustee under the
Indenture
</TABLE>
<PAGE>
JO-ANN STORES, INC., AS ISSUER,
FCA FINANCIAL, INC.
FABRI-CENTERS OF SOUTH DAKOTA, INC.
FABRI-CENTERS OF CALIFORNIA, INC.
FCA OF OHIO, INC.
HOUSE OF FABRICS, INC.
AS GUARANTORS,
AND
HARRIS TRUST AND SAVINGS BANK, AS TRUSTEE
---------
INDENTURE
DATED AS OF MAY 5, 1999
---------
$150,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939,
as amended, and Indenture, dated as of May 5, 1999
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- -------
<S> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . 609
(b). . . . . . . . . . . . . . . . . . . . . 608, 610
Section 311 (a). . . . . . . . . . . . . . . . . . . . . 613
(c). . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 312 (a). . . . . . . . . . . . . . . . . . . . . 701
(b). . . . . . . . . . . . . . . . . . . . . 702
(c). . . . . . . . . . . . . . . . . . . . . 702
Section 313 (a). . . . . . . . . . . . . . . . . . . . . 703
Section 314 (a). . . . . . . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . . . . . 1019
(b). . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . 103, 104, 404, 1201
(c)(2) . . . . . . . . . . . . . . . . . . . 103, 104, 404, 1201
(d). . . . . . . . . . . . . . . . . . . . . Not Applicable
(e). . . . . . . . . . . . . . . . . . . . . 103
Section 315 (a). . . . . . . . . . . . . . . . . . . . . 601(b)
(b). . . . . . . . . . . . . . . . . . . . . 602
(c). . . . . . . . . . . . . . . . . . . . . 601(a)
(d). . . . . . . . . . . . . . . . . . . . . 601(c), 603
(e). . . . . . . . . . . . . . . . . . . . . 514
Section 316 (a)(last sentence) . . . . . . . . . . . . . 101 ("Outstanding")
(a)(1)(A). . . . . . . . . . . . . . . . . . 502, 512
(a)(1)(B). . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b). . . . . . . . . . . . . . . . . . . . . 508
(c). . . . . . . . . . . . . . . . . . . . . 105
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . 504
(b). . . . . . . . . . . . . . . . . . . . . 1003
Section 318 (a). . . . . . . . . . . . . . . . . . . . . 108
- ----------------
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of this Indenture.
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . 2
"Acquired Indebtedness". . . . . . . . . . . . . . . . 2
"Affiliate". . . . . . . . . . . . . . . . . . . . . . 2
"Applicable Procedures". . . . . . . . . . . . . . . . 3
"Asset Sale" . . . . . . . . . . . . . . . . . . . . . 3
"Average Life to Stated Maturity". . . . . . . . . . . 3
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . 3
"Board of Directors" . . . . . . . . . . . . . . . . . 3
"Board Resolution" . . . . . . . . . . . . . . . . . . 3
"Book-Entry Security". . . . . . . . . . . . . . . . . 4
"Business Day" . . . . . . . . . . . . . . . . . . . . 4
"Capital Lease Obligation" . . . . . . . . . . . . . . 4
"Capital Stock". . . . . . . . . . . . . . . . . . . . 4
"Cedel". . . . . . . . . . . . . . . . . . . . . . . . 4
"Change of Control". . . . . . . . . . . . . . . . . . 4
"Commission" . . . . . . . . . . . . . . . . . . . . . 5
"Commodity Price Protection Agreement" . . . . . . . . 5
"Company". . . . . . . . . . . . . . . . . . . . . . . 5
"Company Request" or "Company Order" . . . . . . . . . 5
"Consolidated Fixed Charge Coverage Ratio" . . . . . . 6
"Consolidated Income Tax Expense". . . . . . . . . . . 7
"Consolidated Interest Expense". . . . . . . . . . . . 7
"Consolidated Net Income (Loss)" . . . . . . . . . . . 7
"Consolidated Net Tangible Assets" . . . . . . . . . . 8
"Consolidated Non-cash Charges". . . . . . . . . . . . 8
"Consolidated Rental Payments" . . . . . . . . . . . . 8
"Consolidation". . . . . . . . . . . . . . . . . . . . 8
"Corporate Trust Office" . . . . . . . . . . . . . . . 9
"Credit Facility". . . . . . . . . . . . . . . . . . . 9
"Currency Hedging Agreements". . . . . . . . . . . . . 9
"Default". . . . . . . . . . . . . . . . . . . . . . . 9
-i-
<PAGE>
"Depositary" . . . . . . . . . . . . . . . . . . . . . 9
"Designated Senior Indebtedness" . . . . . . . . . . . 9
"Disinterested Director" . . . . . . . . . . . . . . . 9
"Euroclear". . . . . . . . . . . . . . . . . . . . . . 9
"Event of Default" . . . . . . . . . . . . . . . . . . 9
"Exchange Act" . . . . . . . . . . . . . . . . . . . .10
"Exchange Offer" . . . . . . . . . . . . . . . . . . .10
"Exchange Offer Registration Statement". . . . . . . .10
"Fair Market Value". . . . . . . . . . . . . . . . . .10
"GAAP" . . . . . . . . . . . . . . . . . . . . . . . .10
"Global Securities". . . . . . . . . . . . . . . . . .10
"Guarantee". . . . . . . . . . . . . . . . . . . . . .10
"Guaranteed Debt". . . . . . . . . . . . . . . . . . .10
"Guarantor". . . . . . . . . . . . . . . . . . . . . .11
"Holder" . . . . . . . . . . . . . . . . . . . . . . .11
"Indebtedness" . . . . . . . . . . . . . . . . . . . .11
"Indenture". . . . . . . . . . . . . . . . . . . . . .12
"Indenture Obligations". . . . . . . . . . . . . . . .12
"Initial Securities" . . . . . . . . . . . . . . . . .12
"Initial Purchasers" . . . . . . . . . . . . . . . . .12
"Interest Payment Date". . . . . . . . . . . . . . . .12
"Interest Rate Agreements" . . . . . . . . . . . . . .12
"Investment" . . . . . . . . . . . . . . . . . . . . .12
"Issue Date" . . . . . . . . . . . . . . . . . . . . .12
"Lien" . . . . . . . . . . . . . . . . . . . . . . . .12
"Maturity" . . . . . . . . . . . . . . . . . . . . . .13
"Moody's". . . . . . . . . . . . . . . . . . . . . . .13
"Net Cash Proceeds". . . . . . . . . . . . . . . . . .13
"Non-U.S. Person". . . . . . . . . . . . . . . . . . .14
"Officers' Certificate". . . . . . . . . . . . . . . .14
"Opinion of Counsel" . . . . . . . . . . . . . . . . .14
"Opinion of Independent Counsel" . . . . . . . . . . .14
"Outstanding". . . . . . . . . . . . . . . . . . . . .14
"Pari Passu Indebtedness". . . . . . . . . . . . . . .15
"Paying Agent" . . . . . . . . . . . . . . . . . . . .15
"Permitted Investment" . . . . . . . . . . . . . . . .15
"Person" . . . . . . . . . . . . . . . . . . . . . . .16
"Predecessor Security" . . . . . . . . . . . . . . . .16
"Preferred Stock". . . . . . . . . . . . . . . . . . .16
"Prospectus" . . . . . . . . . . . . . . . . . . . . .16
"Public Equity Offering" . . . . . . . . . . . . . . .16
"Purchase Money Obligation". . . . . . . . . . . . . .16
"Qualified Capital Stock". . . . . . . . . . . . . . .17
-ii-
<PAGE>
"Redeemable Capital Stock" . . . . . . . . . . . . . .17
"Redemption Date". . . . . . . . . . . . . . . . . . .17
"Redemption Price" . . . . . . . . . . . . . . . . . .17
"Registration Rights Agreement". . . . . . . . . . . .17
"Registration Statement" . . . . . . . . . . . . . . .17
"Regular Record Date". . . . . . . . . . . . . . . . .18
"Regulation S" . . . . . . . . . . . . . . . . . . . .18
"Regulation S Global Securities" . . . . . . . . . . .18
"Responsible Officer". . . . . . . . . . . . . . . . .18
"Restricted Subsidiary". . . . . . . . . . . . . . . .18
"Rule 144A". . . . . . . . . . . . . . . . . . . . . .18
"Rule 144A Global Securities". . . . . . . . . . . . .18
"S&P". . . . . . . . . . . . . . . . . . . . . . . . .18
"Securities Act" . . . . . . . . . . . . . . . . . . .18
"Senior Guarantor Indebtedness". . . . . . . . . . . .18
"Senior Indebtedness". . . . . . . . . . . . . . . . .19
"Senior Representative". . . . . . . . . . . . . . . .20
"Series B Global Securities" . . . . . . . . . . . . .20
"Shelf Registration Statement" . . . . . . . . . . . .20
"Special Record Date". . . . . . . . . . . . . . . . .20
"Stated Maturity". . . . . . . . . . . . . . . . . . .20
"Subordinated Indebtedness". . . . . . . . . . . . . .20
"Subsidiary" . . . . . . . . . . . . . . . . . . . . .20
"Successor Security" . . . . . . . . . . . . . . . . .20
"Temporary Cash Investments" . . . . . . . . . . . . .20
"Trustee". . . . . . . . . . . . . . . . . . . . . . .21
"Trust Indenture Act". . . . . . . . . . . . . . . . .21
"Unrestricted Subsidiary". . . . . . . . . . . . . . .21
"Unrestricted Subsidiary Indebtedness" . . . . . . . .21
"Voting Stock" . . . . . . . . . . . . . . . . . . . .22
"Wholly Owned Restricted Subsidiary" . . . . . . . . .22
Section 102. Other Definitions. . . . . . . . . . . . . . . . . . . .22
Section 103. Compliance Certificates and Opinions.. . . . . . . . . .23
Section 104. Form of Documents Delivered to Trustee.. . . . . . . . .24
Section 105. Acts of Holders. . . . . . . . . . . . . . . . . . . . .25
Section 106. Notices, etc., to the Trustee, the Company and any
Guarantor. . . . . . . . . . . . . . . . . . . . . . .26
Section 107. Notice to Holders; Waiver. . . . . . . . . . . . . . . .27
Section 108. Conflict with Trust Indenture Act. . . . . . . . . . . .27
Section 109. Effect of Headings and Table of Contents.. . . . . . . .27
Section 110. Successors and Assigns.. . . . . . . . . . . . . . . . .28
Section 111. Separability Clause. . . . . . . . . . . . . . . . . . .28
Section 112. Benefits of Indenture. . . . . . . . . . . . . . . . . .28
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SECTION 113. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . .28
Section 114. Legal Holidays.. . . . . . . . . . . . . . . . . . . . .28
Section 115. Independence of Covenants. . . . . . . . . . . . . . . .28
Section 116. Schedules and Exhibits.. . . . . . . . . . . . . . . . .29
Section 117. Counterparts.. . . . . . . . . . . . . . . . . . . . . .29
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally. . . . . . . . . . . . . . . . . . . . .29
Section 202. Form of Face of Security.. . . . . . . . . . . . . . . .30
Section 203. Form of Reverse of Securities. . . . . . . . . . . . . .44
Section 204. Form of Guarantee. . . . . . . . . . . . . . . . . . . .52
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms. . . . . . . . . . . . . . . . . . . . .53
Section 302. Denominations. . . . . . . . . . . . . . . . . . . . . .54
Section 303. Execution, Authentication, Delivery and Dating.. . . . .54
Section 304. Temporary Securities.. . . . . . . . . . . . . . . . . .56
Section 305. Registration, Registration of Transfer and Exchange. . .56
Section 306. Book Entry Provisions for Global Securities. . . . . . .58
Section 307. Special Transfer and Exchange Provisions.. . . . . . . .60
Section 308. Mutilated, Destroyed, Lost and Stolen Securities.. . . .63
Section 309. Payment of Interest; Interest Rights Preserved.. . . . .63
Section 310. CUSIP Numbers. . . . . . . . . . . . . . . . . . . . . .65
Section 311. Persons Deemed Owners. . . . . . . . . . . . . . . . . .65
Section 312. Cancellation.. . . . . . . . . . . . . . . . . . . . . .65
Section 313. Computation of Interest. . . . . . . . . . . . . . . . .66
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or
Covenant Defeasance. . . . . . . . . . . . . . . . . .66
Section 402. Defeasance and Discharge.. . . . . . . . . . . . . . . .66
Section 403. Covenant Defeasance. . . . . . . . . . . . . . . . . . .67
Section 404. Conditions to Defeasance or Covenant Defeasance. . . . .67
Section 405. Deposited Money and U.S. Government Obligations to
Be Held in Trust; Other Miscellaneous Provisions.. . .70
Section 406. Reinstatement. . . . . . . . . . . . . . . . . . . . . .70
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ARTICLE FIVE
REMEDIES
Section 501. Events of Default. . . . . . . . . . . . . . . . . . . .71
Section 502. Acceleration of Maturity; Rescission and Annulment.. . .73
Section 503. Collection of Indebtedness and Suits for Enforcement
by Trustee.. . . . . . . . . . . . . . . . . . . . . .74
Section 504. Trustee May File Proofs of Claim.. . . . . . . . . . . .75
Section 505. Trustee May Enforce Claims without Possession
of Securities. . . . . . . . . . . . . . . . . . . . .76
Section 506. Application of Money Collected.. . . . . . . . . . . . .76
Section 507. Limitation on Suits. . . . . . . . . . . . . . . . . . .77
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.. . . . . . . . . . . . . . . . .77
Section 509. Restoration of Rights and Remedies.. . . . . . . . . . .78
Section 510. Rights and Remedies Cumulative.. . . . . . . . . . . . .78
Section 511. Delay or Omission Not Waiver.. . . . . . . . . . . . . .78
Section 512. Control by Holders.. . . . . . . . . . . . . . . . . . .78
Section 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . .79
Section 514. Undertaking for Costs. . . . . . . . . . . . . . . . . .79
Section 515. Waiver of Stay, Extension or Usury Laws. . . . . . . . .79
Section 516. Remedies Subject to Applicable Law.. . . . . . . . . . .80
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee. . . . . . . . . . . . . . . . . . . .80
Section 602. Notice of Defaults.. . . . . . . . . . . . . . . . . . .81
Section 603. Certain Rights of Trustee. . . . . . . . . . . . . . . .82
Section 604. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof. . . . .83
Section 605. Trustee and Agents May Hold Securities;
Collections; etc.. . . . . . . . . . . . . . . . . . .83
Section 606. Money Held in Trust. . . . . . . . . . . . . . . . . . .83
Section 607. Compensation and Indemnification of Trustee and Its
Prior Claim. . . . . . . . . . . . . . . . . . . . . .84
Section 608. Conflicting Interests. . . . . . . . . . . . . . . . . .84
Section 609. Trustee Eligibility. . . . . . . . . . . . . . . . . . .84
Section 610. Resignation and Removal; Appointment of
Successor Trustee. . . . . . . . . . . . . . . . . . .85
Section 611. Acceptance of Appointment by Successor.. . . . . . . . .86
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Section 612. Merger, Conversion, Consolidation or Succession
to Business. . . . . . . . . . . . . . . . . . . . . .87
Section 613. Preferential Collection of Claims Against Company. . . .88
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND
COMPANY
Section 701. Company to Furnish Trustee Names and Addresses
of Holders.. . . . . . . . . . . . . . . . . . . . . .88
Section 702. Disclosure of Names and Addresses of Holders.. . . . . .88
Section 703. Reports by Trustee.. . . . . . . . . . . . . . . . . . .89
Section 704. Reports by Company and Guarantors. . . . . . . . . . . .89
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS
Section 801. Company and Guarantors May Consolidate, etc., Only on
Certain Terms. . . . . . . . . . . . . . . . . . . . .90
Section 802. Successor Substituted. . . . . . . . . . . . . . . . . .93
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without
Consent of Holders.. . . . . . . . . . . . . . . . . .93
Section 902. Supplemental Indentures and Agreements with
Consent of Holders.. . . . . . . . . . . . . . . . . .94
Section 903. Execution of Supplemental Indentures and Agreements. . .96
Section 904. Effect of Supplemental Indentures. . . . . . . . . . . .96
Section 905. Conformity with Trust Indenture Act. . . . . . . . . . .96
Section 906. Reference in Securities to Supplemental Indentures.. . .96
Section 907. Notice of Supplemental Indentures. . . . . . . . . . . .97
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest. . . . . . .97
Section 1002. Maintenance of Office or Agency.. . . . . . . . . . . .97
Section 1003. Money for Security Payments to Be Held in Trust.. . . .98
Section 1004. Corporate Existence.. . . . . . . . . . . . . . . . . .99
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Section 1005. Payment of Taxes and Other Claims.. . . . . . . . . . .99
Section 1006. Maintenance of Properties.. . . . . . . . . . . . . . 100
Section 1007. Maintenance of Insurance. . . . . . . . . . . . . . . 100
Section 1008. Limitation on Indebtedness. . . . . . . . . . . . . . 101
Section 1009. Limitation on Restricted Payments.. . . . . . . . . . 103
Section 1010. Limitation on Transactions with Affiliates. . . . . . 107
Section 1011. Limitation on Liens.. . . . . . . . . . . . . . . . . 108
Section 1012. Limitation on Sale of Assets. . . . . . . . . . . . . 109
Section 1013. Limitation on Issuances of Guarantees of and Pledges
for Indebtedness. . . . . . . . . . . . . . . . . . 114
Section 1014. Limitation on Senior Subordinated Indebtedness. . . . 115
Section 1015. Purchase of Securities upon a Change of Control.. . . 115
Section 1016. Limitation on Subsidiary Capital Stock. . . . . . . . 119
Section 1017. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries. . . . . . . . . . . . . . . 120
Section 1018. Limitations on Unrestricted Subsidiaries. . . . . . . 120
Section 1019. Provision of Financial Statements.. . . . . . . . . . 122
Section 1020. Statement by Officers as to Default.. . . . . . . . . 123
Section 1021. Waiver of Certain Covenants.. . . . . . . . . . . . . 123
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption. . . . . . . . . . . . . . . . . 124
Section 1102. Applicability of Article. . . . . . . . . . . . . . . 124
Section 1103. Election to Redeem; Notice to Trustee.. . . . . . . . 124
Section 1104. Selection by Trustee of Securities to Be Redeemed.. . 124
Section 1105. Notice of Redemption. . . . . . . . . . . . . . . . . 125
Section 1106. Deposit of Redemption Price.. . . . . . . . . . . . . 126
Section 1107. Securities Payable on Redemption Date.. . . . . . . . 126
Section 1108. Securities Redeemed or Purchased in Part. . . . . . . 127
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.. . . . . . . 127
Section 1202. Application of Trust Money. . . . . . . . . . . . . . 128
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
Section 1301. Securities Subordinate to Senior Indebtedness.. . . . 129
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Section 1302. Payment Over of Proceeds Upon Dissolution, etc. . . . 129
Section 1303. Suspension of Payment When Designated Senior
Indebtedness in Default.. . . . . . . . . . . . . . 130
Section 1304. Payment Permitted if No Default.. . . . . . . . . . . 132
Section 1305. Subrogation to Rights of Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . 132
Section 1306. Provisions Solely to Define Relative Rights.. . . . . 133
Section 1307. Trustee to Effectuate Subordination.. . . . . . . . . 133
Section 1308. No Waiver of Subordination Provisions.. . . . . . . . 133
Section 1309. Notice to Trustee.. . . . . . . . . . . . . . . . . . 134
Section 1310. Reliance on Judicial Orders or Certificates.. . . . . 135
Section 1311. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights. . . . . . . . . . 135
Section 1312. Article Applicable to Paying Agents.. . . . . . . . . 136
Section 1313. No Suspension of Remedies.. . . . . . . . . . . . . . 136
Section 1314. Trustee's Relation to Senior Indebtedness.. . . . . . 136
ARTICLE FOURTEEN
GUARANTEES
Section 1401. Guarantors' Guarantee.. . . . . . . . . . . . . . . . 136
Section 1402. Continuing Guarantee; No Right of Set-Off;
Independent Obligation . . . . . . . . . . . . . . . 137
Section 1403. Guarantee Absolute. . . . . . . . . . . . . . . . . . 138
Section 1404. Right to Demand Full Performance. . . . . . . . . . . 141
Section 1405. Waivers.. . . . . . . . . . . . . . . . . . . . . . . 141
Section 1406. The Guarantors Remain Obligated in Event the Company
Is No Longer Obligated to Discharge Indenture
Obligations. . . . . . . . . . . . . . . . . . . . . 142
Section 1407. Fraudulent Conveyance; Contribution; Subrogation. . . 142
Section 1408. Guarantee Is in Addition to Other Security. . . . . . 143
Section 1409. Release of Security Interests.. . . . . . . . . . . . 143
Section 1410. No Bar to Further Actions.. . . . . . . . . . . . . . 143
Section 1411. Failure to Exercise Rights Shall Not Operate as a
Waiver; No Suspension of Remedies. . . . . . . . . . 144
Section 1412. Trustee's Duties; Notice to Trustee.. . . . . . . . . 144
Section 1413. Successors and Assigns. . . . . . . . . . . . . . . . 144
Section 1414. Release of Guarantee. . . . . . . . . . . . . . . . . 145
Section 1415. Execution of Guarantee. . . . . . . . . . . . . . . . 145
Section 1416. Guarantee Subordinate to Senior Guarantor
Indebtedness . . . . . . . . . . . . . . . . . . . . 146
Section 1417. Payment Over of Proceeds Upon Dissolution of the
Guarantor, etc. . . . . . . . . . . . . . . . . . . 146
</TABLE>
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<TABLE>
<C> <S> <C>
Section 1418 Default on Senior Guarantor Indebtedness. . . . . . . 147
Section 1419 Payment Permitted by Each of the Guarantors if
No Default. . . . . . . . . . . . . . . . . . . . . 148
Section 1420 Subrogation to Rights of Holders of Senior Guarantor
Indebtedness. . . . . . . . . . . . . . . . . . . . 148
Section 1421 Provisions Solely to Define Relative Rights.. . . . . 149
Section 1422 Trustee to Effectuate Subordination.. . . . . . . . . 149
Section 1423 No Waiver of Subordination Provisions.. . . . . . . . 149
Section 1424 Notice to Trustee by Each of the Guarantors.. . . . . 150
Section 1425 Reliance on Judicial Orders or Certificates.. . . . . 151
Section 1426 Rights of Trustee as a Holder of Senior Guarantor
Indebtedness; Preservation of Trustee's Rights. . . 151
Section 1427 Article Applicable to Paying Agents.. . . . . . . . . 152
Section 1428 No Suspension of Remedies.. . . . . . . . . . . . . . 152
Section 1429 Trustee's Relation to Senior Guarantor Indebtedness.. 152
</TABLE>
TESTIMONIUM
SIGNATURES AND SEALS
ACKNOWLEDGMENTS
ANNEX A Form of Intercompany Note
SCHEDULE I Existing Indebtedness
SCHEDULE II Existing Dividend Restrictions
EXHIBIT A Regulation S Certificate
EXHIBIT B Restricted Securities Certificate
EXHIBIT C Unrestricted Security Certificate
APPENDIX I Form of Transferee
APPENDIX II Form of Transferee Certificate
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INDENTURE, dated as of May 5, 1999, between Jo-Ann Stores, Inc., an
Ohio corporation (the "Company"), and FCA Financial, Inc., an Ohio
corporation, Fabri-Centers of South Dakota, Inc., an Ohio corporation,
Fabri-Centers of California, Inc., an Ohio corporation, FCA of Ohio, Inc., an
Ohio corporation, and House of Fabrics, Inc., a Delaware corporation (each a
"Guarantor" and collectively, the "Guarantors"), and Harris Trust and Savings
Bank, as trustee (the "Trustee").
RECITALS OF THE COMPANY AND THE GUARANTORS
The Company has duly authorized the creation of an issue of 10 3/8%
Senior Subordinated Notes due 2007, Series A (the "Series A Securities" or
the "Initial Securities"), and an issue of 10 3/8% Senior Subordinated Notes
due 2007, Series B (the "Series B Securities" and, together with the Series A
Securities, the "Securities"), 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 and the Securities;
Each Guarantor has duly authorized the issuance of a Guarantee of
the Securities, of substantially the tenor hereinafter set forth, and to
provide therefor, each Guarantor has duly authorized the execution and
delivery of this Indenture and its Guarantee;
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act that are required to be part of and to
govern indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make (i) the
Securities, when duly issued and executed by the Company and authenticated
and delivered hereunder, the valid obligations of the Company, (ii) the
Guarantees, when executed by each of the Guarantors and delivered hereunder,
the valid obligation of each of the Guarantors and (iii) this Indenture a
valid agreement of the Company and each of the Guarantors in accordance with
the terms of this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. DEFINITIONS.
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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 include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(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) all references to $, US$, dollars or United States dollars
shall refer to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles refer
to this Indenture unless otherwise so indicated.
Certain terms used principally in Article Four are defined in
Article Four.
"Acquired Indebtedness"
means Indebtedness of a Person (1) existing at the time such
Person becomes a Restricted Subsidiary or (2) assumed in
connection with the acquisition of assets from such Person, in
each case, other than Indebtedness incurred in connection with,
or in contemplation of, such Person becoming a Restricted
Subsidiary or such acquisition, as the case may be. Acquired
Indebtedness shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the
acquired Person becomes a Restricted Subsidiary, as the case may
be.
"Affiliate"
means, with respect to any specified Person: (1) any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person; (2) any other Person that owns, directly or indirectly,
5% or more of any class or series of such specified Person's (or
any of such Person's direct or indirect parent's) Capital Stock
or any officer or director of any such specified Person or other
Person or, with respect to any natural Person, any person having
a relationship with such Person by blood, marriage
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<PAGE>
or adoption not more remote than first cousin; or (3) any other
Person 5% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person.
For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Applicable Procedures"
means, with respect to any transfer or transaction involving
a Global Security or beneficial interest therein, the rules and
procedures of the Depositary for such Security, Euroclear and
Cedel, in each case to the extent applicable to such transaction
and as in effect at the time of such transfer or transaction.
"Asset Sale"
means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of
merger, consolidation or sale and leaseback transaction)
(collectively, a "transfer"), directly or indirectly, in one or a
series of related transactions, of: (1) any Capital Stock of any
Restricted Subsidiary; (2) all or substantially all of the
properties and assets of any division or line of business of the
Company or any Restricted Subsidiary; or (3) any other properties
or assets of the Company or any Restricted Subsidiary other than
in the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" shall not include any transfer
of properties and assets (A) that is governed by the provisions
described under Article Eight hereof, (B) that is by the Company
to any Wholly Owned Restricted Subsidiary, or by any Restricted
Subsidiary to the Company or any Wholly Owned Restricted
Subsidiary in accordance with the terms of the Indenture, (C)
that is of obsolete equipment in the ordinary course of business,
or (D) the Fair Market Value of which in the aggregate does not
exceed $5,000,000 in any transaction or series of related
transactions.
"Average Life to Stated Maturity"
means, as of the date of determination with respect to any
Indebtedness, the quotient obtained by dividing (1) the sum of
the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled
principal payment of
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such Indebtedness multiplied by (b) the amount of each such
principal payment by (2) the sum of all such principal payments.
"Bankruptcy Law"
means Title 11, United States Bankruptcy Code of 1978 or any
similar United States federal or state law 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 the board of directors of the Company or any
Guarantor, as the case may be, or any duly authorized committee
of such board.
"Board Resolution"
means a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Company or any Guarantor, as the
case may be, to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Book-Entry Security"
means any Global Securities bearing the legend specified
in Section 202 evidencing all or part of a series of
Securities, authenticated and delivered to the Depositary for
such series or its nominee, and registered in the name of such
Depositary or nominee.
"Business Day"
means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions or trust
companies in The City of New York or the city in which the
Corporate Trust Office of the Trustee is located are authorized
or obligated by law, regulation or executive order to close.
"Capital Lease Obligation"
of any Person means any obligation of such Person and its
Restricted Subsidiaries on a Consolidated basis under any capital
lease of (or other agreement conveying the right to use) real or
personal property which, in accordance with GAAP, is required to
be recorded as a capitalized lease obligation.
"Capital Stock"
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<PAGE>
of any Person means any and all shares, interests,
participations, rights in or other equivalents (however
designated) of such Person's capital stock, other equity
interests whether now outstanding or issued after the date
hereof, partnership interests (whether general or limited),
limited liability company interests, any other interest or
participation that confers on a Person that right to receive a
share of the profits and losses of, or distributions of assets
of, the issuing Person, including any Preferred Stock, and any
rights (other than debt securities convertible into Capital
Stock), warrants or options exchangeable for or convertible into
such Capital Stock.
"Cedel"
means Cedel, S.A. (or any successor securities clearing
agency).
"Change of Control"
means the occurrence of any of the following events: (1) any
"person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership
of all shares that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 35% of the total
outstanding Voting Stock of the Company; (2) during any period of
two consecutive years, individuals who at the beginning of such
period constituted the board of directors of the Company
(together with any new directors whose election to such board or
whose nomination for election by the stockholders of the Company
was approved by a vote of 66 2/3% of the directors then still in
office who were either directors at the beginning of such period
or whose election or nomination for election was previously so
approved), cease for any reason to constitute a majority of such
board of directors then in office; (3) the Company consolidates
with or merges with or into any Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person
consolidates with or merges into or with the Company, in any such
event pursuant to a transaction in which the outstanding Voting
Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction
where (A) the outstanding Voting Stock of the Company is changed
into or exchanged for (1) Voting Stock of the surviving
corporation which is
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not Redeemable Capital Stock or (2) cash, securities and other
property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Company as
a Restricted Payment as described under Section 1009 hereof
(and such amount shall be treated as a Restricted Payment
subject to the provisions of Section 1009 hereof) and (B)
immediately after such transaction, no "person" or "group," is
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have
beneficial ownership of all securities that such person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of
more than 35% of the total outstanding Voting Stock of the
surviving corporation; or (4) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other
than in a transaction which complies with the provisions
described under Article Eight herein. For purposes of this
definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring voting stock of
the Company will be deemed to be a transfer of such portion of
such voting stock as corresponds to the portion of the equity
of such entity that has been so transferred.
"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 the Indenture such Commission is not
existing and performing the duties now assigned to it under the
Securities Act, Exchange Act and Trust Indenture Act then the
body performing such duties at such time.
"Commodity Price Protection Agreement"
means any forward contract, commodity swap, commodity option
or other similar financial agreement or arrangement relating to,
or the value of which is dependent upon, fluctuations in
commodity prices.
"Company"
means Jo-Ann Stores, Inc., a corporation incorporated under
the laws of Ohio, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person. To the
extent necessary to comply with the requirements of the
provisions of Sections 310 through 317 of the Trust Indenture Act
as they are
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applicable to the Company, the term "Company" shall include
any other obligor with respect to the Securities for purposes
of complying with such provisions.
"Company Request" or "Company Order"
means a written request or order signed in the name of the
Company by any one of its Chairman of the Board, its President,
its Chief Executive Officer, its Chief Financial Officer or a
Vice President (regardless of Vice Presidential designation), and
by any one of its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Fixed Charge Coverage Ratio"
of any Person means, for any period, the ratio of (a) the
sum of Consolidated Net Income (Loss), and in each case to the
extent deducted in computing Consolidated Net Income (Loss) for
such period, Consolidated Interest Expense, Consolidated Income
Tax Expense, Consolidated Non-cash Charges and one third of
Consolidated Rental Payments for such period, of such Person and
its Restricted Subsidiaries on a Consolidated basis, all
determined in accordance with GAAP, less all noncash items
increasing Consolidated Net Income for such period and less all
cash payments during such period relating to noncash charges that
were added back to Consolidated Net Income in determining the
Consolidated Fixed Charge Coverage Ratio in any prior period to
(b) the sum of Consolidated Interest Expense for such period,
plus one third of Consolidated Rental Payments during such
period, plus cash and noncash dividends paid on any Redeemable
Capital Stock or Preferred Stock of such Person and its
Restricted Subsidiaries during such period, in each case after
giving PRO FORMA effect (as calculated in accordance with
Article 11 of Regulation S-X under the Securities Act or any
successor provision) to (1) the incurrence of the Indebtedness
giving rise to the need to make such calculation and (if
applicable) the application of the net proceeds therefrom,
including to refinance other Indebtedness, as if such
Indebtedness was incurred, and the application of such proceeds
occurred, on the first day of such period; (2) the incurrence,
repayment or retirement of any other Indebtedness by the Company
and its Restricted Subsidiaries since the first day of such
period as if such Indebtedness was incurred, repaid or retired at
the beginning of such period (except that, in making such
computation, the amount of Indebtedness under any revolving
credit facility shall be computed
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based upon the average daily balance of such Indebtedness
during such period); (3) in the case of Acquired Indebtedness
or any acquisition occurring at the time of the incurrence of
such Indebtedness, the related acquisition, assuming such
acquisition had been consummated on the first day of such
period; and (4) any acquisition or disposition by the Company
and its Restricted Subsidiaries of any company or any business
or any assets out of the ordinary course of business, whether
by merger, stock purchase or sale or asset purchase or sale, or
any related repayment of Indebtedness, in each case since the
first day of such period, assuming such acquisition or
disposition had been consummated on the first day of such
period; PROVIDED that (1) in making such computation, the
Consolidated Interest Expense attributable to interest on any
Indebtedness computed on a PRO FORMA basis and (A) bearing a
floating interest rate shall be computed as if the rate in
effect on the date of computation had been the applicable rate
for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which
bears, at the option of such Person, a fixed or floating rate
of interest, shall be computed by applying at the option of
such Person either the fixed or floating rate and (2) in making
such computation, the Consolidated Interest Expense of such
Person attributable to 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.
"Consolidated Income Tax Expense"
of any Person means, for any period, the provision for
federal, state, local and foreign income taxes of such Person and
its Consolidated Restricted Subsidiaries for such period as
determined in accordance with GAAP.
"Consolidated Interest Expense"
of any Person means, without duplication, for any period,
the sum of (a) the interest expense of such Person and its
Restricted Subsidiaries for such period, on a Consolidated basis,
including, without limitation, (1) amortization of debt discount,
(2) the net costs associated with Interest Rate Agreements,
Currency Hedging Agreements and Commodity Price Protection
Agreements (including amortization of discounts), (3) the
interest portion of any deferred payment obligation, (4) all
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers
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acceptance financing and (5) accrued interest, plus (b)(1) the
interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period and (2) all
capitalized interest of such Person and its Restricted
Subsidiaries plus (c) the interest expense under any Guaranteed
Debt of such Person and any Restricted Subsidiary to the extent
not included under clause (a)(4) above, whether or not paid by
such Person or its Restricted Subsidiaries.
"Consolidated Net Income (Loss)"
of any Person means, for any period, the Consolidated net
income (or loss) of such Person and its Restricted Subsidiaries
for such period on a Consolidated basis as determined in
accordance with GAAP, adjusted, to the extent included in
calculating such net income (or loss), by excluding, without
duplication, (1) all extraordinary gains or losses net of taxes
(less all fees and expenses relating thereto), (2) the portion of
net income (or loss) of such Person and its Restricted
Subsidiaries on a Consolidated basis allocable to minority
interests in unconsolidated Persons or Unrestricted Subsidiaries
to the extent that cash dividends or distributions have not
actually been received by such Person or one of its Consolidated
Restricted Subsidiaries, (3) net income (or loss) of any Person
combined with such Person or any of its Restricted Subsidiaries
on a "pooling of interests" basis attributable to any period
prior to the date of combination, (4) any gain or loss, net of
taxes, realized upon the termination of any employee pension
benefit plan, (5) gains or losses, net of taxes (less all fees
and expenses relating thereto), in respect of dispositions of
assets other than in the ordinary course of business, (6) the net
income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, (7) any
restoration to net income of any contingency reserve, except to
the extent provision for such reserve was made out of income
accrued at any time following the date of this Indenture, or (8)
any net gain arising from the acquisition of any securities or
extinguishment, under GAAP, of any Indebtedness of such Person.
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"Consolidated Net Tangible Assets"
of any Person means, as of any date of determination, the
total assets, less goodwill and other intangibles and less
deferred tax assets, in each case as shown on the balance sheet
of the Company and its Restricted Subsidiaries for the most
recently ended fiscal quarter for which financial statements are
available, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Non-cash Charges"
of any Person means, for any period, the aggregate
depreciation, amortization and other non-cash charges of such
Person and its Restricted Subsidiaries on a Consolidated basis
for such period, as determined in accordance with GAAP (excluding
any non-cash charge which requires an accrual or reserve for cash
charges for any future period).
"Consolidated Rental Payments"
of any Person means, for any period, the aggregate rental
obligations of such Person and its Restricted Subsidiaries on a
Consolidated basis, as determined in accordance with GAAP,
payable in respect of such period under leases of real or
personal property, not including taxes, insurance, maintenance
and similar expenses that the lessee is obligated to pay under
the terms of the relevant leases (net of income from subleases
thereof, not including taxes, insurance, maintenance and similar
expenses that the sublessee is obligated to pay under the terms
of such sublease), whether or not such obligations are reflected
as liabilities or commitments on a consolidated balance sheet of
such Person and its Restricted Subsidiaries or in the Securities
thereto, excluding, however, in any such calculation, (a) that
portion of Consolidated Interest Expense of such Person
representing payments by such Person or any of its consolidated
Restricted Subsidiaries in respect of Capital Lease Obligations
(net of payments to such Person or any of its consolidated
Subsidiaries under subleases qualifying as capitalized lease
subleases to the extent that such payments would be deducted in
determining Consolidated Interest Expense) and (b) the aggregate
amount of amortization of obligations of such Person and its
consolidated Restricted Subsidiaries in respect of such Capital
Lease Obligations for such period (net of payments to such Person
or any of its consolidated Restricted Subsidiaries under
subleases qualifying as capitalized lease subleases to the extent
that such
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<PAGE>
payments would be deducted in determining such amortization
amount).
"Consolidation"
means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to
the extent the accounts of such Person and each of its
subsidiaries would normally be consolidated with those of such
Person, all in accordance with GAAP. The term "Consolidated"
shall have a similar meaning.
"Corporate Trust Office"
means the office of the Trustee or an affiliate or agent
thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be principally
administered, which office at the date of execution of this
Indenture is located at 311 West Monroe Street, Chicago, Illinois
60606.
"Credit Facility"
means the Credit Agreement, dated as of the closing date,
among the Company, the lending institutions named therein and Key
Bank National Association, as agent, as such agreement, in whole
or in part, may be amended, renewed, extended, substituted,
refinanced, restructured, replaced, supplemented or otherwise
modified from time to time (including, without limitation, any
successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other
modifications of the foregoing) (including the addition of one or
more lenders to an existing facility or the replacement of one or
more lenders in a new facility).
"Currency Hedging Agreements"
means one or more of the following agreements which shall be
entered into by one or more financial institutions: foreign
exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect against the
fluctuations in currency values.
"Default"
means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary"
means, with respect to the Securities issued in the form of
one or more Book-Entry Securities, The Depository Trust Company
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("DTC"), its nominees and successors, or another Person
designated as Depositary by the Company, which must be a clearing
agency registered under the Exchange Act.
"Designated Senior Indebtedness"
means (1) all Senior Indebtedness under the Credit Facility
and (2) any other Senior Indebtedness which at the time of
determination has an aggregate principal amount outstanding of at
least $25 million and which is specifically designated in the
instrument evidencing such Senior Indebtedness or the agreement
under which such Senior Indebtedness arises as "Designated Senior
Indebtedness" by the Company.
"Disinterested Director"
means, with respect to any transaction or series of related
transactions, a member of the Board of Directors of the Company
who does not have any material direct or indirect financial
interest in or with respect to such transaction or series of
related transactions.
"Euroclear"
means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default"
has the meaning specified in Section 501.
"Exchange Act"
means the Securities Exchange Act of 1934 or any successor
statute, and the rules and regulations promulgated by the
Commission thereunder.
"Exchange Offer"
means the exchange offer by the Company and the Guarantors
of Series B Securities for Series A Securities to be effected
pursuant to Section 2.1 of the Registration Rights Agreement.
"Exchange Offer Registration Statement"
means the registration statement under the Securities Act
contemplated by Section 2.1 of the Registration Rights Agreement.
"Fair Market Value"
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means, with respect to any asset or property, the sale value
that would be obtained in an arm's-length free market transaction
between an informed and willing seller under no compulsion to
sell and an informed and willing buyer under no compulsion to
buy. Fair Market Value shall be determined by the Board of
Directors of the Company acting in good faith and shall be
evidenced by a resolution of the Board of Directors.
"GAAP"
means generally accepted accounting principles in the United
States, consistently applied, which are in effect on the date of
this Indenture.
"Global Securities"
means the Rule 144A Global Securities, the Regulation S
Global Securities and the Series B Global Securities to be issued
as Book-Entry Securities issued to the Depositary in accordance
with Section 306.
"Guarantee"
means the guarantee by any Guarantor of the Company's
Indenture Obligations.
"Guaranteed Debt"
of any Person means, without duplication, all Indebtedness
of any other Person referred to in the definition of Indebtedness
below guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (1) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (2) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment
of such Indebtedness or to assure the holder of such Indebtedness
against loss, (3) to supply funds to, or in any other manner
invest in, the debtor (including any agreement to pay for
property or services without requiring that such property be
received or such services be rendered), (4) to maintain working
capital or equity capital of the debtor, or otherwise to maintain
the net worth, solvency or other financial condition of the
debtor or to cause such debtor to achieve certain levels of
financial performance or (5) otherwise to assure a creditor
against loss; PROVIDED that the term "guarantee" shall not
include endorsements for collection or deposit, in either case in
the ordinary course of business.
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"Guarantor"
means any Subsidiary which is a guarantor of the Securities,
including any Person that is required after the date hereof to
execute a guarantee of the Securities pursuant to Section 1011 or
Section 1013 herein until a successor replaces such party
pursuant to the applicable provisions of this Indenture and,
thereafter, shall mean such successor.
"Holder"
means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness"
means, with respect to any Person, without duplication, (1)
all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any
trade payables and other accrued current liabilities arising in
the ordinary course of business, but including, without
limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit issued under
letter of credit facilities, acceptance facilities or other
similar facilities, (2) all obligations of such Person evidenced
by bonds, notes, debentures or other similar instruments, (3) all
indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired
by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited
to repossession or sale of such property), but excluding trade
payables arising in the ordinary course of business, (4) all
obligations under Interest Rate Agreements, Currency Hedging
Agreements or Commodity Price Protection Agreements of such
Person, (5) all Capital Lease Obligations of such Person, (6) all
Indebtedness referred to in clauses (1) through (5) above of
other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without
limitation, accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the
payment of such Indebtedness, (7) all Guaranteed Debt of such
Person, (8) all Redeemable Capital Stock issued by such Person
valued at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends, (9)
Preferred Stock of any Restricted Subsidiary of
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the Company or any Guarantor and (10) any amendment,
supplement, modification, deferral, renewal, extension,
refunding or refinancing of any liability of the types referred
to in clauses (1) through (9) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital
Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required
to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such
Redeemable Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the
issuer of such Redeemable Capital Stock.
"Indenture"
means this instrument as originally executed (including all
exhibits and schedules thereto) 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.
"Indenture Obligations"
means the obligations of the Company and any other obligor
under this Indenture or under the Securities, including any
Guarantor, to pay principal of, premium, if any, and interest
when due and payable, and all other amounts due or to become due
under or in connection with this Indenture, the Securities and
the performance of all other obligations to the Trustee and the
holders under this Indenture and the Securities, according to the
respective terms hereof and thereof.
"Initial Securities"
has the meaning stated in the first recital of this
Indenture.
"Initial Purchasers"
means Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co. and Banc One Capital Markets, Inc.
"Interest Payment Date"
means the Stated Maturity of an installment of interest on
the Securities.
"Interest Rate Agreements"
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means one or more of the following agreements which shall be
entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or
other types of interest rate hedging agreements from time to
time.
"Investment"
means, with respect to any Person, directly or indirectly,
any advance, loan (including guarantees), or other extension of
credit or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or
services for the account or use of others), or any purchase,
acquisition or ownership by such Person of any Capital Stock,
bonds, notes, debentures or other securities issued or owned by
any other Person and all other items that would be classified as
investments on a balance sheet prepared in accordance with GAAP.
Investments shall exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade
practices.
"Issue Date"
means the original issue date of the Securities under this
Indenture.
"Lien"
means any mortgage or deed of trust, charge, pledge, lien
(statutory or otherwise), privilege, security interest,
assignment, deposit, arrangement, easement, hypothecation, claim,
preference, priority or other encumbrance upon or with respect to
any property of any kind (including any conditional sale, capital
lease or other title retention agreement, any leases in the
nature thereof, and any agreement to give any security interest),
real or personal, movable or immovable, now owned or hereafter
acquired. A Person will be deemed to own subject to a Lien any
property which it has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement,
Capital Lease Obligation or other title retention agreement.
"Maturity"
means, when used with respect to the Securities, the date on
which the principal of the Securities becomes due and payable as
therein provided or as provided in this Indenture, whether at
Stated Maturity, the Offer Date or the Redemption Date and
whether by declaration of acceleration, Offer in respect of
Excess Proceeds,
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Change of Control Offer in respect of a Change of Control, call
for redemption or otherwise.
"Moody's"
means Moody's Investors Service, Inc. or any successor
rating agency.
"Net Cash Proceeds"
means (a) with respect to any Asset Sale by any Person, the
proceeds thereof (without duplication in respect of all Asset
Sales) in the form of cash or Temporary Cash Investments
including payments in respect of deferred payment obligations
when received in the form of, or stock or other assets when
disposed of for, cash or Temporary Cash Investments (except to
the extent that such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) net of (1)
brokerage commissions and other reasonable fees and expenses
(including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (2) provisions for all taxes payable
as a result of such Asset Sale, (3) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the
assets or properties the subject of such Asset Sale, (4) amounts
required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the assets
subject to the Asset Sale and (5) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in
an Officers' Certificate delivered to the Trustee and (b) with
respect to any issuance or sale of Capital Stock or options,
warrants or rights to purchase Capital Stock, or debt securities
or Capital Stock that have been converted into or exchanged for
Capital Stock as referred to under Section 1009 herein, the
proceeds of such issuance or sale in the form of cash or
Temporary Cash Investments including payments in respect of
deferred payment obligations when received in the form of, or
stock or other assets when disposed of for, cash or Temporary
Cash Investments (except to the extent that such obligations are
financed or sold with recourse to the Company or any
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Restricted Subsidiary), net of attorney's fees, accountant's
fees and brokerage, consultation, underwriting and other fees
and expenses actually incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Non-U.S. Person"
means a Person that is not a "U.S. person" as defined in
Regulation S under the Securities Act.
"Officers' Certificate"
means a certificate signed by the Chairman of the Board, the
President, the Chief Executive Officer, the Chief Financial
Officer or a Vice President (regardless of Vice Presidential
designation), and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company or any
Guarantor, as the case may be, and in form and substance
reasonably satisfactory to, and delivered to, the Trustee.
"Opinion of Counsel"
means a written opinion of counsel, who may be counsel for
the Company, any Guarantor or the Trustee, unless an Opinion of
Independent Counsel is required pursuant to the terms of this
Indenture, and who shall be reasonably acceptable to the Trustee,
and which opinion shall be in form and substance reasonably
satisfactory to the Trustee.
"Opinion of Independent Counsel"
means a written opinion of counsel which is issued by a
Person who is not an employee, director or consultant (other than
non-employee legal counsel) of the Company or any Guarantor and
who shall be reasonably acceptable to the Trustee, and which
opinion shall be in form and substance reasonably satisfactory to
the Trustee.
"Outstanding"
when used with respect to Securities means, as of the date
of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
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(b) Securities, 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 or any Affiliate thereof) in trust or set aside and
segregated in trust by the Company or any Affiliate thereof (if
the Company or any Affiliate thereof shall act as its own Paying
Agent) for the Holders of such Securities; PROVIDED that if such
Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
reasonably satisfactory to the Trustee has been made;
(c) Securities, to the extent provided in Sections 402
and 403, with respect to which the Company has effected
defeasance or covenant defeasance as provided in Article Four;
and
(d) Securities in exchange for or in lieu of which
other Securities have been authenticated and delivered pursuant
to this Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee and the
Company proof reasonably satisfactory to each of them that such
Securities are held by a bona fide purchaser in whose hands the
Securities are valid obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the
requisite principal amount of Outstanding Securities have given
any request, demand, authorization, direction, notice, consent or
waiver hereunder, Securities owned by the Company, any Guarantor,
or any other obligor upon the Securities or any Affiliate of the
Company, any Guarantor or such other obligor shall be disregarded
and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or
waiver, only Securities which the Trustee knows to be so owned
shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the reasonable satisfaction of the Trustee
the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company, any Guarantor or any other
obligor upon the Securities or any Affiliate of the Company, any
Guarantor or such other obligor.
"Pari Passu Indebtedness"
means (a) any Indebtedness of the Company that is equal in
right of payment to the Securities and (b) with respect to any
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Guarantee, Indebtedness which ranks equal in right of payment to
such Guarantee.
"Paying Agent"
means any Person (including the Company) authorized by the
Company to pay the principal of, premium, if any, or interest on,
any Securities on behalf of the Company.
"Permitted Investment"
means (1) Investments in any Wholly Owned Restricted
Subsidiary or any Person which, as a result of such Investment,
(a) becomes a Wholly Owned Restricted Subsidiary or (b) is merged
or consolidated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the
Company or any Wholly Owned Restricted Subsidiary; (2)
Indebtedness of the Company or a Restricted Subsidiary described
under clauses (4), (5) and (6) of the definition of "Permitted
Indebtedness"; (3) Investments in any of the Securities; (4)
Temporary Cash Investments; (5) Investments acquired by the
Company or any Restricted Subsidiary in connection with an Asset
Sale permitted under Section 1012 herein to the extent such
Investments are non-cash proceeds as permitted under such
Section; (6) Investments in existence on the date of the
Indenture; and (7) other Investments which in the aggregate
outstanding at any one time do not total more than $20,000,000.
In connection with any assets or property contributed or
transferred to any Person as an Investment, such property and
assets shall be equal to the Fair Market Value (as determined by
the Company's Board of Directors) at the time of Investment.
"Person"
means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Predecessor Security"
of any particular Security means every previous Security
evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under
Section 308 in exchange for a mutilated Security or in lieu of a
lost, destroyed or stolen Security shall be deemed to evidence
the same debt as the mutilated, lost, destroyed or stolen
Security.
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"Preferred Stock"
means, with respect to any Person, any Capital Stock of any
class or classes (however designated) which is preferred as to
the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over the Capital Stock
of any other class in such Person.
"Prospectus"
means the prospectus included in a Registration Statement,
including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including
any such prospectus supplement with respect to the terms of the
offering of any portion of the Series A Securities covered by a
Shelf Registration Statement, and by all other amendments and
supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference
therein.
"Public Equity Offering"
means an underwritten public offering of common stock (other
than Redeemable Capital Stock) of the Company with gross proceeds
to the Company of at least $35 million pursuant to a registration
statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration
statement on Form S-4 (or any successor form covering
substantially the same transactions), Form S-8 (or any successor
form covering substantially the same transactions) or otherwise
relating to equity securities issuable under any employee benefit
plan of the Company).
"Purchase Money Obligation"
means any Indebtedness secured by a Lien on assets related
to the business of the Company and any additions and accessions
thereto, which are purchased by the Company at any time after the
Securities are issued; PROVIDED that (1) the security agreement
or conditional sales or other title retention contract pursuant
to which the Lien on such assets is created (collectively a
"Purchase Money Security Agreement") shall be entered into within
90 days after the purchase or substantial completion of the
construction of such assets and shall at all times be confined
solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds
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therefrom, (2) at no time shall the aggregate principal amount
of the outstanding Indebtedness secured thereby be increased,
except in connection with the purchase of additions and
accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (3) (A) the
aggregate outstanding principal amount of Indebtedness secured
thereby (determined on a per asset basis in the case of any
additions and accessions) shall not at the time such Purchase
Money Security Agreement is entered into exceed 100% of the
purchase price to the Company of the assets subject thereto or
(B) the Indebtedness secured thereby shall be with recourse
solely to the assets so purchased or acquired, any additions
and accessions thereto and any proceeds therefrom.
"Qualified Capital Stock"
of any Person means any and all Capital Stock of such Person
other than Redeemable Capital Stock.
"Redeemable Capital Stock"
means any Capital Stock that, either by its terms or by the
terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event
or passage of time would be, required to be redeemed prior to the
final Stated Maturity of the principal of the Securities or is
redeemable at the option of the holder thereof at any time prior
to such final Stated Maturity (other than upon a change of
control of, or sale of assets by, the Company in circumstances
where the holders of the Securities would have similar rights),
or is convertible into or exchangeable for debt securities at any
time prior to such final Stated Maturity at the option of the
holder thereof.
"Redemption Date"
when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the date fixed
for such redemption by or pursuant to this Indenture.
"Redemption Price"
when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the price at
which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement"
means the Registration Rights Agreement, dated as of May 5,
1999 among the Company, the Guarantors and the Initial
Purchasers.
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"Registration Statement"
means any registration statement of the Company and the
Guarantors which covers any of the Series A Securities (and
related guarantees) or Series B Securities (and related
guarantees) pursuant to the provisions of the Registration Rights
Agreement, and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in
each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference
therein.
"Regular Record Date"
for the interest payable on any Interest Payment Date means
the April 15th or October 15th (whether or not a Business Day)
next preceding such Interest Payment Date.
"Regulation S"
means Regulation S under the Securities Act.
"Regulation S Global Securities"
means one or more permanent global Securities in registered
form representing the aggregate principal amount of Securities
sold in reliance on Regulation S under the Securities Act.
"Responsible Officer"
when used with respect to the Trustee means any officer or
employee assigned to the Corporate Trust Office or any agent of
the Trustee appointed hereunder, including any vice president,
assistant vice president, secretary, assistant secretary, or any
other officer or assistant officer of the Trustee or any agent of
the Trustee appointed hereunder to whom any corporate trust
matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Subsidiary"
means any Subsidiary of the Company that has not been
designated by the Board of Directors of the Company by a Board
Resolution delivered to the Trustee as an Unrestricted Subsidiary
pursuant to and in compliance with Section 1018 herein.
"Rule 144A"
means Rule 144A under the Securities Act.
"Rule 144A Global Securities"
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means one or more permanent global Securities in registered
form representing the aggregate principal amount of Securities
sold in reliance on Rule 144A under the Securities Act.
"S&P"
means Standard & Poor's Rating Group, a division of McGraw
Hill, Inc. or any successor rating agency.
"Securities Act"
means the Securities Act of 1933 or any successor statute,
and the rules and regulations promulgated by the Commission
thereunder.
"Senior Guarantor Indebtedness"
means the principal of, premium, if any, and interest
(including interest, to the extent allowable, accruing after the
filing of a petition initiating any proceeding under any state,
federal or foreign bankruptcy law) on any Indebtedness of any
Guarantor (other than as otherwise provided in this definition),
whether outstanding on the date of this Indenture or thereafter
created, incurred or assumed, and whether at any time owing,
actually or contingent, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to any
Guarantee. Notwithstanding the foregoing, "Senior Guarantor
Indebtedness" shall not include (1) Indebtedness evidenced by the
Guarantees, (2) Indebtedness that is subordinated or junior in
right of payment to any Indebtedness of any Guarantor, (3)
Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is
without recourse to any Guarantor, (4) Indebtedness which is
represented by Redeemable Capital Stock, (5) any liability for
foreign, federal, state, local or other taxes owed or owing by
any Guarantor to the extent such liability constitutes
Indebtedness, (6) Indebtedness of any Guarantor to a Subsidiary
or any other Affiliate of the Company or any of such Affiliate's
Subsidiaries, (7) to the extent it might constitute Indebtedness,
amounts owing for goods, materials or services purchased in the
ordinary course of business or consisting of trade accounts
payable owed or owing by such Guarantor, and amounts owed by such
Guarantor for compensation to employees or services rendered to
such Guarantor, (8) that portion of any Indebtedness which at the
time of issuance is issued in
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violation of the Indenture and (9) Indebtedness evidenced by
any guarantee of any Subordinated Indebtedness or Pari Passu
Indebtedness.
"Senior Indebtedness"
means the principal of, premium, if any, and interest
(including interest, to the extent allowable, accruing after the
filing of a petition initiating any proceeding under any state,
federal or foreign bankruptcy law) on any Indebtedness of the
Company (other than as otherwise provided in this definition),
whether outstanding on the date of this Indenture or thereafter
created, incurred or assumed, and whether at any time owing,
actually or contingent, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the
Securities. Notwithstanding the foregoing, "Senior Indebtedness"
shall not include (1) Indebtedness evidenced by the Securities,
(2) Indebtedness that is subordinate or junior in right of
payment to any Indebtedness of the Company, (3) 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, (4) Indebtedness which is represented by
Redeemable Capital Stock, (5) any liability for foreign, federal,
state, local or other taxes owed or owing by the Company to the
extent such liability constitutes Indebtedness, (6) Indebtedness
of the Company to a Subsidiary or any other Affiliate of the
Company or any of such Affiliate's Subsidiaries, (7) to the
extent it might constitute Indebtedness, amounts owing for goods,
materials or services purchased in the ordinary course of
business or consisting of trade accounts payable owed or owing by
the Company, and amounts owed by the Company for compensation to
employees or services rendered to the Company, (8) that portion
of any Indebtedness which at the time of issuance is issued in
violation of the Indenture and (9) Indebtedness evidenced by any
guarantee of any Subordinated Indebtedness or Pari Passu
Indebtedness.
"Senior Representative"
means the agent or representative of holders of any
Designated Senior Indebtedness.
"Series B Global Securities"
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means one or more permanent Global Securities in registered
form representing the aggregate principal amount of Series B
Securities exchanged for Series A Securities pursuant to the
Exchange Offer.
"Shelf Registration Statement"
means a "shelf" registration statement of the Company and
the Guarantors pursuant to Section 2.2 of the Registration Rights
Agreement, which covers all of the Registrable Securities (as
defined in the Registration Rights Agreement) on an appropriate
form under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the Commission, and all amendments and
supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Special Record Date"
for the payment of any Defaulted Interest means a date fixed
by the Trustee pursuant to Section 309.
"Stated Maturity"
means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such
Indebtedness as the fixed date on which the principal of such
Indebtedness or such installment of interest, as the case may be,
is due and payable.
"Subordinated Indebtedness"
means Indebtedness of the Company or a Guarantor
subordinated in right of payment to the Securities or a
Guarantee, as the case may be.
"Subsidiary"
of a Person means (1) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or
controlled, directly or indirectly, by such Person or by one or
more other Subsidiaries of such Person, or by such Person and one
or more other Subsidiaries thereof, (2) any limited partnership
of which such Person or any Subsidiary of such Person is a
general partner, or (3) any other Person in which such Person, or
one or more other Subsidiaries of such Person, or such Person and
one or more other Subsidiaries, directly or indirectly, has more
than 50% of the outstanding partnership or similar interests or
has the power, by
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contract or otherwise, to direct or cause the direction of the
policies, management and affairs thereof.
"Successor Security"
of any particular Security means every Security issued
after, and evidencing all or a portion of the same debt as that
evidenced by, such particular Security; and, for the purposes of
this definition, any Security authenticated and delivered under
Section 308 in exchange for or in lieu of a mutilated, destroyed,
lost or stolen Security shall be deemed to evidence the same debt
as the mutilated, destroyed, lost or stolen Security.
"Temporary Cash Investments"
means (1) any evidence of Indebtedness, maturing not more
than one year after the date of acquisition, issued by the United
States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest
by the full faith and credit of the United States of America, (2)
any certificate of deposit, maturing not more than one year after
the date of acquisition, issued by, or time deposit of, a
commercial banking institution that is a member of the Federal
Reserve System and that has combined capital and surplus and
undivided profits of not less than $500,000,000 whose debt has a
rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P, (3) commercial paper, maturing not more than
one year after the date of acquisition, issued by a corporation
(other than an Affiliate or Subsidiary of the Company) organized
and existing under the laws of the United States of America, any
state thereof or the District of Columbia with a rating, at the
time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to
S&P and (4) any money market deposit accounts issued or offered
by a domestic commercial bank having capital and surplus in
excess of $500,000,000; PROVIDED that the short term debt of such
commercial bank has a rating, at the time of Investment, of "P-1"
(or higher) according to Moody's or "A-1" (or higher) according
to S&P.
"Trustee"
means the Person named as the "Trustee" in the first
paragraph of this Indenture, until a successor trustee shall have
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become such pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean such successor
trustee.
"Trust Indenture Act"
means the Trust Indenture Act of 1939 or any successor
statute.
"Unrestricted Subsidiary"
means any Subsidiary of the Company (other than a Guarantor)
designated as such pursuant to and in compliance with Section
1018 herein.
"Unrestricted Subsidiary Indebtedness"
of any Unrestricted Subsidiary means Indebtedness of such
Unrestricted Subsidiary (1) as to which neither the Company nor
any Restricted Subsidiary is directly or indirectly liable (by
virtue of the Company or any such Restricted Subsidiary being the
primary obligor on, guarantor of, or otherwise liable in any
respect to, such Indebtedness), except Guaranteed Debt of the
Company or any Restricted Subsidiary to any Affiliate, in which
case (unless the incurrence of such Guaranteed Debt resulted in a
Restricted Payment at the time of incurrence) the Company shall
be deemed to have made a Restricted Payment equal to the
principal amount of any such Indebtedness to the extent
guaranteed at the time such Affiliate is designated an
Unrestricted Subsidiary and (2) which, upon the occurrence of a
default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Subsidiary to
declare, a default on such Indebtedness of the Company or any
Subsidiary or cause the payment thereof to be accelerated or
payable prior to its Stated Maturity; provided that
notwithstanding the foregoing any Unrestricted Subsidiary may
guarantee the Securities.
"Voting Stock"
of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of such
Person (irrespective of whether or not at the time Capital Stock
of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Wholly Owned Restricted Subsidiary"
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means a Restricted Subsidiary all the Capital Stock of which
is owned by the Company or another Wholly Owned Restricted
Subsidiary.
Section 102. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
---- ------------------
<S> <C>
"Act" 105
"Agent Members" 306
"Change of Control Offer" 1015
"Change of Control Purchase Date" 1015
"Change of Control Purchase Notice" 1015
"Change of Control Purchase Price" 1015
"control" 101
"covenant defeasance" 403
"Defaulted Interest" 309
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Designation" 1018
"Designation Amount 1018
"DTC" 101
"Excess Proceeds" 1012
</TABLE>
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<TABLE>
<S> <C>
"incur" 1008
"Initial Period" 1303
"Non-payment Default" 1303
"Offer" 1012
"Offer Date" 1012
"Offered Price" 1012
"Pari Passu Debt Amount" 1012
"Pari Passu Offer" 1012
"Payment Blockage Period" 1303
"Payment Default" 1303
"Permitted Indebtedness" 1008
"Permitted Guarantor Junior Securities" 1417
"Permitted Junior Securities" 1302
"Permitted Payment" 1009
"Private Placement Legend" 202
"Purchase Money Security Agreement" 101
"refinancing" 1008
"Registration Default" 202
"Required Filing Date" 1019
"Restricted Payments" 1009
"Restricted Period" 201
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"Revocation" 1018
"Securities" Recitals
"Security Amount" 1012
"Security Register" 305
"Security Registrar" 305
"Series A Securities" Recitals
"Series B Securities" Recitals
"Special Payment Date" 309
"Surviving Entity" 801
"Surviving Guarantor Entity" 801
"transfer" 101
"U.S. Government Obligations" 404
</TABLE>
Section 103. 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 Securities (if applicable) shall
furnish to the Trustee an Officers' Certificate in a 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 in a form and substance reasonably
acceptable to the Trustee 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 such
certificates or opinions is specifically required by
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any provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
individual or firm signing such opinion has read and understands such
covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(c) a statement that, in the opinion of 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
(d) a statement as to whether, in the opinion of each such
individual or such firm, such condition or covenant has been complied with.
Section 104. 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 of an officer of the Company, any Guarantor or
other obligor on the Securities 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
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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 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 Securities stating that the information
with respect to such factual matters is in the possession of the Company, any
Guarantor or other obligor on the Securities, unless such officer or 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. Opinions of Counsel required to be delivered to the Trustee may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company
or government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that
various financial covenants have been complied with.
Any certificate or opinion of an officer of the Company, any
Guarantor or other obligor on the Securities may be based, insofar as it
relates to accounting matters, upon a certificate or opinion of, or
representations by, an accountant or firm of accountants in the employ of the
Company, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect
to the accounting matters upon which his certificate or opinion may be based
are erroneous. Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm
is independent with respect to the Company.
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 105. 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 an
agent duly appointed in writing; and, except as herein
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otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to 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
Indenture and conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section 105.
(b) The ownership of Securities shall be proved by the Security
Register.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other Act by the Holder of any Security shall bind every
future Holder of the same Security or the Holder of every Security issued
upon the transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done, suffered or omitted to be done by the Trustee, any
Paying Agent or the Company, any Guarantor or any other obligor of the
Securities in reliance thereon, whether or not notation of such action is
made upon such Security.
(d) 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 his 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 which the Trustee deems
sufficient.
(e) If the Company shall solicit from the Holders 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 such Holders entitled to give
such request, demand, authorization, direction,
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notice, consent, waiver or other Act, but the Company shall have no
obligation to do so. Notwithstanding Trust Indenture Act Section 316(c), any
such record date shall be the record date specified in or pursuant to such
Board Resolution, which shall be a date not more than 30 days prior to the
first solicitation of Holders generally in connection therewith and no later
than the date such first 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 purposes of
determining whether Holders of the requisite proportion of Securities then
Outstanding have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for this
purpose the Securities then Outstanding shall be computed as of such record
date; PROVIDED that no such request, demand, authorization, direction,
notice, consent, waiver or other Act 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 such record date.
(f) For purposes of this Indenture, any action by the Holders
which may be taken in writing may be taken by electronic means or as
otherwise reasonably acceptable to the Trustee.
Section 106. NOTICES, ETC., TO THE 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:
(a) the Trustee by any Holder or by the Company or any Guarantor
or any other obligor on the Securities shall be sufficient for every purpose
(except as provided in Section 501(c)) hereunder if in writing and mailed,
first-class postage prepaid, or delivered by recognized overnight courier, to
or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Department, or at any other address previously furnished in writing to
the Holders or the Company, any Guarantor or any other obligor on the
Securities by the Trustee; or
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(b) the Company or any Guarantor by the Trustee or any Holder
shall be sufficient for every purpose (except as provided in Section 501(c))
hereunder if in writing and mailed, first-class postage prepaid, or delivered
by recognized overnight courier, to the Company or such Guarantor addressed
to it c/o Jo-Ann Stores, Inc., 5555 Darrow Road, Hudson, Ohio 44236,
Attention: Chief Financial Officer, or at any other address previously
furnished in writing to the Trustee by the Company or such Guarantor.
Section 107. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, or delivered
by recognized overnight courier, to each Holder affected by such event, at
its address as it appears in the Security 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 when mailed to a Holder in the
aforesaid manner shall be conclusively deemed to have been received by such
Holder whether or not actually received by such Holder. 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 regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any
event as required by any provision of this Indenture, then any method of
giving such notice as shall be reasonably satisfactory to the Trustee shall
be deemed to be a sufficient giving of such notice.
Section 108. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required
or deemed to be included in this Indenture by any of the
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provisions of the Trust Indenture Act, the provision or requirement of the
Trust Indenture Act shall control. If any provision of this Indenture
modifies or excludes any provision of the Trust Indenture Act that may be so
modified or excluded, the latter provision shall be deemed to apply to this
Indenture as so modified or to be excluded, as the case may be.
Section 109. 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 110. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company and
the Guarantors shall bind their respective successors and assigns, whether so
expressed or not.
Section 111. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities or
Guarantees 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 112. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities or Guarantees,
express or implied, shall give to any Person (other than the parties hereto
and their successors hereunder, any Paying Agent and the Holders) any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 113. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.
Section 114. LEGAL HOLIDAYS.
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<PAGE>
In any case where any Interest Payment Date, Redemption Date,
Maturity or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal or premium, if any, 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 such Interest Payment Date or Redemption Date, or at
the Maturity or Stated Maturity and no interest shall accrue with respect to
such payment for the period from and after such Interest Payment Date,
Redemption Date, Maturity or Stated Maturity, as the case may be, to the next
succeeding Business Day.
Section 115. INDEPENDENCE OF COVENANTS.
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not
permitted by any such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.
Section 116. SCHEDULES AND EXHIBITS.
All schedules and exhibits attached hereto are by this reference
made a part hereof with the same effect as if herein set forth in full.
Section 117. COUNTERPARTS.
This Indenture may be executed in any number of counterparts, each
of which shall be deemed an original; but all such counterparts shall
together constitute but one and the same instrument.
ARTICLE TWO
SECURITY FORMS
Section 201. FORMS GENERALLY.
The Securities, the Guarantees and the Trustee's certificate of
authentication thereon shall be in substantially the forms set forth in this
Article Two, with such appropriate insertions, omissions, substitutions and
other variations as are required or
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<PAGE>
permitted hereby and may have such 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, any
organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such
Securities and Guarantees, as evidenced by their execution of the Securities
and Guarantees. Any portion of the text of any Security may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Security.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange on
which the Securities may be listed, all as determined by the officers
executing such Securities, as evidenced by their execution of such Securities.
Initial Securities offered and sold in reliance on Rule 144A shall
be issued initially in the form of one or more Rule 144A Global Securities,
substantially in the form set forth in Section 202, deposited upon issuance
with the Trustee, as custodian for the Depositary, registered in the name of
the Depositary or its nominee, in each case for credit to an account of a
direct or indirect participant of the Depositary, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Rule 144A Global Securities 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.
Initial Securities offered and sold in reliance on Regulation S
shall be issued in the form of one or more Regulation S Global Securities,
substantially in the form set forth in Section 202, deposited upon issuance
with the Trustee, as custodian for the Depositary, registered in the name of
the Depositary or its nominee, in each case for credit by the Depositary to
an account of a direct or indirect participant of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided; PROVIDED, HOWEVER, that upon such deposit through and including the
40th day after the later of the commencement of the Offering and the original
issue date of the Securities (such period through and including such 40th
day, the "Restricted Period"), all such Securities shall be credited to or
through accounts maintained at the Depositary by or on behalf of
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<PAGE>
Euroclear or Cedel unless exchanged for interests in the Rule 144A Global
Securities in accordance with the transfer and certification requirements
described below. The aggregate principal amount of the Regulation S Global
Securities 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.
Series B Securities exchanged for Series A Securities shall be
issued initially in the form of one or more Series B Global Securities,
substantially in the form set forth in Section 202, deposited upon issuance
with the Trustee, as custodian for the Depositary, registered in the name of
the Depositary or its nominee, in each case for credit to an account of a
direct or indirect participant of the Depositary, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Series B Global Securities 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.
Section 202. FORM OF FACE OF SECURITY.
(a) The form of the face of any Series A Securities authenticated
and delivered hereunder shall be substantially as follows:
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for a Series
B Security in connection with an effective Registration Statement, in each
case pursuant to the Registration Rights Agreement, then such Initial
Security shall bear the legend set forth below (the "Private Placement
Legend") on the face thereof:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION AS SET FORTH BELOW.
-40-
<PAGE>
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A")) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) 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 SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
OUTSIDE THE UNITED STATES PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN
AN OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II)
IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. AS USED HEREIN, THE TERMS
"UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S.
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<PAGE>
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
-42-
<PAGE>
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. 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.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
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 INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
-43-
<PAGE>
JO-ANN STORES, INC.
__________________
10 3/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES A
CUSIP NO. ______________
No. __________ $_______________________
Jo-Ann Stores, Inc., an Ohio 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
or registered assigns, the principal sum of United
States dollars on May 1, 2007, at the office or agency of the Company
referred to below, and to pay interest thereon from May 5, 1999, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on May 1 and November 1 in each year, commencing
November 1, 1999 at the rate of 10 3/8% per annum, subject to adjustments as
described in the second following paragraph, in United States dollars, until
the principal hereof is paid or duly provided for. Interest shall be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Holder of this Series A Security is entitled to the benefits of
the Registration Rights Agreement among the Company, the Guarantors and the
Initial Purchasers, dated May 5, 1999, pursuant to which, subject to the
terms and conditions thereof, the Company and the Guarantors are obligated to
consummate the Exchange Offer pursuant to which the Holder of this Security
(and the related Guarantees) shall have the right to exchange this Security
(and the related Guarantees) for 10 3/8% Senior Subordinated Notes due 2007,
Series B and related guarantees (herein called the "Series B Securities") in
like principal amount as provided therein. In addition, the Company and the
Guarantors have agreed to use their best efforts to register the Securities
for resale under the Securities Act through a Shelf Registration Statement in
the event that the Exchange Offer is not consummated within 150 calendar days
after the original issue of the Securities or under certain other
circumstances. The Series A Securities and the Series B Securities are
together (including related Guarantees) referred to as the "Securities." The
Series A Securities rank PARI PASSU in right of payment with the Series B
Securities.
In the event that (a) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 45th calendar day following
the date of original issue of the Series A Securities, (b) the Exchange Offer
Registration Statement has not been declared effective on or prior to the
120th calendar day following the date of original issue of the Series A
Securities, (c) the Exchange Offer is not consummated on or prior to the
150th calendar day following the date of original issue of the Series A
Securities, (d) a Shelf
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<PAGE>
Registration Statement required to be filed is not declared effective on or
prior to the later of 150 days after the original issue of the Securities or
45 days after the Shelf Registration Statement is requested, if applicable,
or (e) the Shelf Registration Statement is declared effective but shall
thereafter become unusable for more than 30 days in the aggregate (each such
event referred to in clauses (a) through (e) above, a "Registration
Default"), the interest rate borne by the Series A Securities shall be
increased by one-quarter of one percent per annum upon the occurrence of any
Registration Default, which rate (as increased as aforesaid) will increase by
an additional one-quarter of one percent each 90-day period that such
additional interest continues to accrue under any such circumstance, with an
aggregate maximum increase in the interest rate equal to one percent (1%) per
annum. Immediately following the cure of a Registration Default the accrual
of additional interest with respect to that particular Registration Default
will cease.
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 Security (or any Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15th or October 15th (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, and interest
on such defaulted interest at the interest rate borne by the Series A
Securities, to the extent lawful, shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or any Predecessor Securities) 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 Securities not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by this Indenture not
inconsistent with the requirements of such exchange, all as more fully
provided in this Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of the Security, will be made at the
office or agency of the Company in The City of New York maintained for that
purpose (which initially will be a corporate trust office of an affiliate of
the Trustee, Harris Trust Company of New York, located at 88 Pine Street, New
York, New York 10005), or at such other office or agency as may be maintained
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private
debts; PROVIDED, HOWEVER, that payment of interest may be made at the option
of the Company by check mailed to the address of the Person entitled thereto
as such address shall appear on the Security Register.
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<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
This Security is entitled to the benefits of the Guarantees by the
Guarantors of the punctual payment when due and performance of the Indenture
Obligations made in favor of the Trustee for the benefit of the Holders.
Reference is made to Article Fourteen of the Indenture for a statement of the
respective rights, limitations of rights, duties and obligations under the
Guarantees of the Guarantors.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof or by the
authenticating agent appointed as provided in the Indenture by manual
signature of an authorized signer, this Security 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 by the manual or facsimile signature of its authorized officers.
JO-ANN STORES, INC.
By:
-------------------------------------
Name:
Title:
Attest:
- --------------------------------
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 10 3/8% Senior Subordinated Notes due 2007, Series A
referred to in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, as Trustee
By:
-------------------------------------
Authorized Signer
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<PAGE>
Dated:
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant
to Section 1012 or Section 1015, as applicable, of the Indenture, check the
Box: [ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1012 or Section 1015 as applicable, of the
Indenture, state the amount (in original principal amount):
$ _______________.
Date: ___________________ Your Signature: _____________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: __________________________________
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
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<PAGE>
(b) The form of the face of any Series B Securities authenticated and
delivered hereunder shall be substantially as follows:
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. 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.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT 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 INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
-48-
<PAGE>
JO-ANN STORES, INC.
-----------------
10 3/8% SENIOR SUBORDINATED NOTE DUE 2007, SERIES B
CUSIP NO. ______________
No. __________ $_______________________
Jo-Ann Stores, Inc., an Ohio 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
________ or registered assigns, the principal sum of _______________ United
States dollars on May 1, 2007, at the office or agency of the Company
referred to below, and to pay interest thereon from May 5, 1999, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on May 1 and November 1 in each year, commencing
November 1, 1999 at the rate of 10 3/8% per annum, in United States dollars,
until the principal hereof is paid or duly provided for; PROVIDED that to the
extent interest has not been paid or duly provided for with respect to the
Series A Security exchanged for this Series B Security, interest on this
Series B Security shall accrue from the most recent Interest Payment Date to
which interest on the Series A Security which was exchanged for this Series B
Security has been paid or duly provided for. Interest shall be computed on
the basis of a 360-day year comprised of twelve 30-day months.
This Series B Security was issued pursuant to the Exchange Offer
pursuant to which the 10 3/8% Senior Subordinated Notes due 2007, Series A,
and related Guarantees (herein called the "Series A Securities") in like
principal amount were exchanged for the Series B Securities and related
Guarantees. The Series B Securities rank PARI PASSU in right of payment with
the Series A Securities.
For any period in which the Series A Security exchanged for this Series
B Security was outstanding, in the event that (a) the Exchange Offer
Registration Statement shall not have been filed with the Commission on or
prior to the 45th calendar day following the date of original issue of the
Series A Securities, (b) the Exchange Offer Registration Statement shall not
have been declared effective on or prior to the 120th calendar day following
the date of original issue of the Series A Securities, (c) the Exchange Offer
shall not have been consummated on or prior to the 150th calendar day
following the date of original issue of the Series A Securities, (d) a Shelf
Registration Statement required to have been filed shall not have been
declared effective on or prior to the later of 150 days after the original
issue of the Securities or 45 days after the Shelf Registration Statement
shall have been requested, if applicable, or (e) the Shelf Registration
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<PAGE>
Statement shall have been declared effective but thereafter shall have become
unusable for more than 30 days in the aggregate (each such event referred to
in clauses (a) through (e) above, a "Registration Default"), the interest
rate borne by the Series A Securities shall have increased by one-quarter of
one percent per annum upon the occurrence of any Registration Default, which
rate (as increased as aforesaid) shall have increased by an additional
one-quarter of one percent each 90-day period, if any, that such additional
interest shall have continued to accrue under any such circumstance, with an
aggregate maximum increase in the interest rate equal to one percent (1%) per
annum. Immediately following the cure of a Registration Default the accrual
of additional interest with respect to the particular Registration Default
shall have ceased; PROVIDED, HOWEVER, that, if after any such reduction in
interest rate, a different event specified in clause (a), (b), (c), (d) or
(e) above shall have occurred, the interest rate again shall have increased
pursuant to the foregoing provisions. To the extent that interest at such
increased rate shall not have been paid or duly provided for with respect to
the Series A Security exchanged for this Series B Security, interest on this
Series B Security shall accrue at such increased rate, from the most recent
Interest Payment Date to which interest at such increased rate on the Series
A Security exchanged for this Series B Security has been paid or duly
provided for, to the date on which the particular Registration Default shall
have been cured.
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 Security (or any Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15th or October 15th (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, and interest
on such defaulted interest at the interest rate borne by the Series B
Securities, to the extent lawful, shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or any Predecessor Securities) 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 Securities not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in this Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of the Security, will be made at the
office or agency of the Company in The City of New York maintained for such
purpose (which initially will be a corporate trust office of an affiliate of
the Trustee, Harris Trust Company of New York, located at 88 Pine Street, New
York, New York 10005), or at such other office or agency as may be maintained
for such purpose, in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private
debts; PROVIDED,
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<PAGE>
HOWEVER, that payment of interest may be made at the option of the Company by
check mailed to the address of the Person entitled thereto as such address
shall appear on the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
This Security is entitled to the benefits of the Guarantees by the
Guarantors of the punctual payment when due and performance of the Indenture
Obligations made in favor of the Trustee for the benefit of the Holders.
Reference is made to Article Fourteen of the Indenture for a statement of the
respective rights, limitations of rights, duties and obligations under the
Guarantees of the Guarantors.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof or by the
authenticating agent appointed as provided in the Indenture by manual
signature of an authorized signer, this Security 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 by the manual or facsimile signature of its authorized officers.
JO-ANN STORES, INC.
By:
-------------------------------------
Name:
Title:
Attest:
- ---------------------------------------
Authorized Officer
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<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 10 3/8% Senior Subordinated Notes due 2007, Series B
referred to in the within-mentioned Indenture.
HARRIS TRUST AND SAVINGS BANK, as Trustee
By:
-------------------------------------
Authorized Signer
Dated:
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 1012 or Section 1015, as applicable, of the Indenture, check the Box:
[ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1012 or Section 1015 as applicable, of the
Indenture, state the amount (in original principal amount):
$ _______________.
Date: ___________________ Your Signature: _____________________
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee: __________________________________
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
Section 203. FORM OF REVERSE OF SECURITIES.
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<PAGE>
(a) The form of the reverse of the Series A Securities shall be
substantially as follows:
JO-ANN STORES, INC.
10 3/8% Senior Subordinated Note due 2007, Series A
This Security is one of a duly authorized issue of Securities of
the Company designated as its 10 3/8% Senior Subordinated Notes due 2007,
Series A (herein called the "Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
$150,000,000, issued under and subject to the terms of an indenture (herein
called the "Indenture") dated as of May 5, 1999, among the Company, the
Guarantors and Harris Trust and Savings Bank, as trustee (herein called 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 Guarantors, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption at any time on or after
May 1, 2003, at the option of the Company, in whole or in part, on not less
than 30 nor more than 60 days' prior notice, in amounts of $1,000 or an
integral multiple thereof, at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning May 1 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 . . . . . . . . . . 105.188%
2004 . . . . . . . . . . 102.594%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
rights of Holders of record on relevant record dates to receive interest due
on an Interest Payment Date).
In addition, at any time on or prior to May 1, 2002, the Company,
at its option, may use the net proceeds of one or more Public Equity
Offerings to redeem up to an aggregate of 35% of the aggregate principal
amount of Securities originally issued under the Indenture at a redemption
price equal to 110.375% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the Redemption Date; provided
that at
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least 65% of the initial aggregate principal amount of Securities remains
outstanding immediately after the occurrence of such redemption. In order to
effect the foregoing redemption, the Company must mail a notice of redemption
no later than 30 days after the closing of the related Public Equity Offering
and must consummate such redemption within 60 days of the closing of the
Public Equity Offering.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities or portions thereof to be redeemed in compliance
with the requirements of the principal national securities exchange, if any,
on which the Securities are listed, or if the Securities are not so listed,
pro rata, by lot or by any other method the Trustee shall deem fair and
reasonable.
Upon the occurrence of a Change of Control, each Holder may require
the Company to purchase such Holder's Securities in whole or in part in
integral multiples of $1,000, at a purchase price in cash in an amount equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of purchase, pursuant to a Change of Control Offer in
accordance with the procedures set forth in the Indenture.
Under certain circumstances, if all or a portion of the Net Cash
Proceeds received by the Company from any Asset Sale are not required to be
applied to repay permanently any Senior Indebtedness or any Senior Guarantor
Indebtedness, or if the Company determines not to apply such Net Cash
Proceeds to the permanent prepayment of such Senior Indebtedness or Senior
Guarantor Indebtedness, or if no such Senior Indebtedness or Senior Guarantor
Indebtedness is then outstanding, and if the Company has not invested such
Net Cash Proceeds in properties and assets that replace the properties and
assets that were the subject of the Asset Sale or in properties and assets
which will be used in the businesses of the Company or its Restricted
Subsidiaries existing on the date of the Indenture or in businesses
reasonably related thereto and such Net Cash Proceeds not used or invested
exceeds a specified amount, the Company will be required to apply such
proceeds to the repayment of the Securities and certain Indebtedness ranking
PARI PASSU in right of payment to the Securities.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular
Record Date or Special Record Date referred to on the face hereof.
Securities (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.
In the event of redemption or repurchase of this Security in
accordance with the Indenture in part only, a new Security or Securities for
the unredeemed portion hereof shall be issued in the name of the Holder
hereof upon the cancellation hereof.
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If an Event of Default shall occur and be continuing, the principal
amount of all the Securities 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 on the Securities and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders, certain amendments
which require the consent of Holders of 66 2/3% of the outstanding principal
amount of the Securities and certain amendments which require the consent of
all the Holders) as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the Guarantors
and the rights of the Holders under the Indenture and the Securities and the
Guarantees at any time by the Company and the Trustee with the consent of the
Holders of at least a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of at least a majority in aggregate principal amount
of the Securities (Holders of 66 2/3% in aggregate principal amount of the
Securities or 100% of the Holders in certain circumstances) at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company and the Guarantors with certain provisions of the
Indenture and the Securities and the Guarantees and certain past Defaults
under the Indenture and the Securities and the Guarantees and their
consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security 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 Security.
The Securities are, to the extent and manner provided in Article
Thirteen of the Indenture, subordinated and subject in right of payment to
the prior payment in full of all Senior Indebtedness.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, any Guarantor or any other obligor on the Securities (in the event
such Guarantor or such other obligor is obligated to make payments in respect
of the Securities), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on, this Security at the times, place, and
rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in the Borough of Manhattan,
The City of New York, duly endorsed by, or accompanied by a written
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instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or its attorney duly authorized
in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
Certificated securities shall be transferred to all beneficial
holders in exchange for their beneficial interests in the Rule 144A Global
Securities or the Regulation S Global Securities if (i) such Depositary (A)
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or (B) has ceased to be a clearing agency
registered as such under the Exchange Act, and in either case the Company
fails to appoint a successor Depositary within 90 days, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of the Securities in certificated form or (iii) there shall have
occurred and be continuing an Event of Default or any event which after
notice or lapse of time or both would be an Event of Default with respect to
such Global Security. Upon any such issuance, the Trustee is required to
register such certificated Series A Securities in the name of, and cause the
same to be delivered to, such Person or Persons (or the nominee of any
thereof). All such certificated Series A Securities would be required to
include the Private Placement Legend.
Series A Securities in certificated form 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 Series A Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
At any time when the Company is not subject to Sections 13 or 15(d)
of the Exchange Act, upon the written request of a Holder of a Series A
Security, the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities
Act (or any successor provision thereto) to such Holder or to a prospective
purchaser of such Series A Security who such Holder informs the Company is
reasonably believed to be a "Qualified Institutional Buyer" within the
meaning of Rule 144A under the Securities Act, as the case may be, in order
to permit compliance by such Holder with Rule 144A under the Securities Act.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, any Guarantor, the Trustee and any agent of the
Company, any Guarantor or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes, whether or not
this Security is overdue, and neither the Company, any Guarantor, the Trustee
nor any such agent shall be affected by notice to the contrary.
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THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture
and not otherwise defined herein shall have the meanings assigned to them in
the Indenture.
[The Transferee Certificate, in the form of Appendix I hereto, will be
attached to the Series A Security.]
(b) The form of the reverse of the Series B Securities shall be
substantially as follows:
JO-ANN STORES, INC.
10 3/8% Senior Subordinated Note due 2007, Series B
This Security is one of a duly authorized issue of Securities of
the Company designated as its 10 3/8% Senior Subordinated Notes due 2007,
Series B (herein called the "Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
$150,000,000, issued under and subject to the terms of an indenture (herein
called the "Indenture") dated as of May 5, 1999, among the Company, the
Guarantors and Harris Trust and Savings Bank, as trustee (herein called 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 Guarantors, the
Trustee and the Holders of the Securities, and of the terms upon which the
Securities are, and are to be, authenticated and delivered.
The Securities are subject to redemption at any time on or after
May 1, 2003, at the option of the Company, in whole or in part, on not less
than 30 nor more than 60 days' prior notice, in amounts of $1,000 or an
integral multiple thereof, at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning May 1 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 . . . . . . . . . 105.188%
2004 . . . . . . . . . 102.594%
</TABLE>
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and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
rights of Holders of record on relevant record dates to receive interest due
on an Interest Payment Date).
In addition, at any time on or prior to May 1, 2002, the Company
may, at its option, use the net proceeds of one or more Public Equity
Offerings to redeem up to an aggregate of 35% of the aggregate principal
amount of Securities originally issued under the Indenture at a redemption
price equal to 110.375% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the Redemption Date; provided
that at least 65% of the initial aggregate principal amount of Securities
remains outstanding immediately after the occurrence of such redemption. In
order to effect the foregoing redemption, the Company must mail a notice of
redemption no later than 30 days after the closing of the related Public
Equity Offering and must consummate such redemption within 60 days of the
closing of the Public Equity Offering.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities or portions thereof to be redeemed in compliance
with the requirements of the principal national securities exchange, if any,
on which the Securities are listed or, if the Securities are not so listed,
pro rata, by lot or by any other method the Trustee shall deem fair and
reasonable.
Upon the occurrence of a Change of Control, each Holder may require
the Company to purchase such Holder's Securities in whole or in part in
integral multiples of $1,000, at a purchase price in cash in an amount equal
to 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of purchase, pursuant to a Change of Control Offer in
accordance with the procedures set forth in the Indenture.
Under certain circumstances, if all or a portion of the Net Cash
Proceeds received by the Company from any Asset Sale are not required to be
applied to repay permanently any Senior Indebtedness or Senior Guarantor
Indebtedness, or if the Company determines not to apply such Net Cash
Proceeds to the permanent prepayment of such Senior Indebtedness or Senior
Guarantor Indebtedness, or if no such Senior Indebtedness or Senior Guarantor
Indebtedness is then outstanding, and if the Company has not invested such
Net Cash Proceeds in properties and assets that replace the properties and
assets that were the subject of the Asset Sale or in properties and assets
that will be used in the businesses of the Company or its Restricted
Subsidiaries existing on the date of the Indenture or in businesses
reasonably related thereto, and such Net Cash Proceeds not used or invested
exceeds a specified amount, the Company will be required to apply such
proceeds to the repayment of the Securities and certain Indebtedness ranking
PARI PASSU in right of payment to the Securities.
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In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular
Record Date or Special Record Date referred to on the face hereof.
Securities (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.
In the event of redemption or repurchase of this Security in
accordance with the Indenture in part only, a new Security or Securities for
the unredeemed portion hereof shall be issued in the name of the Holder
hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities 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 on the Securities and (b) certain restrictive
covenants and related Defaults and Events of Default, in each case upon
compliance with certain conditions set forth therein.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders, certain amendments
which require the consent of Holders of 66 2/3% of the outstanding principal
amount of the Securities and certain amendments which required the consent of
all of the Holders) as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the Guarantors
and the rights of the Holders under the Indenture and the Securities and the
Guarantees at any time by the Company and the Trustee with the consent of the
Holders of at least a majority in aggregate principal amount of the
Securities at the time Outstanding. The Indenture also contains provisions
permitting the Holders of at least a majority in aggregate principal amount
of the Securities (Holders of 66 2/3% in aggregate principal amount of the
Securities or 100% of the Holders in certain circumstances) at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company and the Guarantors with certain provisions of the
Indenture and the Securities and the Guarantees and certain past Defaults
under the Indenture and the Securities and the Guarantees and their
consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security 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 Security.
The Securities are, to the extent and manner provided in Article
Thirteen of the Indenture, subordinated and subject in right of payment to
the prior payment in full of all Senior Indebtedness.
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No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, any Guarantor or any other obligor on the Securities (in the event
such Guarantor or such other obligor is obligated to make payments in respect
of the Securities), which is absolute and unconditional, to pay the principal
of, and premium, if any, and interest on, this Security at the times, place,
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in the Borough of Manhattan,
The City of New York, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or its attorney duly authorized
in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
Certificated securities shall be transferred to all beneficial
holders in exchange for their beneficial interests in the Rule 144A Global
Securities or the Regulation S Global Securities if (i) such Depositary (A)
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or (B) has ceased to be a clearing agency
registered as such under the Exchange Act, and in either case the Company
fails to appoint a successor Depositary within 90 days, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of the Securities in certificated form or (iii) there shall have
occurred and be continuing an Event of Default or any event which after
notice or lapse of time or both would be an Event of Default with respect to
such Global Security. Upon any such issuance, the Trustee is required to
register such certificated Series B Securities in the name of, and cause the
same to be delivered to, such Person or Persons (or the nominee of any
thereof).
Series B Securities in certificated form 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 Series B Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, any Guarantor, the Trustee and any agent of the
Company, any Guarantor or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof
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for all purposes, whether or not this Security is overdue, and neither the
Company, any Guarantor, the Trustee nor any such agent shall be affected by
notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture
and not otherwise defined herein shall have the meanings assigned to them in
the Indenture.
[The Transferee Certificate, in the form of Appendix II hereto, will
be attached to the Series B Security.]
Section 204. FORM OF GUARANTEE.
The form of Guarantee shall be set forth on the Securities substantially
as follows:
GUARANTEE
For value received, each of the undersigned hereby absolutely, fully and
unconditionally and irrevocably guarantees, jointly and severally with each
other Guarantor, to the holder of this Security the payment of principal of,
premium, if any, and interest on this Security upon which these Guarantees
are endorsed in the amounts and at the time when due and payable whether by
declaration thereof, or otherwise, and interest on the overdue principal and
interest, if any, of this Security, if lawful, and the payment or performance
of all other obligations of the Company under the Indenture or the
Securities, to the holder of this Security and the Trustee, all in accordance
with and subject to the terms and limitations of this Security and Article
Fourteen of the Indenture. This Guarantee will not become effective until
the Trustee duly executes the certificate of authentication on this Security.
These Guarantees shall be governed by and construed in
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accordance with the laws of the State of New York, without regard to conflict
of law principles thereof. The Indebtedness evidenced by these Guarantees
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
Guarantor Indebtedness, whether outstanding on the date of the Indenture or
thereafter, and the Guarantees are issued subject to such provisions.
Dated:
FCA FINANCIAL, INC.
FABRI-CENTERS OF SOUTH DAKOTA, INC.
FABRI-CENTERS OF CALIFORNIA, INC.
FCA OF OHIO, INC.
HOUSE OF FABRICS, INC.
By
----------------------------------------------
Name:
Title:
Attest:
------------------------------
Name:
Title:
ARTICLE THREE
THE SECURITIES
Section 301. TITLE AND TERMS.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $150,000,000
in principal amount of Securities, except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities pursuant to Section 303, 304, 305, 306, 307, 308, 906,
1012, 1015 or 1108.
The Securities shall be known and designated as the "10 3/8% Senior
Subordinated Notes due 2007" of the Company. The Stated Maturity of the
Securities shall be May 1, 2007, and the Securities shall each bear interest
at the rate of 10 3/8% per annum, as such interest rate may be adjusted as
set forth in the Securities, from May 5, 1999, or from the most recent
Interest Payment Date to which interest has been paid, payable semiannually
on May 1 and November 1 in each year, commencing November 1, 1999, 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.
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The principal of, premium, if any, and interest on, the Securities
shall be payable and the Securities shall be exchangeable and transferable at
an office or agency of the Company in The City of New York maintained for
such purposes (which initially will be a corporate trust office of an
affiliate of the Trustee, Harris Trust Company of New York, located at 88
Pine Street, New York, New York 10005); PROVIDED, HOWEVER, that payment of
interest may be made at the option of the Company by check mailed to
addresses of the Persons entitled thereto as shown on the Security Register.
For all purposes hereunder, the Series A Securities and the Series
B Securities will be treated as one class and are together referred to as the
"Securities." The Series A Securities rank PARI PASSU in right of payment
with the Series B Securities.
The Securities shall be subject to repurchase by the Company
pursuant to an Offer as provided in Section 1012.
Holders shall have the right to require the Company to purchase
their Securities, in whole or in part, in the event of a Change of Control
pursuant to Section 1015.
The Securities shall be redeemable as provided in Article Eleven
and in the Securities.
The Indebtedness evidenced by the Securities shall rank junior to
and be subordinated in right of payment to the prior payment in full of all
other Senior Indebtedness. The Securities shall be senior subordinated
Indebtedness of the Company ranking equal to all other existing and future
senior subordinated Indebtedness of the Company and senior to all
Subordinated Indebtedness of the Company.
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Four.
Section 302. DENOMINATIONS.
The Securities shall be issuable only in fully registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
Section 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by one of
its Chairman of the Board, its President, its Chief Executive Officer, its
Chief Financial Officer or one of its Vice Presidents under its corporate
seal reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signatures of any of these officers on the Securities may
be manual or facsimile.
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Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the Company
to the Trustee (with Guarantees endorsed thereon) for authentication,
together with a Company Order for the authentication and delivery of such
Securities; and the Trustee in accordance with such Company Order shall
authenticate and deliver such Securities as provided in this Indenture and
not otherwise.
Each Security shall be dated the date of its authentication.
No Security or Guarantee endorsed thereon shall be entitled to any
benefit under this Indenture or be valid or obligatory for any purpose unless
there appears on such Security a certificate of authentication substantially
in the form provided for herein duly executed by the Trustee by manual
signature of an authorized officer, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such Security 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, in a single transaction or through a series of related transactions,
be consolidated or merged with or into any other Person or shall sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially
all of its properties and assets 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 successor Person
which shall have participated in the sale, assignment, 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
Securities authenticated or delivered prior to such consolidation, merger,
sale, assignment, conveyance, transfer, lease or other disposition may, from
time to time, at the request of the successor Person, be exchanged for other
Securities 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 Securities surrendered for such exchange and of like
principal amount; and the Trustee, upon the request of the successor Person,
shall authenticate and deliver Securities as specified in such request for
the purpose of such exchange. If Securities 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 Securities, such successor Person, at the option of the
Holders but without expense to them, shall provide for the exchange of all
Securities at the time Outstanding for Securities authenticated and delivered
in such new name.
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The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities on behalf of the Trustee. Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Securities 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 Security Registrar or Paying
Agent to deal with the Company and its Affiliates.
Section 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten or
otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively
evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities 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 Securities, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of authorized denominations.
Until so exchanged the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as definitive Securities.
Section 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause the Trustee to keep, so long as it is the
Security Registrar, at the Corporate Trust Office of the Trustee, or such
other office as the Trustee may designate, a register (the register
maintained in such office or in any other office or agency designated
pursuant to Section 1002 being herein sometimes referred to as the "Security
Register") in which, subject to such reasonable regulations as the Security
Registrar may prescribe, the Company shall provide for the registration of
Securities and of transfers of Securities. The Trustee shall initially be
the "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided. The Company may change the
Security Registrar or appoint one or more co-Security Registrars without
notice.
Upon surrender for registration of transfer of any Security 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
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transferees, one or more new Securities of the same series of any authorized
denomination or denominations, of a like aggregate principal amount.
Furthermore, any Holder of the Global Security shall, by acceptance
of such Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained
by the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in a Security shall be required to be reflected in a book
entry.
At the option of the Holder, Securities of any authorized
denomination or denominations may be exchanged for other Securities of a like
aggregate principal amount, upon surrender of the Securities to be exchanged
at such office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, Securities of the same series which the Holder making the exchange
is entitled to receive; PROVIDED that no exchange of Series A Securities for
Series B Securities shall occur until an Exchange Offer Registration
Statement shall have been declared effective by the Commission and the
Exchange Offer shall have expired and that the Series A Securities exchanged
for the Series B Securities shall be canceled.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the
same Indebtedness, and entitled to the same benefits under this Indenture, as
the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer, or for exchange, repurchase or redemption, shall (if so required by
the Company or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer, exchange or redemption of Securities, except for any tax or other
governmental charge that may be imposed in connection therewith, other than
exchanges pursuant to Sections 303, 304, 305, 308, 906, 1012, 1015 or 1108
not involving any transfer.
The Company shall not be required (a) to issue, register the
transfer of or exchange any Security during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of the
Securities selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing or (b) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of Securities being redeemed in part.
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Every Security shall be subject to the restrictions on transfer
provided in the legend required to be set forth on the face of each Security
pursuant to Section 202, and the restrictions set forth in this Section 305,
and the Holder of each Security, by such Holder's acceptance thereof (or
interest therein), agrees to be bound by such restrictions on transfer.
Except as provided in the preceding paragraph, any Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Security, whether pursuant to this Section
305, Section 304, 308, 906 or 1108 or otherwise, shall also be a Global
Security and bear the legend specified in Section 202.
Section 306. BOOK ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) Each Global Security initially shall (i) be registered in the
name of the Depositary for such Global Security or the nominee of such
Depositary, (ii) be deposited with, or on behalf of, the Depositary or with
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 Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under such Global Security, and the Depositary may be treated by the Company,
the Guarantors, the Trustee and any agent of the Company or the Trustee as
the absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Guarantors, 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 Security.
(b) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part may be
registered, in the name of any Person other than the Depositary for such
Global Security or a nominee thereof unless (i) such Depositary (A) has
notified the Company that it is unwilling or unable to continue as Depositary
for such Global Security or (B) has ceased to be a clearing agency registered
as such under the Exchange Act, and in either case the Company fails to
appoint a successor Depositary within 90 days, (ii) the Company, at its
option, executes and delivers to the Trustee a Company Order stating that it
elects to cause the issuance of the Securities in certificated form and that
all Global Securities shall be exchanged in whole for Securities that are not
Global Securities (in which case such exchange shall be effected by the
Trustee) or (iii) there shall have occurred and be continuing an Event of
Default or any event which after notice or lapse of time or both would be an
Event of Default with respect to such Global Security.
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(c) If any Global Security is to be exchanged for other Securities
or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Trustee, as Security Registrar, for exchange
or cancellation as provided in this Article Three. If any Global Security is
to be exchanged for other Securities or canceled in part, or if another
Security is to be exchanged in whole or in part for a beneficial interest in
any Global Security, then either (i) such Global Security shall be so
surrendered for exchange or cancellation as provided in this Article Three or
(ii) the principal amount thereof shall be reduced or increased by an amount
equal to the portion thereof to be so exchanged or canceled, or equal to the
principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, by means of an appropriate adjustment
made on the records of the Trustee, as Security Registrar, whereupon the
Trustee, in accordance with the Applicable Procedures, shall instruct the
Depositary or its authorized representative to make a corresponding
adjustment to its records. Upon any such surrender or adjustment of a Global
Security, the Trustee shall, subject to this Section 306(c) and as otherwise
provided in this Article Three, authenticate and deliver any Securities
issuable in exchange for such Global Security (or any portion thereof) to or
upon the order of, and registered in such names as may be directed by, the
Depositary or its authorized representative. Upon the request of the Trustee
in connection with the occurrence of any of the events specified in the
preceding paragraph, the Company shall promptly make available to the Trustee
a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order, direction
or request of the Depositary or its authorized representative which is given
or made pursuant to this Article Three if such order, direction or request is
given or made in accordance with the Applicable Procedures.
(d) Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Article Three or otherwise, shall
be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other
than the Depositary for such Global Security or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
the Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable
Procedures. Accordingly, any such owner's beneficial interest in a Global
Security will be shown only on, and the transfer of such interest shall be
effected only through, records maintained by the Depositary or its nominee or
its Agent Members.
Section 307. SPECIAL TRANSFER AND EXCHANGE PROVISIONS.
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(a) CERTAIN TRANSFERS AND EXCHANGES. Transfers and exchanges of
Securities and beneficial interests in a Global Security of the kinds
specified in this Section 307 shall be made only in accordance with this
Section 307.
(i) RULE 144A GLOBAL SECURITY TO REGULATION S GLOBAL
SECURITY. If the owner of a beneficial interest in the Rule 144A
Global Security wishes at any time to transfer such interest to a
Person who wishes to acquire the same in the form of a beneficial
interest in the Regulation S Global Security, such transfer may be
effected only in accordance with the provisions of this paragraph and
paragraph (iv) below and subject to the Applicable Procedures. Upon
receipt by the Trustee, as Security Registrar, of (a) an order given
by the Depositary or its authorized representative directing that a
beneficial interest in the Regulation S Global Security in a specified
principal amount be credited to a specified Agent Member's account and
that a beneficial interest in the Rule 144A Global Security in an
equal principal amount be debited from another specified Agent
Member's account and (b) a Regulation S Certificate in the form of
Exhibit A hereto, satisfactory to the Trustee and duly executed by the
owner of such beneficial interest in the Rule 144A Global Security or
his attorney duly authorized in writing, then the Trustee, as Security
Registrar but subject to paragraph (iv) below, shall reduce the
principal amount of the Rule 144A Global Security and increase the
principal amount of the Regulation S Global Security by such specified
principal amount as provided in Section 306(c).
(ii) REGULATION S GLOBAL SECURITY TO RULE 144A GLOBAL SECURITY
If the owner of a beneficial interest in the Regulation S Global
Security wishes at any time to transfer such interest to a Person who
wishes to acquire the same in the form of a beneficial interest in the
Rule 144A Global Security, such transfer may be effected only in
accordance with this paragraph (ii) and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of
(a) an order given by the Depositary or its authorized representative
directing that a beneficial interest in the Rule 144A Global Security
in a specified principal amount be credited to a specified Agent
Member's account and that a beneficial interest in the Regulation S
Global Security in an equal principal amount be debited from another
specified Agent Member's account and (b) if such transfer is to occur
during the Restricted Period, a Restricted Securities Certificate in
the form of Exhibit B hereto, satisfactory to the Trustee and duly
executed by
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the owner of such beneficial interest in the Regulation S Global
Security or his attorney duly authorized in writing, then the
Trustee, as Security Registrar, shall reduce the principal amount
of the Regulation S Global Security and increase the principal
amount of the Rule 144A Global Security by such specified principal
amount as provided in Section 306(c).
(iii) EXCHANGES BETWEEN GLOBAL SECURITY AND NON-GLOBAL SECURITY.
A beneficial interest in a Global Security may be exchanged for a
Security that is not a Global Security as provided in Section 307(b),
PROVIDED that, if such interest is a beneficial interest in the Rule
144A Global Security, or if such interest is a beneficial interest in
the Regulation S Global Security and such exchange is to occur during
the Restricted Period, then such interest shall bear the Private
Placement Legend (subject in each case to Section 307(b).
(iv) REGULATION S GLOBAL SECURITY TO BE HELD THROUGH
EUROCLEAR OR CEDEL DURING RESTRICTED PERIOD. The Company shall use
its best efforts to cause the Depositary to ensure that, until the
expiration of the Restricted Period, beneficial interests in the
Regulation S Global Security may be held only in or through
accounts maintained at the Depositary by Euroclear or Cedel (or by
Agent Members acting for the account thereof), and no person shall
be entitled to effect any transfer or exchange that would result in
any such interest being held otherwise than in or through such an
account; PROVIDED that this paragraph (iv) shall not prohibit any
transfer or exchange of such an interest in accordance with
paragraph (ii) above.
(b) PRIVATE PLACEMENT LEGENDS. Rule 144A Securities and
their Successor Securities and Regulation S Securities and their
Successor Securities shall bear a Private Placement Legend, subject
to the following:
(i) subject to the following clauses of this Section 307(b),
a Security or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Private Placement Legend borne by such Global Security while
represented thereby;
(ii) subject to the following Clauses of this Section 307(b),
a new Security which is not a Global Security and is issued in
exchange for another Security (including a Global Security) or any
portion thereof, upon transfer or otherwise, shall bear the Private
Placement Legend borne by such other Security;
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(iii) Exchange Securities, and all other Securities sold or
otherwise disposed of pursuant to an effective registration statement
under the Securities Act, together with their respective Successor
Securities, shall not bear a Private Placement Legend;
(iv) at any time after the Securities may be freely
transferred without registration under the Securities Act or without
being subject to transfer restrictions pursuant to the Securities Act,
a new Security which does not bear a Private Placement Legend may be
issued in exchange for or in lieu of a Security (other than a Global
Security) or any portion thereof which bears such a legend if the
Trustee has received an Unrestricted Securities Certificate
substantially in the form of Exhibit C hereto, satisfactory to the
Trustee and duly executed by the Holder of such legended Security or
his attorney duly authorized in writing, and after such date and
receipt of such certificate, the Trustee shall authenticate and
deliver such a new Security in exchange for or in lieu of such other
Security as provided in this Article Three;
(v) a new Security which does not bear a Private Placement
Legend may be issued in exchange for or in lieu of a Security (other
than a Global Security) or any portion thereof which bears such a
legend if, in the Company's judgment, placing such a legend upon such
new Security is not necessary to ensure compliance with the
registration requirements of the Securities Act, and the Trustee, at
the direction of the Company, shall authenticate and deliver such a
new Security as provided in this Article Three; and
(vi) notwithstanding the foregoing provisions of this Section
307(b), a Successor Security of a Security that does not bear a
particular form of Private Placement Legend shall not bear such form
of legend unless the Company has reasonable cause to believe that such
Successor Security is a "restricted security" within the meaning of
Rule 144, in which case the Trustee, at the direction of the Company,
shall authenticate and deliver a new Security bearing a Private
Placement Legend in exchange for such Successor Security as provided
in this Article Three.
By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture
and in the Private Placement Legend and agrees that it will transfer
such Security only as provided in this Indenture.
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The Security 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 Security Registrar.
SECTION 308. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, 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
Security has been acquired by a bona fide purchaser, the Company shall
execute and upon a Company Request the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a replacement Security of like tenor and
principal amount, bearing a number not contemporaneously outstanding and each
Guarantor shall execute a replacement Guarantee.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section,
the Company may require the payment of a sum sufficient to pay all
documentary, stamp or similar issue or transfer taxes or other governmental
charges that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every replacement Security and Guarantee issued pursuant to this
Section in lieu of any destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company and any Guarantor,
whether or not the destroyed, lost or stolen Security 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 Securities duly
issued hereunder.
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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 Securities.
Section 309. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid
or duly provided for, on the Stated Maturity of such interest shall be paid
to the Person in whose name the Security (or any Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest payment.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on the Stated Maturity of such
interest, and interest on such defaulted interest at the then applicable
interest rate borne by the Securities, to the extent lawful (such defaulted
interest and interest thereon herein collectively called "Defaulted
Interest"), shall forthwith cease to be payable to the Holder on the Regular
Record Date; and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities (or any relevant Predecessor
Securities) 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 Security and the
date (not less than 30 days after such notice) of the proposed payment (the
"Special Payment 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 Special Payment
Date, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this Subsection 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 date of the Special Payment 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 in writing of such Special Record
Date. In the name and at the expense of the Company, the Trustee shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to
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be mailed, first-class postage prepaid, to each Holder at its address as it
appears in the Security Register, 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 and Special Payment Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities are registered on such Special Record Date and shall no longer
be payable pursuant to the following Subsection (b).
(b) 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 Securities may be listed, and upon such notice as may
be required by this Indenture not inconsistent with the requirements of such
exchange, if, after written notice given by the Company to the Trustee of the
proposed payment pursuant to this Subsection, such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section 309, each
Security delivered under this Indenture upon registration of transfer of or
in exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Security.
Section 310. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if
then generally in use), and the Company, or the Trustee on behalf of the
Company, shall use CUSIP numbers in notices of redemption or exchange as a
convenience to Holders; PROVIDED, HOWEVER, that any such notice shall state
that no representation is made as to the correctness of such numbers either
as printed on the Securities or as contained in any notice of redemption or
exchange and that reliance may be placed only on the other identification
numbers printed on the Securities; and PROVIDED FURTHER, HOWEVER, that
failure to use CUSIP numbers in any notice of redemption or exchange shall
not affect the validity or sufficiency of such notice.
Section 311. PERSONS DEEMED OWNERS.
Prior to and at the time of due presentment of a Security for
registration of transfer, the Company, any Guarantor, the Trustee and any
agent of the Company, any Guarantor or the Trustee may treat the Person in
whose name any Security is registered as the owner of such Security for the
purpose of receiving payment of principal of, premium, if any, and (subject
to Section 309) interest on, such Security and for all other purposes
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whatsoever, whether or not such Security is overdue, and neither 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 312. CANCELLATION.
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and,
if not already canceled, shall be promptly canceled by it. The Company and
any Guarantor may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
or such Guarantor may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section 312, except as expressly
permitted by this Indenture. All canceled Securities held by the Trustee
shall be destroyed and certification of their destruction delivered to the
Company, unless by a Company Order received by the Trustee prior to such
destruction, the Company shall direct that the canceled Securities be
returned to it. The Trustee shall provide the Company a list of all
Securities that have been canceled from time to time as requested by the
Company.
Section 313. COMPUTATION OF INTEREST.
Interest on the Securities shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE.
The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either Section 402 or Section
403 be applied to all of the Outstanding Securities (the "Defeased
Securities"), upon compliance with the conditions set forth below in this
Article Four.
Section 402. DEFEASANCE AND DISCHARGE.
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Upon the Company's exercise under Section 401 of the option
applicable to this Section 402, the Company, each Guarantor and any other
obligor upon the Securities, if any, shall be deemed to have been discharged
from its obligations with respect to the Defeased Securities on the date the
conditions set forth in Section 404 below are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company,
each Guarantor and any other obligor under this Indenture shall be deemed to
have paid and discharged the entire Indebtedness represented by the Defeased
Securities, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 405 and the other Sections of this Indenture referred to
in (a) and (b) below, and to have satisfied all its other obligations under
such Securities and this Indenture insofar as such Securities are concerned
(and the Trustee, at the expense of the Company and upon Company Request,
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 Defeased Securities to receive,
solely from the trust fund described in Section 404 and as more fully set
forth in such Section, payments in respect of the principal of, premium, if
any, and interest on, such Securities, when such payments are due, (b) the
Company's obligations with respect to such Defeased Securities under Sections
304, 305, 308, 1002 and 1003, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 607, and (d) this Article Four. Subject to
compliance with this Article Four, the Company may exercise its option under
this Section 402 notwithstanding the prior exercise of its option under
Section 403 with respect to the Securities.
Section 403. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 401 of the option applicable
to this Section 403, the Company and each Guarantor shall be released from its
obligations under any covenant or provision contained or referred to in Sections
1005 through 1019, inclusive, and the provisions of clause (iii) of Section
801(a), with respect to the Defeased Securities, on and after the date the
conditions set forth in Section 404 below are satisfied (hereinafter, "covenant
defeasance"), and the Defeased Securities shall thereafter be deemed to be not
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the
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Defeased Securities, the Company and each Guarantor may omit to comply with
and shall have no liability in respect of any term, condition or limitation
set forth in any such Section, whether directly or indirectly, by reason of
any reference elsewhere herein to any such Section or by reason of any
reference in any such Section 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(c) or (g) but, except as specified above,
the remainder of this Indenture and such Defeased Securities shall be
unaffected thereby.
Section 404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either
Section 402 or Section 403 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee 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 Securities, (a) cash in United
States dollars in an amount, (b) U.S. Government Obligations which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms and with no further reinvestment will provide,
not later than one day before the due date of payment, money in an amount, or
(c) a combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants or
a nationally recognized investment banking firm expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee to pay and discharge, the principal of,
premium, if any, and interest on, the Defeased Securities, on the Stated
Maturity of such principal or interest (or on any date after May 1, 2003
(such date being referred to as the "Defeasance Redemption Date") if at or
prior to electing to exercise either its option applicable to Section 402 or
its option applicable to Section 403, the Company has delivered to the
Trustee an irrevocable notice to redeem the Defeased Securities on the
Defeasance Redemption Date). For this purpose, "U.S. Government Obligations"
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 (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
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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 U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation 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 U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation
evidenced by such depository receipt;
(2) In the case of an election under Section 402, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in the
United States stating that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the
date hereof, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Independent Counsel in the United States shall confirm that, the Holders of
the Outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance had not
occurred;
(3) In the case of an election under Section 403, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in the
United States to the effect that the Holders of the Outstanding Securities
will not recognize income, gain or loss for federal income tax purposes as a
result of such covenant defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred;
(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Section 501(h) or (i) is
concerned, at any time during the period ending on the 91st day after the
date of deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(5) Such defeasance or covenant defeasance shall not cause the
Trustee for the Securities to have a conflicting interest in violation
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of and for purposes of the Trust Indenture Act with respect to any securities
of the Company or any Guarantor;
(6) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, this Indenture or any
other material agreement or instrument to which the Company, any Guarantor or
any Restricted Subsidiary is a party or by which it is bound;
(7) Such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment company within the
meaning of the Investment Company Act of 1940 unless such trust shall be
registered under such Act or exempt from registration thereunder;
(8) The Company shall have delivered to the Trustee an Opinion of
Independent Counsel in the United States to the effect that after the 91st
day 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;
(9) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the holders of the Securities or any Guarantee over the
other creditors of the Company or any Guarantor with the intent of defeating,
hindering, delaying or defrauding creditors of the Company, any Guarantor or
others;
(10) No event or condition shall exist that would prevent the
Company from making payments of the principal of, premium, if any, and
interest on the Securities on the date of such deposit or at any time ending
on the 91st day after the date of such deposit; and
(11) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 402 or the covenant defeasance under Section 403 (as the case may be)
have been complied with.
Opinions of Counsel or Opinions of Independent Counsel required to
be delivered under this Section shall be in form and substance reasonably
satisfactory to the Trustee and may have qualifications customary for
opinions of the type required and counsel delivering such
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opinions may rely on certificates of the Company or government or other
officials customary for opinions of the type required, which certificates
shall be limited as to matters of fact, including that various financial
covenants have been complied with.
Section 405. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003,
all United States dollars and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 404 in
respect of the Defeased Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(excluding the Company or any of its Affiliates acting as Paying Agent), as
the Trustee may determine, to the Holders of such Securities of all sums due
and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to
the extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 404 or the principal and interest
received in respect thereof other than any such tax, fee or other charge
which by law is imposed, assessed or for the account of the Holders of the
Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any United States dollars or U.S. Government Obligations held by it
as provided in Section 404 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 defeasance or covenant
defeasance.
Section 406. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this
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Indenture and the Securities and any Guarantor's obligations under any
Guarantee shall be revived and reinstated, with present and prospective
effect, as though no deposit had occurred pursuant to Section 402 or 403, as
the case may be, until such time as the Trustee or Paying Agent is permitted
to apply all such United States dollars or U.S. Government Obligations in
accordance with Section 402 or 403, as the case may be; PROVIDED, HOWEVER,
that if the Company makes any payment to the Trustee or Paying Agent of
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Trustee or Paying Agent shall promptly
pay any such amount to the Holders of the Securities and the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the United States dollars and U.S. Government Obligations 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 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):
(a) there shall be a default in the payment of any interest on any
Security when it becomes due and payable, and such default shall continue for
a period of 30 days (whether or not permitted by the subordination
provisions of the Indenture);
(b) there shall be a default in the payment of the principal of
(or premium, if any, on) any Security at its Maturity (upon acceleration,
optional or mandatory redemption, if any, required repurchase or otherwise)
(whether or not prohibited by the subordination provisions of the Indenture);
(c) (i) there shall be a default in the performance, or breach, of
any covenant or agreement of the Company or any Guarantor under this
Indenture or any Guarantee (other than a default in the performance, or
breach, of a covenant or agreement which is specifically dealt with in clause
(a), (b) or in clause (ii), (iii) or (iv) of this clause (c))
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and such default or breach shall continue for a period of 30 days after
written notice has been given, by certified mail, (x) to the Company by the
Trustee or (y) to the Company and the Trustee by the holders of at least 25%
in aggregate principal amount of the Outstanding Securities; (ii) there shall
be a default in the performance or breach of the provisions described in
Article Eight herein; (iii) the Company shall have failed to make or
consummate an Offer in accordance with the provisions of Section 1012 herein;
or (iv) the Company shall have failed to make or consummate a Change of
Control Offer in accordance with the provisions of Section 1015 herein;
(d) one or more defaults shall have occurred under any of the
agreements, indentures or instruments under which the Company, any Guarantor
or any Restricted Subsidiary then has outstanding Indebtedness in excess of
$10,000,000 individually or in the aggregate, and either (i) such default
results from the failure to pay such Indebtedness at its stated final
maturity or (ii) such default or defaults have resulted in the acceleration
of the maturity of such Indebtedness;
(e) any Guarantee shall for any reason cease to be, or shall for
any reason be asserted in writing by any Guarantor or the Company not to be,
in full force and effect and enforceable in accordance with its terms, except
to the extent contemplated by this Indenture and any such Guarantee;
(f) one or more judgments, orders or decrees of any court or
regulatory or administrative agency for the payment of money in excess of
$10,000,000, either individually or in the aggregate, shall be rendered
against the Company, any Guarantor or any Restricted Subsidiary or any of
their respective properties and shall not be discharged and either (i) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (ii) there shall have been a period of 60 consecutive days
during which a stay of enforcement of such judgment or order, by reason of an
appeal or otherwise, shall not be in effect;
(g) any holder or holders of at least $10,000,000 in aggregate
principal amount of Indebtedness of the Company, any Guarantor or any
Restricted Subsidiary after a default under such Indebtedness shall notify
the Trustee of the intended sale or disposition of any assets of the Company,
any Guarantor or any Restricted Subsidiary that have been pledged to or for
the benefit of such holder or holders to secure such Indebtedness or shall
commence proceedings, or take any action (including by way of set-off), to
retain in satisfaction of such Indebtedness or to collect
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on, seize, dispose of or apply in satisfaction of Indebtedness, assets of the
Company, any Guarantor or any Restricted Subsidiary (including funds on
deposit or held pursuant to lock-box and other similar arrangements);
(h) there shall have been the entry by a court of competent
jurisdiction of (i) a decree or order for relief in respect of the Company,
any Guarantor or any Restricted Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or (ii) a decree or order
adjudging the Company, any Guarantor or any Restricted Subsidiary bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company, any Guarantor or any Restricted Subsidiary
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company, any Guarantor or any Restricted Subsidiary or of
any substantial part of their respective properties, or ordering the winding
up or liquidation of their affairs, and any such decree or order for relief
shall continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 consecutive days; or
(i) (i) the Company, any Guarantor or any Restricted Subsidiary
commences a voluntary case or proceeding under any applicable Bankruptcy Law
or any other case or proceeding to be adjudicated bankrupt or insolvent, (ii)
the Company, any Guarantor or any Restricted Subsidiary consents to the entry
of a decree or order for relief in respect of the Company, such Guarantor or
such Restricted Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, (iii) the Company, any Guarantor or
any Restricted Subsidiary files a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, (iv) the
Company, any Guarantor or any Restricted Subsidiary (1) consents to the
filing of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company, any Guarantor or such Restricted Subsidiary or of
any substantial part of their respective properties, (2) makes an assignment
for the benefit of creditors or (3) admits in writing its inability to pay
its debts generally as they become due or (v) the Company, any Guarantor or
any Restricted Subsidiary takes any corporate action in furtherance of any
such actions in this paragraph (i).
Section 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
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If an Event of Default (other than an Event of Default specified in
Sections 501(h) and (i) within) shall occur and be continuing with respect to
this Indenture, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Securities then Outstanding may, and the Trustee at
the request of such holders shall, declare all unpaid principal of, premium,
if any, and accrued interest on all Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if
given by the holders of the Securities) and upon any such declaration, such
principal, premium, if any, and interest shall become due and payable
immediately. If an Event of Default specified in clause (h) or (i) of
Section 501 occurs and is continuing, then all the Securities shall IPSO
FACTO become and be due and payable immediately in an amount equal to the
principal amount of the Securities, together with accrued and unpaid
interest, if any, to the date the Securities become due and payable, without
any declaration or other act on the part of the Trustee or any holder.
Thereupon, the Trustee may, at its discretion, proceed to protect and enforce
the rights of the holders of the Securities by appropriate judicial
proceedings.
After a declaration of acceleration with respect to the Securities,
but before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the holders
of a majority in aggregate principal amount of the Securities Outstanding, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Outstanding Securities,
(iii) the principal of and premium, if any, on any Outstanding
Securities which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities,
and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
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(b) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction; and
(c) all Events of Default, other than the non-payment of principal
of, premium, if any, and interest on the Securities which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 513. No such rescission shall affect any subsequent
Default or impair any right consequent thereon.
Section 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.
The Company and each Guarantor covenant that if
(a) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(b) default is made in the payment of the principal of or premium,
if any, on any Security at the Stated Maturity thereof or otherwise,
the Company and such Guarantor will, upon demand of the Trustee, pay to it,
for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal and premium, if any, and
interest, with interest upon the overdue principal and premium, if any, and,
to the extent that payment of such interest shall be legally enforceable,
upon overdue installments of interest, at the rate borne by the Securities;
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company or any Guarantor, as the case may be,
fails to pay such amounts forthwith upon such demand, the Trustee, in its own
name and as trustee of an express trust, may institute a judicial proceeding
for the collection of the sums so due and unpaid and may prosecute such
proceeding to judgment or final decree, and may enforce the same against the
Company or any Guarantor or any other obligor upon the Securities 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 Securities, 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 private
or judicial proceedings as the Trustee shall deem most effectual to protect
and enforce 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 therein, 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 512. 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 Securities or the property of the Company
or of such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Securities 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 or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) 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
Securities 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
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official 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
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compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 607.
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
Securities 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.
Section 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture, the
Securities or the Guarantees may be prosecuted and enforced by the Trustee
without the possession of any of the Securities 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
Securities in respect of which such judgment has been recovered.
Section 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article or
otherwise on behalf of the Holders or the Trustee pursuant to this Article or
through any proceeding or any arrangement or restructuring in anticipation or
in lieu of any proceeding contemplated by this Article shall be applied,
subject to applicable law, 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, premium, if any, or interest, upon presentation of the Securities
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;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal, premium, if any, and interest, 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
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due and payable on such Securities for principal, premium, if any, and
interest; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto, including 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.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or the
Securities, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities 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;
(c) such Holder or Holders have offered to the Trustee a
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 15 days after its receipt of such notice,
request and offer (and if requested, provision) of indemnity has failed to
institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 15-day period by the Holders of a majority
in principal amount of the Outstanding Securities;
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 Security 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 Security or any Guarantee, except in the manner provided
in this Indenture and for the equal and ratable benefit of all the Holders.
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Section 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder
of any Security shall have the right based on the terms stated herein, which
is absolute and unconditional, to receive payment of the principal of,
premium, if any, and (subject to Section 309) interest on such Security on
the respective Stated Maturities expressed in such Security (or, in the case
of redemption or repurchase, on the Redemption Date or the repurchase date)
and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
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 the Company, any Guarantor, any other obligor on the Securities, the
Trustee and the Holders shall, subject to any determination in such
proceeding, 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.
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
Security 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
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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 aggregate principal
amount of the Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, PROVIDED that
(a) such direction shall not be in conflict with any rule of law
or with this Indenture (including, without limitation, Section 507) or any
Guarantee, expose the Trustee to personal liability, or be unduly prejudicial
to Holders not joining therein; and
(b) 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.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of 66 2/3 %
in aggregate principal amount of the Outstanding Securities or the Holders of
all Outstanding Securities waive any past Default hereunder and its
consequences, except a Default
(a) in the payment of the principal of, premium, if any, or
interest on any Security (which may only be waived with the consent of each
Holder of Securities effected); or
(b) in respect of a covenant or a provision hereof which under
this Indenture cannot be modified or amended without the consent of the
Holders of 66 2/3% in aggregate principal amount of the Outstanding
Securities or the Holder of each Security Outstanding affected by such
modification or amendment.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Section 514. UNDERTAKING FOR COSTS.
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All parties to this Indenture agree, and each Holder of any
Security 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, 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 Securities, or to any suit instituted by any Holder for
the enforcement of the payment of the principal of, premium, if any, or
interest on, any Security on or after the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on or after the
Redemption Date).
Section 515. WAIVER OF STAY, EXTENSION OR USURY LAWS.
Each of the Company and the Guarantors 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 or any usury or other law wherever enacted, now or
at any time hereafter in force, which would prohibit or forgive the Company
or any Guarantor from paying all or any portion of the principal of, premium,
if any, or interest on the Securities contemplated herein or in the
Securities or which may affect the covenants or the performance of this
Indenture; and each of the Company and the Guarantors (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 516. REMEDIES SUBJECT TO APPLICABLE LAW.
All rights, remedies and powers provided by this Article Five may
be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law in the premises, and all the provisions of
this Indenture are intended to be subject to all applicable mandatory
provisions of law which may be controlling in the premises and to be limited
to the extent necessary so that they will not render this
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Indenture invalid, unenforceable or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
ARTICLE SIX
THE TRUSTEE
Section 601. DUTIES OF TRUSTEE.
Subject to the provisions of Trust Indenture Act Sections 315(a)
through 315(d):
(a) if a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in its
exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs;
(b) except during the continuance of a Default or an Event of
Default:
(1) the Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be implied
in this Indenture that are adverse to 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. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture;
(c) the Trustee may not be relieved from liability for its own
grossly negligent action, its own grossly negligent failure to act, or its
own willful misconduct, except that:
(1) this Subsection (c) does not limit the effect of Subsection (b)
of this Section 601;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the Trustee
was grossly negligent in ascertaining the pertinent facts; and
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(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith, in accordance with a direction of the
Holders of a majority in principal amount of Outstanding Securities relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power confirmed upon the
Trustee under this Indenture;
(d) 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 if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it;
(e) whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to Subsections (a), (b), (c) and (d) of this Section 601; and
(f) the Trustee shall not be liable for interest on any money
or assets received by it. Assets held in trust by the Trustee need not be
segregated from other assets except to the extent required by law.
Section 602. NOTICE OF DEFAULTS.
Within 30 days after a Responsible Officer of the Trustee receives
notice of the occurrence of any Default, the Trustee shall transmit by mail
to all Holders and any other Persons entitled to receive reports pursuant to
Section 313(c) of the Trust Indenture Act, as their names and addresses
appear in the Security Register, notice of such Default hereunder known to
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, premium, if any, or interest on any Security, the Trustee shall
be protected in withholding such notice if and so long as a trust committee
of Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.
Section 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601 hereof and Trust Indenture
Act Sections 315(a) through 315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon receipt by it of any resolution, certificate,
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statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of Indebtedness or other paper
or document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) 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;
(c) the Trustee may consult with counsel of its selection and any
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) 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 therein;
(e) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other than
any liabilities arising out of the gross negligence, bad faith or willful
misconduct of the Trustee;
(f) 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,
approval, appraisal, bond, debenture, note, coupon, security or other paper
or document unless requested in writing to do so by the Holders of not less
than a majority in aggregate principal amount of the Securities then
Outstanding; PROVIDED that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in
the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms
of this Indenture, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding; the reasonable expenses
of every such investigation so requested by the Holders of not less than a
majority in aggregate principal amount of the Securities Outstanding
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shall be paid by the Company or, if paid by the Trustee or any predecessor
Trustee, shall be repaid by the Company upon demand; PROVIDED, FURTHER, the
Trustee in its discretion may make such further inquiry or investigation into
such facts or matters as it may deem 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; and
(g) 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.
Section 604. TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITIONS OF
SECURITIES OR APPLICATION OF PROCEEDS THEREOF.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Guarantors, 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 Securities, except that the
Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Securities and perform its obligations hereunder
and that the statements made by it in any Statement of Eligibility and
Qualification on Form T-1 to be supplied to the Company will be 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 Securities or
the proceeds thereof.
Section 605. TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS;
ETC.
The Trustee, any Paying Agent, Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Securities, with the same rights it would have if it were
not the Trustee, Paying Agent, Security Registrar or such other agent and,
subject to Trust Indenture Act Sections 310 and 311, may otherwise deal with
the Company and receive, collect, hold and retain collections from the
Company with the same rights it would have if it were not the Trustee, Paying
Agent, Security Registrar or such other agent.
Section 606. MONEY HELD IN TRUST.
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All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Except for funds or securities
deposited with the Trustee pursuant to Article Four, the Trustee shall be
required to invest all moneys received by the Trustee, until used or applied
as herein provided, in Temporary Cash Investments in accordance with the
written directions of the Company.
Section 607. COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS
PRIOR CLAIM.
The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation 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) and the Company covenants and agrees to pay or reimburse the Trustee
and each predecessor Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by or on behalf of the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and
of all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its gross negligence, bad
faith or willful misconduct. The Company also covenants and agrees to
indemnify the Trustee and each predecessor Trustee for, and to hold it
harmless against, any claim, loss, liability, tax, assessment, governmental
charge (other than taxes applicable to the Trustee's compensation hereunder)
or expense incurred without gross negligence, bad faith or willful misconduct
on its part, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder and its duties
hereunder, including the costs of enforcement of this Section 607 and the
costs and expenses of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder. The obligations of the Company under this Section 607
to compensate and indemnify the Trustee and each predecessor Trustee and to
pay or reimburse the Trustee and each predecessor Trustee for reasonable
expenses, disbursements and advances shall constitute an additional
obligation hereunder and shall survive the satisfaction and discharge of this
Indenture and the resignation or removal of the Trustee and each predecessor
Trustee.
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Section 608. CONFLICTING INTERESTS.
The Trustee shall comply with the provisions of Section 310(b) of
the Trust Indenture Act.
Section 609. TRUSTEE ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
eligible to act as trustee under Trust Indenture Act Section 310(a) and which
shall have a combined capital and surplus of at least $250,000,000, to the
extent there is an institution eligible and willing to serve. If the Trustee
does not have a Corporate Trust 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 Trustee 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
609, 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 609, the Trustee
shall resign immediately in the manner and with the effect hereinafter
specified in this Article.
Section 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR
TRUSTEE.
(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 under Section 611.
(b) The Trustee, or any trustee or trustees hereafter appointed,
may at any time resign by giving written notice thereof to the Company no
later than 20 Business Days prior to the proposed date of resignation. 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 of the Company, a copy of which shall be delivered to the resigning
Trustee and a copy to the successor trustee. If an instrument of acceptance
by a successor trustee shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee
may, or any Holder who has been a bona
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fide Holder of a Security 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. Such court may
thereupon, after such notice, if any, as it may deem proper, appoint and
prescribe a successor trustee.
(c) The Trustee may be removed at any time for any cause or for no
cause by an Act of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, delivered to the Trustee and
to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at least six
months,
(2) the Trustee shall cease to be eligible under Section 609 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 Security for at least six months,
or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver 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,
then, in any case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, the Holder of any Security who has
been a bona fide Holder of a Security 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. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint 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 and shall comply with the applicable requirements of Section 611.
If, within 60 days after such resignation, removal or
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incapability, or the occurrence of such vacancy, the Company has not
appointed a successor Trustee, a successor trustee shall be appointed by the
Act of the Holders of a majority in principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee. Such 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 of the Securities and accepted appointment in the
manner hereinafter provided, the Trustee or the Holder of any Security who
has been a bona fide Holder for at least six months may, subject to Section
514, 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 by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor trustee and
the address of its Corporate Trust Office or agent hereunder.
Section 611. 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 as if
originally named as Trustee hereunder; but, nevertheless, on the written
request of the Company or the successor trustee, upon payment of its charges
pursuant to Section 607 then unpaid, such retiring Trustee shall pay over to
the successor trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. 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 and powers.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 611 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under
the provisions of Trust Indenture Act Section 310(a) and this Article Six and
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shall have a combined capital and surplus of at least $250,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 609.
Upon acceptance of appointment by any successor trustee as provided
in this Section 611, the Company shall give notice thereof to the Holders of
the Securities, by mailing such notice to such Holders at their addresses as
they shall appear on the Security Register. If the acceptance of appointment
is substantially contemporaneous with the appointment, then the notice called
for by the preceding sentence may be combined with the notice called for by
Section 610. If the Company fails to give such notice within 10 days after
acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be given at the expense of the Company.
Section 612. 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 (including the trust created by this Indenture) shall
be the successor of the Trustee hereunder, PROVIDED that such corporation
shall be eligible under Trust Indenture Act Section 310(a) and this Article
Six and shall have a combined capital and surplus of at least $250,000,000
and have a Corporate Trust Office or an agent selected in accordance with
Section 609, without the execution or filing of any paper or any further act
on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to
the trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder
or in the name of the successor trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities
or in this Indenture provided that the certificate of the Trustee shall have;
PROVIDED that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Securities in the name of any
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predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
Section 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the
Company (or other obligor under the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of
claims against the Company (or any such other obligor). A Trustee who has
resigned or been removed shall be subject to Trust Indenture Act Section
311(a) to the extent indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, 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 Security
Registrar, no such list need be furnished.
Section 702. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS.
Holders may communicate pursuant to Trust Indenture Act Section
312(b) with other Holders with respect to their rights under this Indenture
or the Securities, and the Trustee shall comply with Trust Indenture Act
Section 312(b). The Company, the Trustee, the Security Registrar and any
other Person shall have the protection of Trust Indenture Act Section 312(c).
Further, every Holder of Securities, by receiving and
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holding the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee or any agent of either of them shall be held
accountable by reason of the disclosure of any information as to the names
and addresses of the Holders in accordance with Trust Indenture Act 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 Trust Indenture Act Section 312.
Section 703. REPORTS BY TRUSTEE.
(a) Within 60 days after May 15 of each year commencing with the
first May 15 after the issuance of Securities, the Trustee, if so required
under the Trust Indenture Act, shall transmit by mail to all Holders, in the
manner and to the extent provided in Trust Indenture Act Section 313(c), a
brief report dated as of such May 15 in accordance with and with respect to
the matters required by Trust Indenture Act Section 313(a). The Trustee
shall also transmit by mail to all Holders, in the manner and to the extent
provided in Trust Indenture Act Section 313(c), a brief report in accordance
with and with respect to the matters required by Trust Indenture Act Section
313(b)(2).
(b) A copy of each report transmitted to Holders pursuant to this
Section 703 shall, at the time of such transmission, be mailed to the Company
and filed with each stock exchange, if any, upon which the Securities are
listed and also with the Commission. The Company will notify the Trustee
promptly if the Securities are listed on any stock exchange.
Section 704. REPORTS BY COMPANY AND GUARANTORS.
The Company, and each Guarantor, as the case may be, shall:
(a) file with the Trustee, within 15 days after the Company or any
Guarantor, as the case may be, is required to file the same with the
Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe) which
the Company or any Guarantor may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the
Company or any Guarantor, as the case may be, is not required to file
information, documents or reports pursuant to either of said Sections, then
it shall (i) deliver to the Trustee
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annual audited financial statements of the Company and its Subsidiaries,
prepared on a Consolidated basis in conformity with GAAP, within 120 days
after the end of each fiscal year of the Company, and (ii) file with the
Trustee and, to the extent permitted by law, the Commission, in accordance
with the rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Exchange Act in
respect of a security listed and registered on a national securities exchange
as may be prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with
the rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to compliance
by the Company or any Guarantor, as the case may be, with the conditions and
covenants of this Indenture as are required from time to time by such rules
and regulations (including such information, documents and reports referred
to in Trust Indenture Act Section 314(a)); and
(c) within 15 days after the filing thereof with the Trustee,
transmit by mail to all Holders in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information,
documents and reports required to be filed by the Company or any Guarantor,
as the case may be, pursuant to Section 1019 hereunder and subsections (a)
and (b) of this Section as are required by rules and regulations prescribed
from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS
Section 801. COMPANY AND GUARANTORS MAY CONSOLIDATE, ETC., ONLY ON
CERTAIN TERMS.
(a) The Company will not, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any
other Person or sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of its properties and assets to any Person or group
of Persons, or permit any of its Restricted Subsidiaries to enter into any
such transaction or series of transactions, if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment,
conveyance,
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transfer, lease or disposition of all or substantially all of the properties
and assets of the Company and its Restricted Subsidiaries on a Consolidated
basis to any other Person or group of Persons, unless at the time and after
giving effect thereto:
(i) either (a) the Company will be the continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or disposition all
or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a Consolidated basis (the "Surviving Entity") will
be a corporation duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia and
such Person expressly assumes, by a supplemental indenture, in a form
reasonably satisfactory to the Trustee, all the obligations of the Company
under the Securities and this Indenture and the Registration Rights
Agreement, as the case may be, and the Securities and this Indenture and the
Registration Rights Agreement will remain in full force and effect as so
supplemented (and any Guarantees will be confirmed as applying to such
Surviving Entity's obligation);
(ii) immediately before and immediately after giving effect
to such transaction on a PRO FORMA basis (and treating any Indebtedness not
previously an obligation of the Company or any of its Restricted Subsidiaries
which becomes the obligation of the Company or any of its Restricted
Subsidiaries as a result of such transaction as having been incurred at the
time of such transaction), no Default or Event of Default will have occurred
and be continuing;
(iii) immediately before and immediately after giving effect
to such transaction on a PRO FORMA basis (on the assumption that the
transaction occurred on the first day of the four-quarter period for which
financial statements are available ending immediately prior to the
consummation of such transaction with the appropriate adjustments with
respect to the transaction being included in such PRO FORMA calculation), the
Company (or the Surviving Entity if the Company is not the continuing obligor
hereunder) could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 1008;
(iv) at the time of the transaction, each Guarantor, if any,
unless it is the other party to the transactions described above, will have
by supplemental indenture confirmed that its Guarantee shall apply to such
Person's obligations under this Indenture and under the Securities;
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(v) at the time of the transaction if any of the property
or assets of the Company or any of its Restricted Subsidiaries
would thereupon become subject to any Lien, the provisions of
Section 1011 are complied with; and
(vi) at the time of the transaction the Company or the
Surviving Entity will have delivered, or caused to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, transfer,
lease or other transaction and the supplemental indenture in respect thereof
comply with this Indenture and that all conditions precedent herein provided
for relating to such transaction have been complied with.
(b) Each Guarantor will not, and the Company will not permit a
Guarantor to, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person (other
than the Company or any Guarantor) or sell, assign, convey, transfer, lease
or otherwise dispose of all or substantially all of its properties and assets
to any Person or group of Persons (other than the Company or any Guarantor)
or permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Guarantor and its Restricted Subsidiaries on a
Consolidated basis to any other Person or group of Persons (other than the
Company or any Guarantor), unless at the time and after giving effect thereto:
(i) either (1) the Guarantor will be the continuing
corporation or limited liability company in the case of a consolidation or
merger involving the Guarantor or (2) the Person (if other than the
Guarantor) formed by such consolidation or into which such Guarantor is
merged or the Person which acquires by sale, assignment, conveyance,
transfer, lease or disposition all or substantially all of the properties and
assets of the Guarantor and its Restricted Subsidiaries on a Consolidated
basis (the "Surviving Guarantor Entity") will be a corporation or limited
liability company duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia and
such Person expressly assumes, by a supplemental indenture, in a form
reasonably satisfactory to the Trustee, all the obligations of such Guarantor
under its Guarantee of the Securities and this Indenture and the Registration
Rights Agreement, and such Guarantee, Indenture and Registration Rights
Agreement will remain in full force and effect;
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(ii) immediately before and immediately after giving effect
to such transaction on a PRO FORMA basis, no Default or Event of Default will
have occurred and be continuing; and
(iii) at the time of the transaction such Guarantor or the
Surviving Guarantor Entity will have delivered, or caused to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each to the effect that such
consolidation, merger, transfer, sale, assignment, conveyance, lease or other
transaction and the supplemental indenture in respect thereof comply with
this Indenture and that all conditions precedent therein provided for
relating to such transaction have been complied with.
(c) Notwithstanding the foregoing, the provisions of Section 801(b)
shall not apply to any Guarantor whose Guarantee of the Securities is
unconditionally released and discharged in accordance with paragraph (b) under
Section 1013.
Section 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company or any Guarantor, if any, in accordance
with Section 801, the successor Person formed by such consolidation or into
which the Company or such Guarantor, as the case may be, is merged or the
successor Person to which such sale, assignment, conveyance, transfer, lease
or disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company or such Guarantor, as the case
may be, under this Indenture, the Securities and/or the related Guarantee, as
the case may be, with the same effect as if such successor had been named as
the Company or such Guarantor, as the case may be, herein, in the Securities
and/or in the Guarantee, as the case may be, and the Company or such
Guarantor, as the case may be, shall be discharged (other than in a
transaction that results in the transfer of assets constituting or accounting
for less than 95% of the Consolidated assets (as of the last balance sheet
date available to the Company) of the Company or the Consolidated revenue of
the Company (as of the last 12-month period for which financial statements
are available)) from all obligations and covenants under the Indenture and
the Securities or its Guarantee, as the case may be; PROVIDED that in the
case of a transfer by lease, the predecessor shall not be released from the
payment of principal and interest on the Securities or its Guarantee, as the
case may be.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. SUPPLEMENTAL INDENTURES AND AGREEMENTS
WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, the Guarantors, if
any, and any other obligor under the Securities when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto or agreements or other
instruments with respect to the Indenture, the Securities or any Guarantee,
in form and substance satisfactory to the Trustee, for any of the following
purposes:
(a) to evidence the succession of another Person to the Company or
a Guarantor or any other obligor upon the Securities, and the assumption by
any such successor of the covenants of the Company or such Guarantor or
obligor herein and in the Securities and in any Guarantee in accordance with
Article Eight;
(b) to add to the covenants of the Company, any Guarantor or any
other obligor upon the Securities for the benefit of the Holders, or to
surrender any right or power conferred upon the Company or any Guarantor or
any other obligor upon the Securities, as applicable, herein, in the
Securities or in any Guarantee;
(c) to cure any ambiguity, or to correct or supplement any
provision herein or in any supplemental indenture, the Securities or any
Guarantee which may be defective or inconsistent with any other provision
herein or in the Securities or any Guarantee or to make any other provisions
with respect to matters or questions arising under this Indenture, the
Securities or the Guarantees; PROVIDED that, in each case, such provisions
shall not adversely affect the interest of the Holders;
(d) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by Section 905 or otherwise;
(e) to add a Guarantor pursuant to the requirements of Section
1013 hereof or otherwise;
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(f) to evidence and provide the acceptance of the appointment of a
successor trustee hereunder; or
(g) to mortgage, pledge, hypothecate or grant a security interest
in favor of the Trustee for the benefit of the Holders as additional security
for the payment and performance of the Company's or any Guarantor's Indenture
Obligations, in any property, or assets, including any of which are required
to be mortgaged, pledged or hypothecated, or in which a security interest is
required to be granted to the Trustee pursuant to this Indenture or otherwise.
Section 902. SUPPLEMENTAL INDENTURES AND AGREEMENTS WITH CONSENT OF
HOLDERS.
Except as permitted by Section 901, with the consent of the Holders
of at least a majority in aggregate principal amount of the Outstanding
Securities (including consents obtained in connection with a tender offer or
exchange offer for Securities), by Act of said Holders delivered to the
Company, each Guarantor, if any, and the Trustee, the Company and each
Guarantor (if a party thereto) when authorized by Board Resolutions, and the
Trustee may (i) enter into an indenture or indentures supplemental hereto or
agreements or other instruments with respect to any Guarantee in form and
substance satisfactory to the Trustee, for the purpose of adding any
provisions to or amending, modifying or changing in any manner or eliminating
any of the provisions of this Indenture, the Securities or any Guarantee
(including but not limited to, for the purpose of modifying in any manner the
rights of the Holders under this Indenture, the Securities or any Guarantee)
or (ii) waive compliance with any provision in this Indenture, the Securities
or any Guarantee (other than waivers of past Defaults covered by Section 513
and waivers of covenants which are covered by Section 1021); PROVIDED,
HOWEVER, that no such supplemental indenture, agreement or instrument shall,
without the consent of the Holder of each Outstanding Security affected
thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, or change to an earlier date any Redemption Date
of, or waive a default in the payment of the principal of, premium, if any,
or interest on, any such Security or reduce the principal amount thereof or
the rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which the principal of any
Security or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date);
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(b) amend, change or modify the obligation of the Company to make
and consummate an Offer with respect to any Asset Sale or Asset Sales in
accordance with Section 1012 or the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control in
accordance with Section 1015, including, in each case, amending, changing or
modifying any definitions relating thereto;
(c) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver or compliance with certain provisions of this Indenture;
(d) modify any of the provisions of this Section 902 or Section
513 or 1021, except to increase the percentage of such Outstanding Securities
required for such actions or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder of
each such Security affected thereby;
(e) except as otherwise permitted under Article Eight, consent to
the assignment or transfer by the Company or any Guarantor of any of its
rights and obligations hereunder; or
(f) amend or modify any of the provisions of this Indenture
relating to the subordination of the Securities or any Guarantee in any
manner adverse to the Holders of the Securities or any Guarantee;
and PROVIDED, FURTHER, that no such supplemental indenture, agreement or
instrument shall, without the consent of the Holders of 66 2/3 % of the
Outstanding Securities, release the obligations of a Guarantor under its
Guarantee of the Securities.
Upon the written request of the Company and each Guarantor, if any,
accompanied by a copy of Board Resolutions authorizing the execution of any
such supplemental indenture or Guarantee, and upon the filing with the
Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall
join with the Company and each Guarantor in the execution of such
supplemental indenture or Guarantee.
It shall not be necessary for any Act of Holders under this Section
902 to approve the particular form of any proposed supplemental indenture or
Guarantee or agreement or instrument relating to any Guarantee, but it shall
be sufficient if such Act shall approve the substance thereof.
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Section 903. EXECUTION OF SUPPLEMENTAL INDENTURES AND AGREEMENTS.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Trust
Indenture Act Sections 315(a) through 315(d) and Section 602 hereof) shall be
fully protected in relying upon, an Opinion of Counsel and an Officers'
Certificate stating that the execution of such supplemental indenture,
agreement or instrument (a) is authorized or permitted by this Indenture and
(b) does not violate the provisions of any agreement or instrument evidencing
any other Indebtedness of the Company, any Guarantor or any other Restricted
Subsidiary. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture, agreement or instrument which affects the
Trustee's own rights, duties or immunities under this Indenture, any
Guarantee or otherwise.
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 Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
Section 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in
effect.
Section 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article Nine 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 Securities so modified as to conform, in the opinion
of the Trustee and the Board of Directors, to any such supplemental indenture
may be prepared and executed by the Company and each Guarantor and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
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Section 907. NOTICE OF SUPPLEMENTAL INDENTURES.
Promptly after the execution by the Company, any Guarantor 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
Security affected, in the manner provided for in Section 106, setting forth
in general terms the substance of such supplemental indenture. Any failure
of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
ARTICLE TEN
COVENANTS
Section 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall duly and punctually pay the principal of,
premium, if any, and interest on the Securities in accordance with the terms
of the Securities and this Indenture.
Section 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain an office or agency where Securities may
be presented or surrendered for payment. The Company also will maintain in
The City of New York an office or agency where Securities may be surrendered
for registration of transfer, redemption or exchange and where notices and
demands to or upon the Company in respect of the Securities and this
Indenture may be served. The office of an affiliate of the Trustee, Harris
Trust Company of New York, at its corporate trust office initially located at
88 Pine Street, New York, New York 10005, will be such office or agency of
the Company, unless the Company shall designate and maintain some other
office or agency for one or more of such purposes. The Company will give
prompt written notice to the Trustee of the location and any change in the
location of any such offices or agencies. If at any time the Company shall
fail to maintain any such required offices or agencies or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the office of the Trustee and
the Company hereby appoints the Trustee such agent as its agent to receive
all such presentations, surrenders, notices and demands.
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The Company may from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the
Securities may be presented or surrendered for any or all such purposes, and
may from time to time rescind such designation. The Company will give prompt
written notice to the Trustee of any such designation or rescission and any
change in the location of any such office or agency.
The Trustee shall initially act as Paying Agent for the Securities.
Section 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company or any of its Affiliates shall at any time act as
Paying Agent, it will, on or before each due date of the principal of,
premium, if any, or interest on any of the Securities, segregate and hold in
trust for the benefit of the Holders entitled thereto a sum sufficient to pay
the principal, 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 so to act.
If the Company or any of its Affiliates is not acting as Paying
Agent, the Company will, on or before each due date of the principal of,
premium, if any, or interest on any of the Securities, deposit with a Paying
Agent a sum in same day funds sufficient to pay the principal, 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 so to act.
If the Company is not acting as Paying Agent, 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:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on the Securities 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;
(b) give the Trustee notice of any Default by the Company or any
Guarantor (or any other obligor upon the Securities) in the making of any
payment of principal, premium, if any, or interest on the Securities;
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(c) 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; and
(d) acknowledge, accept and agree to comply in all aspects with
the provisions of this Indenture relating to the duties, rights and
liabilities of 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 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 money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Security and remaining unclaimed for two years
after such principal and premium, if any, or interest has become due and
payable shall promptly 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 Security 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, may at the expense of the Company cause to be published once, in
the NEW YORK TIMES and THE WALL STREET JOURNAL (national edition), and mail
to each such Holder, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date
of such notification, publication and mailing, any unclaimed balance of such
money then remaining will promptly be repaid to the Company.
Section 1004. CORPORATE EXISTENCE.
Subject to Article Eight, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect the
corporate existence and related rights and franchises (charter and statutory)
of the Company and each Restricted Subsidiary; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or franchise or the
corporate existence of any such Restricted Subsidiary if the Board of
Directors
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of the Company shall determine that the preservation thereof is no longer
necessary or desirable in the conduct of the business of the Company and its
Restricted Subsidiaries as a whole; and PROVIDED, FURTHER, HOWEVER, that the
foregoing shall not prohibit a sale, transfer or conveyance of a Restricted
Subsidiary or any of its assets in compliance with the terms of this
Indenture.
Section 1005. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, on or before the date the same shall become due and payable, (a)
all taxes, assessments and governmental charges levied or imposed upon the
Company or any of its Restricted Subsidiaries shown to be due on any return
of the Company or any of its Restricted Subsidiaries or otherwise assessed or
upon the income, profits or property of the Company or any of its Restricted
Subsidiaries if failure to pay or discharge the same could reasonably be
expected to have a material adverse effect on the ability of the Company or
any Guarantor to perform its obligations hereunder and (b) all lawful claims
for labor, materials and supplies, which, if unpaid, would by law become a
Lien upon the property of the Company or any of its Restricted Subsidiaries,
except for any Lien permitted to be incurred under Section 1011, if failure
to pay or discharge the same could reasonably be expected to have a material
adverse effect on the ability of the Company or any Guarantor to perform its
obligations hereunder; PROVIDED, HOWEVER, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings properly instituted and
diligently conducted and in respect of which appropriate reserves (in the
good faith judgment of management of the Company) are being maintained in
accordance with GAAP.
Section 1006. MAINTENANCE OF PROPERTIES.
The Company shall cause all material properties owned by the
Company or any of its Restricted Subsidiaries or used or held for use in the
conduct of its business or the business of any of its Restricted Subsidiaries
to be maintained and kept in good condition, repair and working order
(ordinary wear and tear excepted) and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the reasonable judgment of
the Company may be consistent with sound business practice and 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 from discontinuing the maintenance of any of such
properties if such
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discontinuance is, in the reasonable judgment of the Company, desirable in
the conduct of its business or the business of any of its Restricted
Subsidiaries; and PROVIDED, FURTHER, however, that the foregoing shall not
prohibit a sale, transfer or conveyance of a Restricted Subsidiary or any of
its properties or assets in compliance with the terms of this Indenture.
Section 1007. MAINTENANCE OF INSURANCE.
The Company shall at all times keep all of its and its Restricted
Subsidiaries' properties which are of an insurable nature insured with
insurers, believed by the Company in good faith to be financially sound and
responsible, against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated and owning
like properties in the same general geographic areas in which the Company and
its Restricted Subsidiaries operate, except where the failure to do so could
not reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), earnings, business affairs or prospects of the
Company and its Restricted Subsidiaries, taken as a whole.
Section 1008. LIMITATION ON INDEBTEDNESS.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, create, issue, incur, assume, guarantee or
otherwise in any manner become directly or indirectly liable for the payment
of or otherwise incur, contingently or otherwise (collectively, "incur"), any
Indebtedness (including any Acquired Indebtedness), unless such Indebtedness
is incurred by the Company or any Guarantor or constitutes Acquired
Indebtedness of a Restricted Subsidiary and, in each case, the Company's
Consolidated Fixed Charge Coverage Ratio for the most recent four full fiscal
quarters for which financial statements are available immediately preceding
the incurrence of such Indebtedness taken as one period is at least equal to
or greater than 2.0:1.
Notwithstanding the foregoing, the Company and, to the extent
specifically set forth below, the Restricted Subsidiaries may incur each and
all of the following (collectively, the "Permitted Indebtedness"):
(i) Indebtedness of the Company (and guarantees thereof by
Restricted Subsidiaries) under the Credit Facility in an aggregate principal
amount at any one time outstanding not to exceed $300,000,000 (including up
to $30,000,000 of other credit lines) under any revolving credit facility
thereunder or in respect of letters of credit thereunder minus the amount by
which any commitments thereunder are permanently reduced and minus the
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aggregate amount of Net Cash Proceeds of Asset Sales applied to permanently
reduce the commitments with respect to such Indebtedness pursuant to Section
1012 herein;
(ii) Indebtedness of the Company pursuant to the Securities and
Indebtedness of any Guarantor pursuant to a Guarantee of the Securities;
(iii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the date of the Indenture, listed on Schedule I hereto and not
otherwise referred to in this definition of "Permitted Indebtedness;"
(iv) Indebtedness of the Company owing to a Restricted Subsidiary;
PROVIDED that any Indebtedness of the Company owing to a Restricted
Subsidiary that is not a Guarantor is made pursuant to an intercompany note
in the form attached to this Indenture as Annex A and is unsecured and is
subordinated in right of payment from and after such time as the Securities
shall become due and payable (whether at Stated Maturity, acceleration or
otherwise) to the payment and performance of the Company's obligations under
the Securities; PROVIDED, FURTHER, that any disposition, pledge or transfer
of any such Indebtedness to a Person (other than a disposition, pledge or
transfer to a Restricted Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by the Company or other obligor not permitted by this
clause (iv);
(v) Indebtedness of a Wholly Owned Restricted Subsidiary owing to
the Company or another Wholly Owned Restricted Subsidiary; PROVIDED that any
such Indebtedness is made pursuant to an intercompany note in the form
attached to this Indenture as Annex A; PROVIDED, FURTHER, that (a) any
disposition, pledge or transfer of any such Indebtedness to a Person (other
than a disposition, pledge or transfer to the Company or a Wholly Owned
Restricted Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (v), and (b) any
transaction pursuant to which any Wholly Owned Restricted Subsidiary, which
has Indebtedness owing to the Company or any other Wholly Owned Restricted
Subsidiary, ceases to be a Wholly Owned Restricted Subsidiary shall be deemed
to be the incurrence of Indebtedness by such Wholly Owned Restricted
Subsidiary that is not permitted by this clause (v);
(vi) guarantees of any Restricted Subsidiary made in accordance
with Section 1013 herein;
(vii) obligations of the Company or any Guarantor entered into in
the ordinary course of business (a) pursuant to Interest Rate Agreements
designed to protect the Company or any Restricted Subsidiary against
fluctuations in interest rates in respect of Indebtedness of the Company or
any Restricted Subsidiary as long as such obligations do not exceed the
aggregate principal amount of such Indebtedness then outstanding, (b) under
any Currency Hedging Agreements, relating to (i) Indebtedness of the Company
or any
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Restricted Subsidiary and/or (ii) obligations to purchase or sell assets or
properties, in each case, incurred in the ordinary course of business of the
Company or any Restricted Subsidiary; provided, however, that such Currency
Hedging Agreements do not increase the Indebtedness or other obligations of
the Company or any Restricted Subsidiary outstanding other than as a result
of fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder or (c) under any Commodity
Price Protection Agreements which do not increase the amount of Indebtedness
or other obligations of the Company or any Restricted Subsidiary outstanding
other than as a result of fluctuations in commodity prices or by reason of
fees, indemnities and compensation payable thereunder;
(viii) Indebtedness of the Company or any Guarantor represented by
Capital Lease Obligations or Purchase Money Obligations or other Indebtedness
incurred or assumed in connection with the acquisition or development of real
or personal, movable or immovable, property, in each case, incurred for the
purpose of financing or refinancing all or any part of the purchase price or
cost of construction or improvement of property used in the business of the
Company, in an aggregate principal amount pursuant to this clause (viii) not
to exceed 10% of the Consolidated Net Tangible Assets of the Company
outstanding at any time; PROVIDED that the principal amount of any
Indebtedness permitted under this clause (viii) did not in each case at the
time of incurrence exceed the Fair Market Value, as determined by the Company
in good faith, of the acquired or constructed asset or improvement so
financed;
(ix) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
Indebtedness described in clauses (ii) and (iii) of this definition of
"Permitted Indebtedness," including any successive refinancings so long as
the borrower under such refinancing is the Company or, if not the Company,
the same as the borrower of the Indebtedness being refinanced and the
aggregate principal amount of Indebtedness represented thereby (or if such
Indebtedness provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness plus any accreted
value attributable thereto since the original issuance of such Indebtedness)
is not increased by such refinancing plus the lesser of (I) the stated amount
of any premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or
(II) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
the Company incurred in connection with such refinancing and (A) in the case
of any refinancing of Indebtedness that is Subordinated Indebtedness, such
new Indebtedness is made subordinated to the Securities at least to the same
extent as the Indebtedness being refinanced and (B) in the case of Pari Passu
Indebtedness or Subordinated Indebtedness, as the case may be, such
refinancing does not reduce the Average Life to Stated Maturity or the Stated
Maturity of such Indebtedness; and
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(x) Indebtedness of the Company or any Guarantor in addition to
that described in clauses (i) through (ix) above, and any renewals,
extensions, substitutions, refinancings or replacements of such Indebtedness,
so long as the aggregate principal amount of all such Indebtedness shall not
exceed $10,000,000 outstanding at any one time in the aggregate.
For purposes of determining compliance with this Section 1008, in
the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness permitted by this covenant, the Company in its sole
discretion shall classify such item of Indebtedness and only be required to
include the amount of such Indebtedness as one of such types.
Section 1009. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company will not, and will not cause or permit
any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other
than dividends or distributions payable solely in shares of
its Qualified Capital Stock or in options, warrants or other
rights to acquire shares of such Qualified Capital Stock);
(ii) purchase, redeem, defease or otherwise acquire or retire for
value, directly or indirectly, the Company's Capital Stock or
any Capital Stock of any Affiliate of the Company (other than
Capital Stock of any Wholly Owned Restricted Subsidiary of the
Company) or options, warrants or other rights to acquire such
Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled
principal payment, sinking fund payment or maturity, any
Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital
Stock of any Restricted Subsidiary to any Person (other
than (a) to the Company or any of its Wholly Owned Restricted
Subsidiaries or (b) dividends or distributions made by a
Restricted Subsidiary on a pro rata basis to all stockholders
of such Restricted Subsidiary); or
(v) make any Investment in any Person (other than any Permitted
Investments)
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(any of the foregoing actions described in clauses (i) through (v),
other than any such action that is a Permitted Payment (as defined
below), collectively, "Restricted Payments") (the amount of any such
Restricted Payment, if other than cash, shall be the Fair Market Value
of the assets proposed to be transferred, as determined by the board of
directors of the Company, whose determination shall be conclusive and
evidenced by a board resolution), unless (1) immediately before and
immediately after giving effect to such proposed Restricted Payment on a
PRO FORMA basis, no Default or Event of Default shall have occurred and
be continuing and such Restricted Payment shall not be an event which
is, or after notice or lapse of time or both, would be, an "event of
default" under the terms of any Indebtedness of the Company or its
Restricted Subsidiaries; (2) immediately before and immediately after
giving effect to such Restricted Payment on a PRO FORMA basis, the
Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under Section 1008 herein; and (3) after giving
effect to the proposed Restricted Payment, the aggregate amount of all
such Restricted Payments declared or made after the date of this
Indenture and all Designation Amounts does not exceed the sum of:
(A) 50% of the aggregate Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning on May 2, 1999 and ending
on the last day of the Company's last fiscal quarter ending prior to the
date of the Restricted Payment (or, for each fiscal quarter of the
Company beginning with the third quarter of the Company's fiscal year
ending January 29, 2000, if such aggregate cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company either (x) as capital contributions in the form
of common equity to the Company or (y) from the issuance or sale (other
than to any of its Subsidiaries) of Qualified Capital Stock of the
Company or any options, warrants or rights to purchase such Qualified
Capital Stock of the Company (except, in each case, to the extent such
proceeds are used to purchase, redeem or otherwise retire Capital Stock
or Subordinated Indebtedness as set forth below in clause (ii) or (iii)
of paragraph (b) below) (and excluding the Net Cash Proceeds from the
issuance of Qualified Capital Stock financed, directly or indirectly,
using funds borrowed from the Company or any Subsidiary until and to the
extent such borrowing is repaid);
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(C) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company (other than from any of its Subsidiaries)
upon the exercise of any options, warrants or rights to purchase
Qualified Capital Stock of the Company (and excluding the Net Cash
Proceeds from the exercise of any options, warrants or rights to
purchase Qualified Capital Stock financed, directly or indirectly,
using funds borrowed from the Company or any Subsidiary until and to
the extent such borrowing is repaid);
(D) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company from the conversion or exchange, if any, of
debt securities or Redeemable Capital Stock of the Company or its
Restricted Subsidiaries into or for Qualified Capital Stock of the
Company plus, to the extent such debt securities or Redeemable Capital
Stock were issued after the date of this Indenture, the aggregate of
Net Cash Proceeds from their original issuance (and excluding the Net
Cash Proceeds from the conversion or exchange of debt securities or
Redeemable Capital Stock financed, directly or indirectly, using
funds borrowed from the Company or any Subsidiary until and to the
extent such borrowing is repaid); and
(E) (a) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the date of this Indenture, an
amount (to the extent not included in Consolidated Net Income) equal to the
lesser of the return of capital with respect to such Investment and the
initial amount of such Investment, in either case, less the cost of the
disposition of such Investment and net of taxes, and (b) in the case of the
designation of an Unrestricted Subsidiary as a Restricted Subsidiary (as long
as the designation of such Subsidiary as an Unrestricted Subsidiary was
deemed a Restricted Payment), the Fair Market Value of the Company's interest
in such Subsidiary provided that such amount shall not in any case exceed the
amount of the Restricted Payment deemed made at the time the Subsidiary was
designated as an Unrestricted Subsidiary; and
(F) $10,000,000.
(b) Notwithstanding the foregoing, and in the case of clauses
(ii) through (v) below, so long as no Default or Event of Default is
continuing or would arise therefrom, the foregoing provisions shall not
prohibit the following actions (each of clauses (i) through (iv) being
referred to as a "Permitted Payment"):
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(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (a) of this Section and such payment
shall have been deemed to have been paid on such date of declaration and
shall not have been deemed a "Permitted Payment" for purposes of the
calculation required by paragraph (a) of this Section 1009;
(ii) the repurchase, redemption, or other acquisition or
retirement for value of any shares of any class of Capital Stock of the
Company in exchange for (including any such exchange pursuant to the exercise
of a conversion right or privilege in connection with which cash is paid in
lieu of the issuance of fractional shares or scrip), or out of the Net Cash
Proceeds of a substantially concurrent issuance and sale for cash (other than
to a Subsidiary) of, other shares of Qualified Capital Stock of the Company;
PROVIDED that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of paragraph (a) of
this Section 1009;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or in an amount not in excess of the Net Cash
Proceeds of, a substantially concurrent issuance and sale for cash (other
than to any Subsidiary of the Company) of any Qualified Capital Stock of the
Company, PROVIDED that the Net Cash Proceeds from the issuance of such shares
of Qualified Capital Stock are excluded from clause (3)(B) of paragraph (a)
of this Section 1009; and
(iv) the repurchase, redemption, defeasance, retirement,
refinancing, acquisition for value or payment of principal of any
Subordinated Indebtedness (other than Redeemable Capital Stock) (a
"refinancing") through the substantially concurrent issuance of new
Subordinated Indebtedness of the Company, PROVIDED that any such new
Subordinated Indebtedness (1) shall be in a principal amount that does not
exceed the principal amount so refinanced (or, if such Subordinated
Indebtedness provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration thereof, then such
lesser amount as of the date of determination), plus the lesser of (I) the
stated amount of any premium or other payment required to be paid in
connection with such a refinancing pursuant to the terms of the Indebtedness
being refinanced or (II) the amount of premium or other payment actually paid
at such time to refinance the Indebtedness, plus, in either case, the amount
of expenses of the Company incurred in connection with such refinancing; (2)
has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Securities; (3) has a Stated Maturity for its
final scheduled principal payment later than the Stated Maturity for the
final scheduled principal payment of the Securities; and (4) is expressly
subordinated in right of payment to the Securities at least to the same
extent as the Subordinated Indebtedness to be refinanced.
Section 1010. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
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The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with
or for the benefit of any Affiliate of the Company (other than the Company or
a Wholly Owned Restricted Subsidiary) unless such transaction or series of
related transactions is entered into in good faith and in writing and (a)
such transaction or series of related transactions is on terms that are not
substantially less favorable to the Company or such Restricted Subsidiary, as
the case may be, than those that would be available in a comparable
transaction in arm's-length dealings with an unrelated third party, (b) with
respect to any transaction or series of related transactions involving
aggregate value in excess of $5,000,000, such transaction or series of
related transactions has been approved by a majority of the Disinterested
Directors of the Board of Directors of the Company, or in the event there is
only one Disinterested Director, by such Disinterested Director, and (c) with
respect to any transaction or series of related transactions involving
aggregate value in excess of $10,000,000, the Company delivers to the
Trustee a written opinion of an investment banking firm of national standing
or other recognized independent expert with experience appraising the terms
and conditions of the type of transaction or series of related transactions
for which an opinion is required stating that the transaction or series of
related transactions is fair to the Company or such Restricted Subsidiary
from a financial point of view; PROVIDED, HOWEVER, that this provision shall
not apply to (1) employment agreements and employee benefit arrangements with
any officer or director of the Company, including under any stock option or
stock incentive plans, entered into in the ordinary course of business,
consistent with the past practices of the Company or such Restricted
Subsidiary and (2) transactions pursuant to agreements in effect on the date
of this Indenture, including amendments thereto entered into after that date,
provided that the terms of any such amendment are not less favorable to the
Company or such Restricted Subsidiary than the terms of such agreement prior
to such amendment.
Section 1011. LIMITATION ON LIENS.
The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, create, incur or affirm any Lien of
any kind securing any Pari Passu Indebtedness or Subordinated Indebtedness
(including any assumption, guarantee or other liability with respect thereto
by any Restricted Subsidiary) upon any property or assets (including any
intercompany notes) of the Company or any Restricted Subsidiary owned on the
date of this Indenture or acquired after the date of this Indenture, or
assign or convey any right to receive any income or profits therefrom, unless
the Securities (or a Guarantee in the case of Liens of a Guarantor) are
directly secured equally and ratably with (or, in the case of Subordinated
Indebtedness, prior or senior thereto, with the same relative priority as the
Securities shall have with respect to such Subordinated Indebtedness) the
obligation or liability secured by such Lien except for Liens
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(A) securing any Indebtedness which became Indebtedness pursuant to a
transaction permitted under Article Eight herein or securing Acquired
Indebtedness which in each case was created prior to (and not created
in connection with, or in contemplation of) the incurrence of such
Pari Passu Indebtedness or Subordinated Indebtedness (including any
assumption, guarantee or other liability with respect thereto by any
Restricted Subsidiary) and which Indebtedness is permitted under the
provisions of Section 1008 herein or
(B) securing any Indebtedness incurred in connection with any refinancing,
renewal, substitutions or replacements of any such Indebtedness
described in clause (A), so long as the aggregate principal amount of
Indebtedness represented thereby (or if such Indebtedness provides for
an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof, the
original issue price of such Indebtedness plus any accreted value
attributable thereto since the original issuance of such Indebtedness)
is not increased by such refinancing by an amount greater than the
lesser of (1) the stated amount of any premium or other payment
required to be paid in connection with such a refinancing pursuant to
the terms of the Indebtedness being refinanced or (2) the amount of
premium or other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the
Company incurred in connection with such refinancing,
PROVIDED, HOWEVER, that in the case of clauses (A) and (B), any such Lien
only extends to the assets that were subject to such Lien securing such
Indebtedness prior to the related acquisition by the Company or its
Restricted Subsidiaries.
Notwithstanding the foregoing, any Lien securing the
Securities granted pursuant to this covenant shall be automatically and
unconditionally released and discharged upon the release by the holders of
the Pari Passu Indebtedness or Subordinated Indebtedness described above of
their Lien on the property or assets of the Company or any Restricted
Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness), at such time as the holders of all such
Pari Passu Indebtedness or Subordinated Indebtedness also release their Lien
on the property or assets of the Company or such Restricted Subsidiary, or
upon any sale, exchange or transfer to any Person not an Affiliate of the
Company of the property or assets secured by such Lien, or of all of the
Capital Stock held by the Company or any Restricted Subsidiary in, or all or
substantially all the assets of, any Restricted Subsidiary creating such Lien.
Section 1012. LIMITATION ON SALE OF ASSETS.
(a) The Company will not, and will not cause or permit any of
its Restricted Subsidiaries to, directly or indirectly, consummate an Asset
Sale unless (i) at least 75% of
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the consideration from such Asset Sale is received in cash and (ii) the
Company or such Restricted Subsidiary receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the shares or
assets subject to such Asset Sale (as determined by the Board of Directors of
the Company and evidenced in a Board Resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset
Sale are not required to be applied to repay permanently any Senior
Indebtedness or Senior Guarantor Indebtedness then outstanding as required by
the terms thereof, or the Company determines not to apply such Net Cash
Proceeds to the permanent prepayment of such Senior Indebtedness or Senior
Guarantor Indebtedness, or if no such Senior Indebtedness or Senior Guarantor
Indebtedness is then outstanding, then the Company or a Restricted Subsidiary
may within 360 days of the Asset Sale invest the Net Cash Proceeds in
properties and other assets that (as determined by the Board of Directors of
the Company) replace the properties and assets that were the subject of the
Asset Sale or in properties and assets that will be used in the businesses of
the Company or its Restricted Subsidiaries existing on the date of this
Indenture or in businesses reasonably related thereto. The amount of such
Net Cash Proceeds not used or invested within 360 days of the Asset Sale as
set forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds
$10,000,000 or more, the Company will apply the Excess Proceeds to the
repayment of the Securities and any other Pari Passu Indebtedness outstanding
with similar provisions requiring the Company to make an offer to purchase
such Indebtedness with the proceeds from any Asset Sale as follows: (A) the
Company will make an offer to purchase (an "Offer") from all holders of the
Securities in accordance with the procedures set forth in this Indenture in
the maximum principal amount (expressed as a multiple of $1,000) of
Securities that may be purchased out of an amount (the "Security Amount")
equal to the product of such Excess Proceeds multiplied by a fraction, the
numerator of which is the outstanding principal amount of the Securities, and
the denominator of which is the sum of the outstanding principal amount (or
accreted value in the case of Indebtedness issued with original issue
discount) of the Securities and such Pari Passu Indebtedness (subject to
proration in the event such amount is less than the aggregate Offered Price
(as defined herein) of all Securities tendered) and (B) to the extent
required by such Pari Passu Indebtedness to permanently reduce the principal
amount of such Pari Passu Indebtedness (or accreted value in the case of
Indebtedness issued with original issue discount), the Company will make an
offer to purchase or otherwise repurchase or redeem Pari Passu Indebtedness
(a "Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to
the excess of the Excess Proceeds over the Security Amount; PROVIDED that in
no event will the Company be required to make a Pari Passu Offer in a Pari
Passu Debt Amount exceeding the principal amount (or accreted value) of such
Pari Passu Indebtedness plus the amount of any premium required to be paid to
repurchase such Pari Passu Indebtedness. The offer price for the Securities
will be payable in cash in an amount equal to 100% of the principal amount of
the Securities plus
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accrued and unpaid interest, if any, to the date (the "Offer Date") such
Offer is consummated (the "Offered Price"), in accordance with the procedures
set forth in this Indenture. To the extent that the aggregate Offered Price
of the Securities tendered pursuant to the Offer is less than the Security
Amount relating thereto or the aggregate amount of Pari Passu Indebtedness
that is purchased in a Pari Passu Offer is less than the Pari Passu Debt
Amount, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Securities and Pari
Passu Indebtedness surrendered by holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Securities to be purchased on a
pro rata basis. Upon the completion of the purchase of all the Securities
tendered pursuant to an Offer and the completion of a Pari Passu Offer, the
amount of Excess Proceeds, if any, shall be reset at zero.
(d) If the Company becomes obligated to make an Offer pursuant
to clause (c) above, the Securities and the Pari Passu Indebtedness shall be
purchased by the Company, at the option of the holders thereof, in whole or
in part in integral multiples of $1,000, on a date that is not earlier than
30 days and not later than 60 days from the date the notice of the Offer is
given to holders, or such later date as may be necessary for the Company to
comply with the requirements under the Exchange Act.
(e) In the event that the Company is required to make an Offer
but is restricted from making an Offer pursuant to clause (c) above under the
terms of any of its outstanding Senior Indebtedness, then the Company need
not make such an Offer pursuant to clause (c) above and shall not be deemed
to be in default in the performance of such covenant by virtue of not making
such an Offer, provided that in any such event (1) the Company shall use all
or a portion of the Net Cash Proceeds of any Asset Sale to repay permanently
any Senior Indebtedness or Senior Guarantor Indebtedness then outstanding as
required by the terms thereof or (2) the Company or a Restricted Subsidiary
shall within 360 days of the Asset Sale invest the Net Cash Proceeds in
properties and other assets that (as determined by the Board of Directors of
the Company) replace the properties and assets that were the subject of the
Asset Sale or in properties and assets that will be used in the businesses of
the Company or its Restricted Subsidiaries existing on the date of this
Indenture or in businesses reasonably related thereto.
(f) The Company will comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, and any other applicable
securities laws or regulations in connection with an Offer.
(g) Subject to paragraph (f) above, within 30 days after the
date on which the amount of Excess Proceeds equals or exceeds $10,000,000,
the Company shall send or cause to be sent by first-class mail, postage
prepaid, to the Trustee and to each Holder, at his address appearing in the
Security Register, a notice stating or including:
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(1) that the Holder has the right to require the Company to
repurchase, subject to proration, such Holder's Securities at the
Offered Price;
(2) the Offer Date;
(3) the instructions a Holder must follow in order to have
his Securities purchased in accordance with paragraph (c) of this
Section;
(4) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q, as
applicable, and any Current Report on Form 8-K of the Company filed
subsequent to such Quarterly Report, other than Current Reports
describing Asset Sales otherwise described in the offering materials
(or corresponding successor reports) (or in the event the Company is
not required to prepare any of the foregoing Forms, the comparable
information required pursuant to Section 1019), (ii) a description of
material developments, if any, in the Company's business subsequent to
the date of the latest of such reports, (iii) if material, appropriate
pro forma financial information, and (iv) such other information, if
any, concerning the business of the Company which the Company in good
faith believes will enable such Holders to make an informed investment
decision regarding the Offer;
(5) the Offered Price;
(6) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
(7) that Securities must be surrendered prior to the Offer
Date to the Paying Agent at the office of the Paying Agent or to an
office or agency referred to in Section 1002 to collect payment;
(8) that any Securities not tendered will continue to accrue
interest and that unless the Company defaults in the payment of the
Offered Price, any Security accepted for payment pursuant to the Offer
shall cease to accrue interest on and after the Offer Date;
(9) the procedures for withdrawing a tender; and
(10) that the Offered Price for any Security which has been
properly tendered and not withdrawn and which has been accepted for
payment pursuant to the Offer will be paid promptly following the
Offered Date.
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(h) Holders electing to have Securities purchased hereunder will
be required to surrender such Securities at the address specified in the
notice prior to the Offer Date. Holders will be entitled to withdraw their
election to have their Securities purchased pursuant to this Section 1012 if
the Company receives, not later than one Business Day prior to the Offer
Date, a telegram, telex, facsimile transmission or letter setting forth (1)
the name of the Holder, (2) the certificate number of the Security in respect
of which such notice of withdrawal is being submitted, (3) the principal
amount of the Security (which shall be $1,000 or an integral multiple
thereof) delivered for purchase by the Holder as to which his election is to
be withdrawn, (4) a statement that such Holder is withdrawing his election to
have such principal amount of such Security purchased, and (5) the principal
amount, if any, of such Security (which shall be $1,000 or an integral
multiple thereof) that remains subject to the original notice of the Offer
and that has been or will be delivered for purchase by the Company.
(i) The Company shall (i) not later than the Offer Date, accept
for payment Securities or portions thereof tendered pursuant to the Offer,
(ii) not later than 10:00 a.m. (New York time) on the Offer Date, deposit
with the Trustee or with a Paying Agent an amount of money in same day funds
(or New York Clearing House funds if such deposit is made prior to the Offer
Date) sufficient to pay the aggregate Offered Price of all the Securities or
portions thereof which are to be purchased on that date and (iii) not later
than 10:00 a.m. (New York time) on the Offer Date, deliver to the Paying
Agent an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to Holders of Securities so accepted payment in an amount equal to
the Offered Price of the Securities purchased from each such Holder, and the
Company shall execute and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed or delivered by the Paying Agent at the
Company's expense to the Holder thereof. For purposes of this Section 1012,
the Company shall choose a Paying Agent which shall not be the Company.
Subject to applicable escheat laws, the Trustee and the Paying
Agent shall return to the Company any cash that remains unclaimed, together
with interest, if any, thereon, held by them for the payment of the Offered
Price; PROVIDED, HOWEVER, that (x) to the extent that the aggregate amount of
cash deposited by the Company with the Trustee in respect of an Offer exceeds
the aggregate Offered Price of the Securities or portions thereof to be
purchased, then the Trustee shall hold such excess for the Company and (y)
unless otherwise directed by the Company in writing, promptly after the
Business Day following the Offer Date the Trustee shall return any such
excess to the Company together with interest or dividends, if any, thereon.
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(j) Securities to be purchased shall, on the Offer Date, become
due and payable at the Offered Price and from and after such date (unless the
Company shall default in the payment of the Offered Price) such Securities
shall cease to bear interest. Such Offered Price shall be paid to such
Holder promptly following the later of the Offer Date and the time of
delivery of such Security to the relevant Paying Agent at the office of such
Paying Agent by the Holder thereof in the manner required. Upon surrender of
any such Security for purchase in accordance with the foregoing provisions,
such Security shall be paid by the Company at the Offered Price; PROVIDED,
HOWEVER, that installments of interest whose Stated Maturity is on or prior
to the Offer Date shall be payable to the Person in whose name the Securities
(or any Predecessor Securities) is registered as such on the relevant Regular
Record Dates according to the terms and the provisions of Section 309;
PROVIDED, FURTHER, that Securities to be purchased are subject to proration
in the event the Excess Proceeds are less than the aggregate Offered Price of
all Securities tendered for purchase, with such adjustments as may be
appropriate by the Trustee so that only Securities in denominations of $1,000
or integral multiples thereof, shall be purchased. If any Security tendered
for purchase shall not be so paid upon surrender thereof by deposit of funds
with the Trustee or a Paying Agent in accordance with paragraph (i) above,
the principal thereof (and premium, if any, thereon) shall, until paid, bear
interest from the Offer Date at the rate borne by such Security. Any
Security that is to be purchased only in part shall be surrendered to a
Paying Agent at the office of such Paying Agent (with, if the Company, the
Security Registrar or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar or 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
Security, without service charge, one or more new Securities of any
authorized denomination as requested by such Holder in an aggregate principal
amount equal to, and in exchange for, the portion of the principal amount of
the Security so surrendered that is not purchased. The Company shall
publicly announce the results of the Offer on or as soon as practicable after
the Offer Date.
Section 1013. LIMITATION ON ISSUANCES OF GUARANTEES OF AND PLEDGES
FOR INDEBTEDNESS.
(a) The Company will not cause or permit any Restricted
Subsidiary, other than a Guarantor, directly or indirectly, to secure the
payment of any Senior Indebtedness of the Company and the Company will not,
and will not permit any Restricted Subsidiary to, pledge any intercompany
securities representing obligations of any Restricted Subsidiary (other than
a Guarantor) to secure the payment of any Senior Indebtedness unless in each
case such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a guarantee of payment
of the Securities by such Restricted Subsidiary, which guarantee shall be on
the same terms as the guarantee of the Senior Indebtedness (if a guarantee of
Senior Indebtedness is granted by any such Restricted
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Subsidiary) except that the guarantee of the Securities need not be secured
and shall be subordinated to the claims against such Restricted Subsidiary in
respect of Senior Indebtedness to the same extent as the Securities are
subordinated to Senior Indebtedness of the Company under the Indenture.
(b) The Company will not cause or permit any Restricted
Subsidiary (which is not a Guarantor), directly or indirectly, to guarantee,
assume or in any other manner become liable with respect to any Indebtedness
of the Company or any Restricted Subsidiary unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a Guarantee of the Securities on the same terms as
the guarantee of such Indebtedness except that (A) such guarantee need not be
secured unless required pursuant to Section 1011 herein, (B) if such
Indebtedness is by its terms Senior Indebtedness, any such assumption,
guarantee or other liability of such Restricted Subsidiary with respect to
such Indebtedness shall be senior to such Restricted Subsidiary's Guarantee
of the Securities to the same extent as such Senior Indebtedness is senior to
the Securities and (C) if such Indebtedness is by its terms expressly
subordinated to the Securities, any such assumption, guarantee or other
liability of such Restricted Subsidiary with respect to such Indebtedness
shall be subordinated to such Restricted Subsidiary's Guarantee of the
Securities at least to the same extent as such Indebtedness is subordinated
to the Securities.
(c) Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary of the Securities shall provide by its terms that it (and all
Liens securing the same) shall be 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
transaction is in compliance with the terms of this Indenture and such
Restricted Subsidiary is released from all guarantees, if any, by it of other
Indebtedness of the Company or any Restricted Subsidiaries and (ii) with
respect to any Guarantees created after the date of this Indenture, the
release by the holders of the Indebtedness of the Company described in
clauses (a) and (b) above of their security interest or their guarantee by
such Restricted Subsidiary (including any deemed release upon payment in full
of all obligations under such Indebtedness), at such time as (A) no other
Indebtedness of the Company has been secured or guaranteed by such Restricted
Subsidiary, as the case may be, or (B) the holders of all such other
Indebtedness which is secured or guaranteed by such Restricted Subsidiary
also release their security interest in or guarantee by such Restricted
Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness).
Section 1014. LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS.
The Company will not, and will not permit or cause any Guarantor
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise in any manner become directly or indirectly liable for or with
respect to or otherwise permit to exist any Indebtedness that is subordinate
in right of payment to any Indebtedness of the Company or
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such Guarantor, as the case may be, unless such Indebtedness is also PARI
PASSU with the Securities or the Guarantee of such Guarantor or subordinated
in right of payment to the Securities or such Guarantee at least to the same
extent as the Securities or such Guarantee are subordinated in right of
payment to Senior Indebtedness or Senior Indebtedness of such Guarantor, as
the case may be.
Section 1015. PURCHASE OF SECURITIES UPON A CHANGE OF CONTROL.
(a) If a Change of Control occurs, then each Holder shall have
the right to require that the Company purchase all or any part (in integral
multiples of $1,000) of such Holder's Securities pursuant to the offer
described below in this Section 1015 (the "Change of Control Offer") and in
accordance with the other procedures set forth in subsections (b), (c), (d)
and (e) of this Section 1015. In the Change of Control Offer, the Company
shall offer to purchase all of the Securities at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount of such Securities, plus accrued and unpaid interest, if
any, to the date of purchase (the "Change of Control Purchase Date") (subject
to the rights of holders of record on relevant record dates to receive
interest due on an interest payment date).
(b) Within 30 days of any Change of Control or, at the Company's
option, prior to such Change of Control but after it is publicly announced,
the Company shall notify the Trustee and give written notice (a "Change of
Control Purchase Notice") of such Change of Control to each Holder by
first-class mail, postage prepaid, at his address appearing in the Security
Register. The Change of Control Purchase Notice shall state, among other
things:
(1) that a Change of Control has occurred, the date of such
event, and that such Holder has the right to require the Company to
repurchase such Holder's Securities at the Change of Control Purchase
Price;
(2) the circumstances and relevant facts regarding such
Change of Control (including but not limited to information with
respect to pro forma historical income, cash flow and capitalization
after giving effect to such Change of Control);
(3) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q, as
applicable, and any Current Report on Form 8-K of the Company filed
subsequent to such Quarterly Report (or in the event the Company is
not required to prepare any of the foregoing Forms, the comparable
information required to be prepared by the Company and any Guarantor
pursuant to Section 1019), (ii) a description of material
developments, if any, in the Company's business subsequent to the date
of the latest of such reports and (iii) such other
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information, if any, concerning the business of the Company which the
Company in good faith believes will enable such Holders to make an
informed investment decision regarding the Change of Control Offer;
(4) that the Change of Control Offer is being made pursuant
to this Section 1015 and that all Securities properly tendered
pursuant to the Change of Control Offer will be accepted for payment
at the Change of Control Purchase Price;
(5) the Change of Control Purchase Date, which shall be fixed
by the Company on a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed, or such later date
as is necessary to comply with requirements under the Exchange Act;
(6) the Change of Control Purchase Price;
(7) the names and addresses of the Paying Agent and the
offices or agencies referred to in Section 1002;
(8) that Securities must be surrendered on or prior to the
Change of Control Purchase Date to the Paying Agent at the office of
the Paying Agent or to an office or agency referred to in Section 1002
to collect payment;
(9) that the Change of Control Purchase Price for any
Security which has been properly tendered and not withdrawn will be
paid promptly following the Change of Control Offer Purchase Date;
(10) the procedures that a Holder must follow to accept a
Change of Control Offer or to withdraw such acceptance;
(11) that any Security not tendered will continue to accrue
interest; and
(12) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Securities accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Purchase Date.
(c) Upon receipt by the Company of the proper tender of
Securities, the Holder of the Security in respect of which such proper tender
was made shall (unless the tender of such Security is properly withdrawn)
thereafter be entitled to receive solely the Change of Control Purchase Price
with respect to such Security. Upon surrender of any such Security for
purchase in accordance with the foregoing provisions, such Security shall be
paid by the Company at the Change of Control Purchase Price; PROVIDED,
HOWEVER, that
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installments of interest whose Stated Maturity is on or prior to the Change
of Control Purchase Date shall be payable to the Holders of such Securities,
or one or more Predecessor Securities, registered as such on the relevant
Regular Record Dates according to the terms and the provisions of Section
309. If any Security tendered for purchase in accordance with the provisions
of this Section 1015 shall not be so paid upon surrender thereof, the
principal thereof (and premium, if any, thereon) shall, until paid, bear
interest from the Change of Control Purchase Date at the rate borne by such
Security. Holders electing to have Securities purchased will be required to
surrender such Securities to the Paying Agent at the address specified in the
Change of Control Purchase Notice at least one Business Day prior to the
Change of Control Purchase Date. Any Security that is to be purchased only
in part shall be surrendered to a Paying Agent at the office of such Paying
Agent (with, if the Company, the Security Registrar or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Security Registrar or the Trustee, as the
case may be, 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 Security, without
service charge, one or more new Securities of any authorized denomination as
requested by such Holder in an aggregate principal amount equal to, and in
exchange for, the portion of the principal amount of the Security so
surrendered that is not purchased.
(d) The Company shall (i) not later than the Change of Control
Purchase Date, accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer, (ii) not later than 10:00 a.m. (New
York time) on the Business Day following the Change of Control Purchase Date,
deposit with the Trustee or with a Paying Agent an amount of money in same
day funds (or New York Clearing House funds if such deposit is made prior to
the Change of Control Purchase Date) sufficient to pay the aggregate Change
of Control Purchase Price of all the Securities or portions thereof which
have been so accepted for payment and (iii) not later than 10:00 a.m. (New
York time) on the Business Day following the Change of Control Purchase Date,
deliver to the Paying Agent an Officers' Certificate stating the Securities
or portions thereof accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver to Holders of Securities so accepted payment
in an amount equal to the Change of Control Purchase Price of the Securities
purchased from each such Holder, and the Company shall execute and the
Trustee shall promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted shall be promptly mailed or
delivered by the Paying Agent at the Company's expense to the Holder thereof.
The Company will publicly announce the results of the Change of Control
Offer on the Change of Control Purchase Date. For purposes of this Section
1015, the Company shall choose a Paying Agent which shall not be the Company.
(e) A tender made in response to a Change of Control Purchase
Notice may be withdrawn if the Company receives, not later than one Business
Day prior to the Change
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of Control Purchase Date, a telegram, telex, facsimile transmission or
letter, specifying, as applicable:
(1) the name of the Holder;
(2) the certificate number of the Security in respect of
which such notice of withdrawal is being submitted;
(3) the principal amount of the Security (which shall be
$1,000 or an integral multiple thereof) delivered for purchase by the
Holder as to which such notice of withdrawal is being submitted;
(4) a statement that such Holder is withdrawing his election
to have such principal amount of such Security purchased; and
(5) the principal amount, if any, of such Security (which
shall be $1,000 or an integral multiple thereof) that remains subject
to the original Change of Control Purchase Notice and that has been or
will be delivered for purchase by the Company.
(f) Subject to applicable escheat laws, the Trustee and the
Paying Agent shall return to the Company any cash that remains unclaimed,
together with interest or dividends, if any, thereon, held by them for the
payment of the Change of Control Purchase Price; PROVIDED, HOWEVER, that, (x)
to the extent that the aggregate amount of cash deposited by the Company
pursuant to clause (ii) of paragraph (d) above exceeds the aggregate Change
of Control Purchase Price of the Securities or portions thereof to be
purchased, then the Trustee shall hold such excess for the Company and (y)
unless otherwise directed by the Company in writing, promptly after the
Business Day following the Change of Control Purchase Date the Trustee shall
return any such excess to the Company together with interest, if any, thereon.
(g) The Company shall comply, to the extent applicable, with the
applicable tender offer rules, including Rule 14e-1 under the Exchange Act,
and any other applicable securities laws or regulations in connection with a
Change of Control Offer.
(h) Notwithstanding the foregoing, the Company will not be
required to make a Change of Control Offer if a third party makes the Change
of Control Offer, in the manner, at the times and otherwise in compliance
with the requirements set forth in this Indenture applicable to a Change of
Control Offer made by the Company and purchases all the Securities validly
tendered and not withdrawn under such Change of Control Offer.
Section 1016. LIMITATION ON SUBSIDIARY CAPITAL STOCK.
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(a) The Company will not permit any Restricted Subsidiary of the
Company to issue, sell or transfer any Capital Stock, except for (1) Capital
Stock issued or sold to, held by or transferred to the Company or a Wholly
Owned Restricted Subsidiary and (2) Capital Stock issued by a Person prior to
the time (A) such Person becomes a Restricted Subsidiary, (B) such Person
merges with or into a Restricted Subsidiary or (C) a Restricted Subsidiary
merges with or into such Person; PROVIDED that such Capital Stock was not
issued or incurred by such Person in anticipation of the type of transaction
contemplated by subclause (A), (B) or (C). This clause (a) shall not apply
on the acquisition of all the outstanding Capital Stock of such Restricted
Subsidiary in accordance with the terms of this Indenture.
(b) The Company will not permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary) to acquire Capital Stock of
any Restricted Subsidiary from the Company or any Restricted Subsidiary,
except upon the acquisition of all the outstanding Capital Stock of such
Restricted Subsidiary in accordance with the terms of this Indenture.
Section 1017. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.
The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (1) pay dividends or make any other
distribution on its Capital Stock or any other interest or participation in
or measured by its profits, (2) pay any Indebtedness owed to the Company or
any other Restricted Subsidiary, (3) make any Investment in the Company or
any other Restricted Subsidiary or (4) transfer any of its properties or
assets to the Company or any other Restricted Subsidiary. However, this
covenant does not prohibit any encumbrance or restriction (1) pursuant to an
agreement in effect on the date of this Indenture and listed on Schedule II
to this Indenture; (2) with respect to a Restricted Subsidiary that is not a
Restricted Subsidiary of the Company on the date of the Indenture, in
existence at the time such Person becomes a Restricted Subsidiary of the
Company and not incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary, provided that such encumbrances and
restrictions are not applicable to the Company or any Restricted Subsidiary
or the properties or assets of the Company or any Restricted Subsidiary other
than such Subsidiary which is becoming a Restricted Subsidiary; and (3) under
any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (1) and
(2), or in this clause (3), PROVIDED that the terms and conditions of any
such encumbrances or restrictions are no more restrictive in any material
respect than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced.
Section 1018. LIMITATIONS ON UNRESTRICTED SUBSIDIARIES.
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The Company may designate after the Issue Date any Subsidiary (other
than a Guarantor) as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:
(a) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation;
(b) the Company would be permitted to make an Investment (other
than a Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
Section 1009 herein in an amount (the "Designation Amount") equal to the
greater of (1) the net book value of the Company's interest in such
Subsidiary calculated in accordance with GAAP or (2) the Fair Market Value
of the Company's interest in such Subsidiary as determined in good faith by
the Company's Board of Directors;
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 1008
hereof at the time of such Designation (assuming the effectiveness of such
Designation);
(d) such Unrestricted Subsidiary does not own any Capital Stock in
any Restricted Subsidiary of the Company which is not simultaneously being
designated an Unrestricted Subsidiary;
(e) such Unrestricted Subsidiary is not liable, directly or
indirectly, with respect to any Indebtedness other than Unrestricted
Subsidiary Indebtedness, provided that an Unrestricted Subsidiary may
provide a Guarantee for the Securities; and
(f) such Unrestricted Subsidiary is not a party to any agreement,
contract, arrangement or understanding at such time with the Company or any
Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company or, in the event such
condition is not satisfied, the value of such agreement, contract,
arrangement or understanding to such Unrestricted Subsidiary shall be
deemed a Restricted Payment.
In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
1009 hereof for all purposes of this Indenture equal to the Designation
Amount.
The Company shall not and shall not cause or permit any Restricted
Subsidiary to at any time (a) provide credit support for, or subject any of
its property or assets (other than the Capital Stock of any Unrestricted
Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing
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such Indebtedness) (other than Permitted Investments in Unrestricted
Subsidiaries) or (b) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary. For purposes of the foregoing, the Designation
of a Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed
to be the Designation of all of the Subsidiaries of such Subsidiary as
Unrestricted Subsidiaries.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture; and
(c) unless such redesignated Subsidiary shall not have any
Indebtedness outstanding (other than Indebtedness that would be Permitted
Indebtedness), immediately after giving effect to such proposed Revocation,
and after giving pro forma effect to the incurrence of any such
Indebtedness of such redesignated Subsidiary as if such Indebtedness was
incurred on the date of the Revocation, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 1009 herein.
All Designations and Revocations must be evidenced by a resolution
of the Board of Directors of the Company delivered to the Trustee certifying
compliance with the foregoing provisions.
Section 1019. PROVISION OF FINANCIAL STATEMENTS.
Whether or not the Company is subject to Section 13(a) or 15(d) of
the Exchange Act, the Company and each Guarantor will, to the extent
permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Company and such
Guarantor would have been required to file with the Commission pursuant to
Sections 13(a)
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or 15(d) if the Company or such Guarantor were so subject, such documents to
be filed with the Commission on or prior to the date (the "Required Filing
Date") by which the Company and such Guarantor would have been required so to
file such documents if the Company and such Guarantor were so subject. The
Company and any Guarantor will also in any event (a) within 15 days of each
Required Filing Date (1) transmit by mail to all holders, as their names and
addresses appear in the Security Register, without cost to such holders and
(2) file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company and such Guarantor would have been required
to file with the Commission pursuant to Sections 13(a) or 15(d) of the
Exchange Act if the Company and such Guarantor were subject to either of such
Sections and (b) if filing such documents by the Company and such Guarantor
with the Commission is not permitted under the Exchange Act, promptly upon
written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective holder at the
Company's cost. If any Guarantor's financial statements would be required to
be included in the financial statements filed or delivered pursuant to this
Indenture if the Company were subject to Section 13(a) or 15(d) of the
Exchange Act, the Company shall include such Guarantor's financial statements
in any filing or delivery pursuant to this Indenture. In addition, so long
as any of the Securities remain outstanding, the Company will make available
to any prospective purchaser of Securities or beneficial owner of Securities
in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act, until such time as the Company has
either exchanged the Securities for securities identical in all material
respects which have been registered under the Securities Act or until such
time as the holders thereof have disposed of such Securities pursuant to an
effective registration statement under the Securities Act.
Section 1020. STATEMENT BY OFFICERS AS TO DEFAULT.
(a) The Company and the Guarantors will deliver to the Trustee,
on or before a date not more than 120 days after the end of each fiscal year
of the Company ending after the date hereof, and 60 days after the end of
each fiscal quarter ending after the date hereof, a written statement signed
by two executive officers of the Company and the Guarantors, one of whom
shall be the principal executive officer, principal financial officer or
principal accounting officer of the Company and the Guarantors, as to
compliance herewith, including whether or not, after a review of the
activities of the Company during such year or such quarter and of the
Company's and each Guarantor's performance under this Indenture, to the best
knowledge, based on such review, of the signers thereof, the Company and each
Guarantor have fulfilled all of their respective obligations and are in
compliance with all conditions and covenants under this Indenture throughout
such year or quarter, as the case may be, and, if there has been a Default
specifying each Default and the nature and status thereof and any actions
being taken by the Company and the Guarantors with respect thereto.
(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or the trustee for or the holder
of any other evidence of Indebtedness of the Company or any Subsidiary gives
any notice or takes any other action with respect to a claimed default, the
Company and the Guarantors shall deliver to the Trustee by registered or
certified mail or facsimile transmission followed by an originally executed
copy of an Officers' Certificate specifying such Default, Event of Default,
notice or other action, the status thereof and what actions the Company and
the Guarantors are taking or propose to take with respect thereto, within
five Business Days after the occurrence of such Default or Event of Default.
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Section 1021. WAIVER OF CERTAIN COVENANTS.
The Company and the Guarantors may omit in any particular instance
to comply with any covenant or condition set forth in Sections 1006 through
1011, 1013, 1014, and 1016 through 1020, if, before or after the time for
such compliance, the Holders of not less than a majority in aggregate
principal amount of the Securities at the time Outstanding shall, by Act of
such Holders, waive such compliance in such instance with such covenant or
provision, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such covenant or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. RIGHTS OF REDEMPTION.
(a) The Securities are subject to redemption at any time on or
after May 1, 2003, at the option of the Company, in whole or in part, subject
to the conditions, and at the Redemption Prices, specified in the form of
Security, together with accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on relevant
Regular Record Dates and Special Record Dates to receive interest due on
relevant Interest Payment Dates and Special Payment Dates).
(b) In addition, at any time prior to May 1, 2002, the Company,
at its option, may use the net proceeds of one or more Public Equity
Offerings to redeem up to an aggregate of 35% of the aggregate principal
amount of Securities originally issued under this Indenture at a redemption
price equal to 110.375% of the aggregate principal amount thereof, plus
accrued and unpaid interest thereon, if any, to the Redemption Date; PROVIDED
that at least 65% of the initial aggregate principal amount of Securities
remains outstanding immediately after the occurrence of such redemption. In
order to effect the foregoing redemption, the Company must mail a notice of
redemption no later than 30 days after the closing of the related Public
Equity Offering and must consummate such redemption within 60 days of the
closing of the Public Equity Offering.
Section 1102. APPLICABILITY OF ARTICLE.
Redemption of Securities 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 Eleven.
Section 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
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The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Company Order and an Officers'
Certificate. In case of any redemption at the election of the Company, the
Company shall, not less than 45 nor more than 60 days prior to the Redemption
Date fixed by the Company (unless a shorter notice period shall be
satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the principal amount of Securities to be redeemed.
Section 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed shall be selected not more than
30 days prior to the Redemption Date. The Trustee shall select the
Securities or portions thereof to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which
the Securities are listed, or if the Securities are not so listed, PRO RATA,
by lot or by any other method the Trustee shall deem fair and reasonable.
The amounts to be redeemed shall be equal to $1,000 or any integral multiple
thereof.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the
case of any Securities 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 Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
Section 1105. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at its address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date upon
surrender of such
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Security, new Security or Securities in the aggregate principal amount equal
to the unredeemed portion thereof will be issued;
(e) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become
due and payable upon each such Security or portion thereof to be redeemed,
and that (unless the Company shall default in payment of the Redemption
Price) interest thereon shall cease to accrue on and after said date;
(g) the names and addresses of the Paying Agent and the offices
or agencies referred to in Section 1002 where such Securities are to be
surrendered for payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Securities; and
(i) the procedures that a Holder must follow to surrender the
Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's written
request, by the Trustee in the name and at the expense of the Company. If
the Company elects to give notice of redemption, it shall provide the Trustee
with a certificate stating that such notice has been given in compliance with
the requirements of this Section 1105.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect
in the notice to the Holder of any Security designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security.
Section 1106. DEPOSIT OF REDEMPTION PRICE.
On or prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company or any of its
Affiliates is acting as Paying Agent, segregate and hold in trust as provided
in Section 1003) an amount of money in same day funds sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date or Special Payment Date) accrued interest on, all the Securities
or portions thereof which are to be redeemed on that date. The Paying Agent
shall promptly mail or deliver to Holders of Securities so redeemed payment
in an amount equal to the Redemption Price of the Securities purchased from
each such Holder. All money, if any, earned on funds held in trust by the
Trustee or any Paying Agent shall be remitted to the
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Company. For purposes of this Section 1106, the Company shall choose a
Paying Agent which shall not be the Company.
Section 1107. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at
the Redemption Price therein specified and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price together with
accrued interest to the Redemption Date; PROVIDED, HOWEVER, that installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall
be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such on the relevant Regular Record Dates and
Special Record Dates according to the terms and the provisions of Section 309.
If any Security 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 such
Security.
Section 1108. SECURITIES REDEEMED OR PURCHASED IN PART.
Any Security which is to be redeemed or purchased only in part
shall be surrendered to the Paying Agent at the office or agency maintained
for such purpose pursuant to Section 1002 (with, if the Company, the Security
Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar or the Trustee, as the case may be, 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 Security without service charge, a new Security or Securities,
of any authorized denomination as requested by such Holder in aggregate
principal amount equal to, and in exchange for, the unredeemed portion of the
principal of the Security so surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall be discharged and shall cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of Securities as expressly provided for herein) as to all Outstanding
Securities hereunder, and the Trustee, upon
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Company Request and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when
(a) either
(1) all the Securities theretofore authenticated and
delivered (other than (i) lost, stolen or destroyed Securities which
have been replaced or paid as provided in Section 308 or (ii) all
Securities for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the
Trustee for cancellation (i) have become due and payable, (ii) will
become due and payable at their Stated Maturity within one year or
(iii) are to be 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;
(b) the Company or any Guarantor has irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust an amount in
United States dollars sufficient to pay and discharge the entire Indebtedness
on the Securities not theretofore delivered to the Trustee for cancellation,
including the principal of, premium, if any, and accrued interest on, such
Securities at such Maturity, Stated Maturity or Redemption Date;
(c) the Company or any Guarantor has paid or caused to be paid
all other sums payable hereunder by the Company and any Guarantor; and
(d) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, in form and substance
satisfactory to the Trustee, each stating that (i) all conditions precedent
herein relating to the satisfaction and discharge hereof have been complied
with and (ii) such satisfaction and discharge will not result in a breach or
violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company, any Guarantor or any
Restricted Subsidiary is a party or by which the Company, any Guarantor or
any Restricted Subsidiary is bound.
Notwithstanding the satisfaction and discharge hereof, the
obligations of the Company to the Trustee under Section 607 and, if United
States dollars shall have been deposited with the Trustee pursuant to
subclause (2) of subsection (a) of this Section 1201, the obligations of the
Trustee under Section 1202 and the last paragraph of Section 1003 shall
survive.
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Section 1202. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003,
all United States dollars deposited with the Trustee pursuant to Section 1201
shall be held in trust and applied by it, in accordance with the provisions
of the Securities 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 of, premium, if any, and interest on, the Securities for whose
payment such United States dollars have been deposited with the Trustee.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
Section 1301. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and each Holder of a Security, by
such Holder's acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article, the
Indebtedness represented by the Securities and the payment of the principal
of, premium, if any, and interest on, the Securities are hereby expressly
made subordinate and subject in right of payment as provided in this Article
to the prior payment in full of the Senior Indebtedness.
This Article Thirteen shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue
to hold Senior Indebtedness; and such provisions are made for the benefit of
the holders of Senior Indebtedness; and such holders are made obligees
hereunder and they or each of them may enforce such provisions as provided
herein.
Section 1302. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding, relative to the Company or to its assets, or (b) any
liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary, or (c) any assignment for the benefit of creditors
or any other marshaling of assets or liabilities of the Company, then and in
any such event:
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full of all amounts due on or in respect of Senior
Indebtedness before the Holders of the Securities are entitled to receive any
payment or distribution of any kind or character (excluding securities of the
Company or any other corporation that are equity securities or are
subordinated in right of payment to all Senior Indebtedness, that may be
outstanding, to
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substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article ("Permitted Junior
Securities")) on account of the principal of, premium, if any, or interest on
the Securities or on account of the purchase, redemption, defeasance or other
acquisition of, or in respect of, the Securities (other than amounts
previously set aside with the Trustee, or payments previously made, in either
case, pursuant to the provisions of Sections 402 and 403 of this Indenture);
and
(2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (excluding
Permitted Junior Securities), by set-off or otherwise, to which the Holders
or the Trustee would be entitled but for the provisions of this Article shall
be paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior
Indebtedness or their representative or representatives or to the trustee or
trustees under any indenture under which any instruments evidencing any of
such Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness held
or represented by each, to the extent necessary to make payment in full of
all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (excluding Permitted
Junior Securities), in respect of principal, premium, if any, and interest on
the Securities before all Senior Indebtedness is paid in full, then and in
such event such payment or distribution (excluding Permitted Junior
Securities) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payments or distributions of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of the Company
following the sale, assignment, conveyance, transfer, lease or other disposal
of its properties and assets substantially as an entirety to another Person
upon the terms and conditions set forth in Article Eight shall not be deemed
a dissolution, winding up, liquidation, reorganization, assignment for the
benefit of creditors or marshaling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation
or the surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of such properties
and assets substantially as an entirety, as the case
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may be, shall, as a part of such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposal, comply with the conditions set
forth in Article Eight.
Section 1303. SUSPENSION OF PAYMENT WHEN DESIGNATED SENIOR
INDEBTEDNESS IN DEFAULT.
(a) Unless Section 1302 shall be applicable, upon the occurrence
of any default in the payment of any Designated Senior Indebtedness beyond
any applicable grace period (a "Payment Default") and after the receipt by
the Trustee from a Senior Representative of any Designated Senior
Indebtedness of written notice of such default, no payment (other than
amounts previously set aside with the Trustee or payments previously made, in
either case, pursuant to Section 402 or 403 in this Indenture) or
distribution of any assets of the Company of any kind or character (excluding
Permitted Junior Securities) may be made on account of the principal of,
premium, if any, or interest on, the Securities, or on account of the
purchase, redemption, defeasance or other acquisition of or in respect of,
the Securities unless and until such Payment Default shall have been cured or
waived or shall have ceased to exist or such Designated Senior Indebtedness
shall have been discharged or paid in full, after which the Company shall
(subject to the other provisions of this Article Thirteen) resume making any
and all required payments in respect of the Securities, including any missed
payments.
(b) Unless Section 1302 shall be applicable, (1) upon the
occurrence and during the continuance of any non-payment default with respect
to any Designated Senior Indebtedness pursuant to which the maturity thereof
may then be accelerated immediately (a "Non-payment Default") and (2) after
the receipt by the Trustee and the Company from a Senior Representative of
any Designated Senior Indebtedness of written notice of such Non-payment
Default, no payment (other than any amounts previously set aside with the
Trustee, or payments previously made, in either case, pursuant to the
provisions of Sections 402 or 403 in this Indenture) or distribution of any
assets of the Company of any kind or character (excluding Permitted Junior
Securities) may be made by the Company on account of the principal of,
premium, if any, or interest on, the Securities, or on account of the
purchase, redemption, defeasance or other acquisition of, or in respect of,
the Securities for the period specified below ("Payment Blockage Period").
(c) The Payment Blockage Period shall commence upon the receipt
of notice of the Non-payment Default by the Trustee and the Company from a
Senior Representative and shall end on the earliest of (i) the 179th day
after such commencement, (ii) the date on which such Non-payment Default (and
all Non-payment Defaults as to which notice is given after such Payment
Blockage Period is initiated) is cured, waived or ceases to exist or on which
such Designated Senior Indebtedness is discharged or paid in full, or (iii)
the date on which such Payment Blockage Period (and all other Non-payment
Defaults as to which notice is given after such Payment Blockage Period is
initiated) shall have been terminated by written notice to the Company or the
Trustee from the Senior Representative
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initiating such Payment Blockage Period. When the Payment Blockage Period
ends, the Company shall promptly resume making any and all required payments
in respect of the Securities, including any missed payments. In no event will
a Payment Blockage Period extend beyond 179 days from the date of the receipt
by the Company or the Trustee of the notice initiating such Payment Blockage
Period (such 179-day period referred to as the "Initial Period"). Any number
of notices of Non-payment Defaults may be given during the Initial Period.
However, during any period of 365 consecutive days only one Payment Blockage
Period, during which payment of principal of, or interest on, the Securities
may not be made, may commence, the duration of such period may not exceed 179
days, and there must be a 186 consecutive day period in any 365 day period
during which no Payment Blockage Period is in effect. No Non-payment Default
with respect to Designated Senior Indebtedness that existed or was continuing
on the date of the commencement of any Payment Blockage Period will be, or
can be, made the basis for the commencement of a second Payment Blockage
Period, whether or not within a period of 365 consecutive days, unless such
default has been cured or waived for a period of not less than 90 consecutive
days subsequent to the commencement of the Initial Period. The Company
shall deliver a notice to the Trustee promptly after the date on which any
Non-payment Default is cured or waived or ceases to exist or on which the
Designated Senior Indebtedness related thereto is discharged or paid in full,
and the Trustee is authorized to act in reliance on such notice.
(d) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security
prohibited by the foregoing provisions of this Section, then and in such
event such payment shall be paid over and delivered forthwith to a Senior
Representative of the holders of the Designated Senior Indebtedness or as a
court of competent jurisdiction shall direct.
Section 1304. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article, elsewhere in this Indenture or
in any of the Securities shall prevent the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other
winding-up, assignment for the benefit of creditors or other marshaling 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, premium, if any, or interest on the Securities.
Section 1305. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
After the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated 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 principal of,
premium, if any, and interest on, the Securities 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 Securities 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
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Securities or the Trustee, shall, as among the Company, its creditors other
than holders of Senior Indebtedness, and the Holders of the Securities, be
deemed to be a payment or distribution by the Company to or on account of the
Senior Indebtedness.
Section 1306. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are intended solely for the purpose
of defining the relative rights of the Holders of the Securities 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 Securities
is intended to or shall (a) impair, as among the Company, its creditors other
than holders of Senior Indebtedness and the Holders of the Securities, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of, premium, if any, and interest on,
the Securities as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company or the Holders of the Securities and creditors of the Company other
than the holders of Senior Indebtedness; or (c) prevent the Trustee or the
Holder of any Security 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 (1) in any
case, proceeding, dissolution, liquidation or other winding up, assignment
for the benefit of creditors or other marshaling of assets and liabilities of
the Company referred to in Section 1302, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable
or deliverable to the Trustee or such Holder, or (2) under the conditions
specified in Section 1303, to prevent any payment prohibited by such Section
or enforce their rights pursuant to Section 1303(d).
Section 1307. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by such Holder's 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 such Holder's
attorney-in-fact for any and all such purposes, including, in the event of
any dissolution, winding-up, liquidation or reorganization of the Company
whether in bankruptcy, insolvency, receivership proceedings, or otherwise,
the timely filing of a claim for the unpaid balance of the indebtedness of
the Company owing to such Holder in the form required in such proceedings and
the causing of such claim to be approved.
Section 1308. NO WAIVER OF SUBORDINATION PROVISIONS.
(a) 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
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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.
(b) Without limiting the generality of subsection (a) of this
Section, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders
of Senior Indebtedness, do any one or more of the following: (1) change the
manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (2) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (3) release any Person liable in any manner for
the collection or payment of Senior Indebtedness; and (4) exercise or refrain
from exercising any rights against the Company and any other Person;
PROVIDED, HOWEVER, that in no event shall any such actions limit the right of
the Holders of the Securities to take any action to accelerate the maturity
of the Securities pursuant to Article Five of this Indenture or to pursue any
rights or remedies hereunder or under applicable laws if the taking of such
action does not otherwise violate the terms of this Article.
Section 1309. 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 Securities. 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 Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Indebtedness or
from a Senior Representative or any trustee, fiduciary or agent therefor;
and, prior to the receipt of any such written notice, the Trustee 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 by Noon, Eastern Time, on the Business Day 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, premium, if
any, or interest on any Security), then, anything herein contained to the
contrary notwithstanding but without limiting the rights and remedies of the
holders of Senior Indebtedness, a Senior Representative or any trustee,
fiduciary or agent thereof, 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 after such date; nor shall the
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Trustee be charged with knowledge of the curing of any such default or the
elimination of the act or condition preventing any such payment unless and
until the Trustee shall have received an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it
of a written notice to the Trustee and the Company by a Person which
represents itself as a Senior Representative or a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that
such notice has been given by a Senior Representative or a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor); PROVIDED, HOWEVER,
that failure to give such notice to the Company shall not affect in any way
the ability of the Trustee to rely on such notice. 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 1310. RELIANCE ON JUDICIAL ORDERS OR CERTIFICATES.
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee and the Holders of the Securities 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, or a certificate of a Senior
Representative, delivered to the Trustee or to the Holders of Securities 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 the foregoing shall apply only if
such court has been fully apprised of the provisions of this Article.
Section 1311. RIGHTS OF TRUSTEE AS A HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S 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
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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 1312. 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 under this Indenture,
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 1311 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
Section 1313. NO SUSPENSION OF REMEDIES.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant to Article Five of this Indenture or to
pursue any rights or remedies hereunder or under applicable law, subject to
the rights, if any, under this Article of the holders, from time to time, of
Senior Indebtedness to receive the cash, property or securities receivable
upon the exercise of such rights or remedies.
Section 1314. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Article against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and
the Trustee shall not be liable to any holder of Senior Indebtedness if it
shall in good faith mistakenly (absent willful misconduct) pay over or
deliver to Holders, the Company or any other Person moneys or assets to which
any holder of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
ARTICLE FOURTEEN
GUARANTEES
Section 1401. GUARANTORS' GUARANTEE.
For value received, each of the Guarantors, in accordance with this
Article Fourteen, hereby absolutely, fully, unconditionally and irrevocably
guarantees, jointly and
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severally with each other and with each other Person which may become a
Guarantor hereunder, to the Trustee and the Holders, as if the Guarantors
were the principal debtor, the punctual payment and performance when due of
all Indenture Obligations (which for purposes of this Guarantee shall also be
deemed to include all commissions, fees, charges, costs and other expenses
(including reasonable legal fees and disbursements of one counsel) arising
out of or incurred by the Trustee or the Holders in connection with the
enforcement of this Guarantee).
Section 1402. CONTINUING GUARANTEE; NO RIGHT OF SET-OFF; INDEPENDENT
OBLIGATION.
(a) This Guarantee shall be a continuing guarantee of the payment
and performance of all Indenture Obligations and shall remain in full force
and effect until the payment in full of all of the Indenture Obligations and
shall apply to and secure any ultimate balance due or remaining unpaid to the
Trustee or the Holders; and this Guarantee shall not be considered as wholly
or partially satisfied by the payment or liquidation at any time or from time
to time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Each Guarantor, jointly and severally, covenants and
agrees to comply with all obligations, covenants, agreements and provisions
applicable to it in this Indenture including those set forth in Article
Eight. Without limiting the generality of the foregoing, each Guarantor's
liability shall extend to all amounts which constitute part of the Indenture
Obligations and would be owed by the Company under this Indenture and the
Securities but for the fact that they are unenforceable, reduced, limited,
impaired, suspended or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.
(b) Each Guarantor, jointly and severally, hereby guarantees that
the Indenture Obligations will be paid to the Trustee without set-off or
counterclaim or other reduction whatsoever (whether for taxes, withholding or
otherwise) in lawful currency of the United States of America.
(c) Each Guarantor, jointly and severally, guarantees that the
Indenture Obligations shall be paid strictly in accordance with their terms
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the holders of the
Securities.
(d) Each Guarantor's liability to pay or perform or cause the
performance of the Indenture Obligations under this Guarantee shall arise
forthwith after demand for payment or performance by the Trustee has been
given to the Guarantors in the manner prescribed in Section 106 hereof.
(e) Except as provided herein, the provisions of this Article
Fourteen cover all agreements between the parties hereto relative to this
Guarantee and none of the parties shall be bound by any representation,
warranty or promise made by any Person relative
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thereto which is not embodied herein; and it is specifically acknowledged and
agreed that this Guarantee has been delivered by each Guarantor free of any
conditions whatsoever and that no representations, warranties or promises
have been made to any Guarantor affecting its liabilities hereunder, and that
the Trustee shall not be bound by any representations, warranties or promises
now or at any time hereafter made by the Company to any Guarantor.
(f) This Guarantee is a guarantee of payment, performance and
compliance and not of collectibility and is in no way conditioned or
contingent upon any attempt to collect from or enforce performance or
compliance by the Company or upon any event or condition whatsoever.
(g) The obligations of the Guarantors set forth herein constitute
the full recourse obligations of the Guarantors enforceable against them to
the full extent of all their assets and properties.
Section 1403. GUARANTEE ABSOLUTE.
The obligations of the Guarantors hereunder are independent of the
obligations of the Company under the Securities and this Indenture and a
separate action or actions may be brought and prosecuted against any
Guarantor whether or not an action or proceeding is brought against the
Company and whether or not the Company is joined in any such action or
proceeding. The liability of the Guarantors hereunder is irrevocable,
absolute and unconditional and (to the extent permitted by law) the liability
and obligations of the Guarantors hereunder shall not be released,
discharged, mitigated, waived, impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of
any Indebtedness or other obligation of the Company or any
other Person under this Indenture or the Securities, or any
agreement or instrument relating to any of the foregoing;
(b) any grants of time, renewals, extensions, indulgences,
releases, discharges or modifications which the Trustee or the
Holders may extend to, or make with, the Company, any Guarantor
or any other Person, or any change in the time, manner or place
of payment of, or in any other term of, all or any of the
Indenture Obligations, or any other amendment or waiver of, or
any consent to or departure from, this Indenture or the
Securities, including any increase or decrease in the Indenture
Obligations;
(c) the taking of security from the Company, any Guarantor or any
other Person, and the release, discharge or alteration of, or
other dealing with, such security;
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(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action
of any governmental authority or court amending, varying,
reducing or otherwise affecting, or purporting to amend, vary,
reduce or otherwise affect, any of the Indenture Obligations
and the obligations of any Guarantor hereunder;
(e) the abstention from taking security from the Company, any
Guarantor or any other Person or from perfecting, continuing to
keep perfected or taking advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any
security received from the Company, any Guarantor or any other
Person, and including any other guarantees received by the
Trustee;
(g) any other dealings with the Company, any Guarantor or any other
Person, or with any security;
(h) the Trustee's or the Holders' acceptance of compositions from
the Company or any Guarantor;
(i) the application by the Holders or the Trustee of all monies at
any time and from time to time received from the Company, any
Guarantor or any other Person on account of any indebtedness
and liabilities owing by the Company or any Guarantor to the
Trustee or the Holders, in such manner as the Trustee or the
Holders deems best and the changing of such application in
whole or in part and at any time or from time to time, or any
manner of application of collateral, or proceeds thereof, to
all or any of the Indenture Obligations, or the manner of sale
of any collateral;
(j) the release or discharge of the Company or any Guarantor of the
Securities or of any Person liable directly as surety or
otherwise by operation of law or otherwise for the Securities,
other than an express release in writing given by the Trustee,
on behalf of the Holders, of the liability and obligations of
any Guarantor hereunder;
(k) any change in the name, business, capital structure or
governing instrument of the Company or any Guarantor or any
refinancing or restructuring of any of the Indenture
Obligations;
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(l) the sale of the Company's or any Guarantor's business or any
part thereof;
(m) subject to Section 1414, any merger or consolidation,
arrangement or reorganization of the Company, any Guarantor,
any Person resulting from the merger or consolidation of the
Company or any Guarantor with any other Person or any other
successor to such Person or merged or consolidated Person or
any other change in the corporate existence, structure or
ownership of the Company or any Guarantor or any change in the
corporate relationship between the Company and any Guarantor,
or any termination of such relationship;
(n) the insolvency, bankruptcy, liquidation, winding-up,
dissolution, receivership, arrangement, readjustment,
assignment for the benefit of creditors or distribution of the
assets of the Company or its assets or any resulting discharge
of any obligations of the Company (whether voluntary or
involuntary) or of any Guarantor (whether voluntary or
involuntary) or the loss of corporate existence;
(o) subject to Section 1414, any arrangement or plan of
reorganization affecting the Company or any Guarantor;
(p) any failure, omission or delay on the part of the Company to
conform or comply with any term of this Indenture;
(q) any limitation on the liability or obligations of the Company
or any other Person under this Indenture, or any discharge,
termination, cancellation, distribution, irregularity,
invalidity or unenforceability in whole or in part of this
Indenture;
(r) any other circumstance (including any statute of limitations)
that might otherwise constitute a defense available to, or
discharge of, the Company or any Guarantor; or
(s) any modification, compromise, settlement or release by the
Trustee, or by operation of law or otherwise, of the Indenture
Obligations or the liability of the Company or any other
obligor under the Securities, in whole or in part, and any
refusal of payment by the Trustee, in whole or in part, from
any other obligor or other guarantor in connection with any of
the Indenture Obligations, whether or not with notice to, or
further assent by, or any reservation of rights against, each
of the Guarantors.
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Section 1404. RIGHT TO DEMAND FULL PERFORMANCE.
In the event of any demand for payment or performance by the
Trustee from any Guarantor hereunder, the Trustee or the Holders shall have
the right to demand its full claim and to receive all dividends or other
payments in respect thereof until the Indenture Obligations have been paid in
full, and the Guarantors shall continue to be jointly and severally liable
hereunder for any balance which may be owing to the Trustee or the Holders by
the Company under this Indenture and the Securities. The retention by the
Trustee or the Holders of any security, prior to the realization by the
Trustee or the Holders of its rights to such security upon foreclosure
thereon, shall not, as between the Trustee and any Guarantor, be considered
as a purchase of such security, or as payment, satisfaction or reduction of
the Indenture Obligations due to the Trustee or the Holders by the Company or
any part thereof. Each Guarantor, promptly after demand, will reimburse the
Trustee and the Holders for all costs and expenses of collecting such amount
under, or enforcing this Guarantee, including, without limitation, the
reasonable fees and expenses of counsel.
Section 1405. WAIVERS.
(a) Each Guarantor hereby expressly waives (to the extent
permitted by law) notice of the acceptance of this Guarantee and notice of
the existence, renewal, extension or the non-performance, non-payment, or
non-observance on the part of the Company of any of the terms, covenants,
conditions and provisions of this Indenture or the Securities or any other
notice whatsoever to or upon the Company or such Guarantor with respect to
the Indenture Obligations, whether by statute, rule of law or otherwise.
Each Guarantor hereby acknowledges communication to it of the terms of this
Indenture and the Securities and all of the provisions therein contained and
consents to and approves the same. Each Guarantor hereby expressly waives
(to the extent permitted by law) diligence, presentment, protest and demand
for payment with respect to (i) any notice of sale, transfer or other
disposition of any right, title to or interest in the Securities by the
Holders or in this Indenture, (ii) any release of any Guarantor from its
obligations hereunder resulting from any loss by it of its rights of
subrogation hereunder and (iii) any other circumstances whatsoever that might
otherwise constitute a legal or equitable discharge, release or defense of a
guarantor or surety or that might otherwise limit recourse against such
Guarantor.
(b) Without prejudice to any of the rights or recourses which the
Trustee or the Holders may have against the Company, each Guarantor hereby
expressly waives (to the extent permitted by law) any right to require the
Trustee or the Holders to:
(i) enforce, assert, exercise, initiate or exhaust any
rights, remedies or recourse against the Company, any
Guarantor or any other Person under this Indenture or
otherwise;
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(ii) value, realize upon, or dispose of any security of the
Company or any other Person held by the Trustee or the
Holders;
(iii) initiate or exhaust any other remedy which the Trustee or
the Holders may have in law or equity; or
(iv) mitigate the damages resulting from any default under
this Indenture;
before requiring or becoming entitled to demand payment from such Guarantor
under this Guarantee.
Section 1406. THE GUARANTORS REMAIN OBLIGATED IN EVENT THE COMPANY IS
NO LONGER OBLIGATED TO DISCHARGE INDENTURE OBLIGATIONS.
It is the express intention of the Trustee and the Guarantors that if
for any reason the Company has no legal existence, is or becomes under no
legal obligation to discharge the Indenture Obligations owing to the Trustee
or the Holders by the Company or if any of the Indenture Obligations owing by
the Company to the Trustee or the Holders becomes irrecoverable from the
Company by operation of law or for any reason whatsoever, this Guarantee and
the covenants, agreements and obligations of the Guarantors contained in this
Article Fourteen shall nevertheless be binding upon the Guarantors, as
principal debtor, until such time as all such Indenture Obligations have been
paid in full to the Trustee and all Indenture Obligations owing to the
Trustee or the Holders by the Company have been discharged, or such earlier
time as Section 402 shall apply to the Securities and the Guarantors shall be
responsible for the payment thereof to the Trustee or the Holders upon demand.
Section 1407. FRAUDULENT CONVEYANCE; CONTRIBUTION; SUBROGATION.
(a) Each Guarantor that is a Subsidiary of the Company and, by
its acceptance hereof, each Holder hereby confirm that it is the intention of
all such parties that the Guarantee by such Guarantor pursuant to its
Guarantee not constitute a fraudulent transfer or conveyance for purposes of
the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law. To effectuate
the foregoing intention, the Holders and such Guarantor hereby irrevocably
agree that the obligations of such Guarantor under its Guarantee shall be
limited to the maximum amount which, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under this Indenture, will result in
the
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obligations of such Guarantor under its Guarantee not constituting such
fraudulent transfer or conveyance.
(b) Each Guarantor that makes a payment or distribution under its
Guarantee shall be entitled to a contribution from each other Guarantor, if
any, in a pro rata amount based on the net assets of each Guarantor,
determined in accordance with GAAP.
(c) Each Guarantor hereby waives all rights of subrogation or
contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under federal bankruptcy law) or
otherwise by reason of any payment by it pursuant to the provisions of this
Article Fourteen.
Section 1408. GUARANTEE IS IN ADDITION TO OTHER SECURITY.
This Guarantee shall be in addition to and not in substitution for any
other guarantees or other security which the Trustee may now or hereafter
hold in respect of the Indenture Obligations owing to the Trustee or the
Holders by the Company and (except as may be required by law) the Trustee
shall be under no obligation to marshal in favor of each of the Guarantors
any other guarantees or other security or any moneys or other assets which
the Trustee may be entitled to receive or upon which the Trustee or the
Holders may have a claim.
Section 1409. RELEASE OF SECURITY INTERESTS.
Without limiting the generality of the foregoing and except as
otherwise provided in this Indenture, each Guarantor hereby consents and
agrees, to the fullest extent permitted by applicable law, that the rights of
the Trustee hereunder, and the liability of the Guarantors hereunder, shall
not be affected by any and all releases for any purpose of any collateral, if
any, from the Liens and security interests created by any collateral document
and that this Guarantee shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Indenture
Obligations is rescinded or must otherwise be returned by the Trustee upon
the insolvency, bankruptcy or reorganization of the Company or otherwise, all
as though such payment had not been made.
Section 1410. NO BAR TO FURTHER ACTIONS.
Except as provided by law, no action or proceeding brought or
instituted under Article Fourteen and this Guarantee and no recovery or
judgment in pursuance thereof shall be a bar or defense to any further action
or proceeding which may be brought under Article Fourteen and this Guarantee
by reason of any further default or defaults under Article Fourteen and this
Guarantee or in the payment of any of the Indenture Obligations owing by the
Company.
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Section 1411. FAILURE TO EXERCISE RIGHTS SHALL NOT OPERATE AS A WAIVER;
NO SUSPENSION OF REMEDIES.
(a) No failure to exercise and no delay in exercising, on the
part of the Trustee or the Holders, any right, power, privilege or remedy
under this Article Fourteen and this Guarantee shall operate as a waiver
thereof, nor shall any single or partial exercise of any rights, power,
privilege or remedy preclude any other or further exercise thereof, or the
exercise of any other rights, powers, privileges or remedies. The rights and
remedies herein provided for are cumulative and not exclusive of any rights
or remedies provided in law or equity.
(b) Nothing contained in this Article Fourteen shall limit the
right of the Trustee or the Holders to take any action to accelerate the
maturity of the Securities pursuant to Article Five or to pursue any rights
or remedies hereunder or under applicable law.
Section 1412. TRUSTEE'S DUTIES; NOTICE TO TRUSTEE.
(a) Any provision in this Article Fourteen or elsewhere in this
Indenture allowing the Trustee to request any information or to take any
action authorized by, or on behalf of any Guarantor, shall be permissive and
shall not be obligatory on the Trustee except as the Holders may direct in
accordance with the provisions of this Indenture or where the failure of the
Trustee to request any such information or to take any such action arises
from the Trustee's gross negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the
existence, powers or capacities of the Company, any Guarantor or the
officers, directors or agents acting or purporting to act on their respective
behalf.
Section 1413. SUCCESSORS AND ASSIGNS.
All terms, agreements and conditions of this Article Fourteen shall
extend to and be binding upon each Guarantor and its successors and permitted
assigns and shall enure to the benefit of and may be enforced by the Trustee
and its successors and assigns; PROVIDED, HOWEVER, that the Guarantors may
not assign any of their rights or obligations hereunder other than in
accordance with Article Eight.
Section 1414. RELEASE OF GUARANTEE.
Concurrently with the payment in full of all of the Indenture
Obligations, the Guarantors shall be released from and relieved of their
obligations under this Article Fourteen. Upon the delivery by the Company to
the Trustee of an Officers' Certificate and, if requested by the Trustee, an
Opinion of Counsel to the effect that the transaction giving rise to the
release of this Guarantee was made by the Company in accordance with the
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provisions of this Indenture and the Securities, the Trustee shall execute
any documents reasonably required in order to evidence the release of the
Guarantors from their obligations under this Guarantee. If any of the
Indenture Obligations are revived and reinstated after the termination of
this Guarantee, then all of the obligations of the Guarantors under this
Guarantee shall be revived and reinstated as if this Guarantee had not been
terminated until such time as the Indenture Obligations are paid in full, and
each Guarantor shall enter into an amendment to this Guarantee, reasonably
satisfactory to the Trustee, evidencing such revival and reinstatement.
This Guarantee shall terminate with respect to each Guarantor and
shall be automatically and unconditionally released and discharged as
provided in Section 1015(c).
Section 1415. EXECUTION OF GUARANTEE.
(a) To evidence the Guarantee, each Guarantor hereby agrees to
execute the guarantee substantially in the form set forth in Section 204, to
be endorsed on each Security authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of each Guarantor by its
Chairman of the Board, its President, its Chief Executive Officer, Chief
Operating Officer or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.
(b) Any person that was not a Guarantor on the date of this
Indenture may become a Guarantor by executing and delivering to the Trustee
(i) a supplemental indenture in form and substance satisfactory to the
Trustee, which subjects such person to the provisions (including the
representations and warranties) of this Indenture as a Guarantor, (ii) in the
event that as of the date of such supplemental indenture any Registrable
Securities are outstanding, an instrument in form and substance satisfactory
to the Trustee which subjects such person to the provisions of the
Registration Rights Agreement with respect to such outstanding Registrable
Securities, and (iii) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such person
and constitutes the legal, valid and binding obligation of such person
(subject to such customary assumptions and exceptions as may be acceptable to
the Trustee in its reasonable discretion).
(c) If an officer whose signature is on this Indenture no longer
holds that office at the time the Trustee authenticates a Security on which
this Guarantee is endorsed, such Guarantee shall be valid nevertheless.
Section 1416. GUARANTEE SUBORDINATE TO SENIOR GUARANTOR INDEBTEDNESS.
Each Guarantor covenants and agrees, and each Holder of a
Guarantee, by his acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article, the
Indebtedness represented by the Guarantees is hereby
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expressly made subordinate and subject in right of payment as provided in
this Article to the prior payment in full of all Senior Guarantor
Indebtedness; PROVIDED, HOWEVER, that the Indebtedness represented by this
Guarantee in all respects shall rank equally with, or prior to, all existing
and future Indebtedness of such Guarantor that is expressly subordinated to
such Guarantor's Senior Guarantor Indebtedness.
This Article Fourteen shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue
to hold Senior Guarantor Indebtedness; and such provisions are made for the
benefit of the holders of Senior Guarantor Indebtedness; and such holders are
made obligees hereunder and they or each of them may enforce such provisions.
Section 1417. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION OF THE
GUARANTOR, ETC.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding, relative to any Guarantor or to its assets, or (b) any
liquidation, dissolution or other winding up of any Guarantor, whether
voluntary or involuntary, or (c) any assignment for the benefit of creditors
or any other marshaling of assets or liabilities of any Guarantor, then and
in any such event:
(1) the holders of Senior Guarantor Indebtedness shall be
entitled to receive payment in full of all amounts due on or in respect of
all Senior Guarantor Indebtedness before the Holders of the Securities are
entitled to receive any payment or distribution of any kind or character
(excluding securities of any Guarantor or any other corporation that are
equity securities or are subordinated in right of payment to all Senior
Guarantor Indebtedness, that may be outstanding, to substantially the same
extent as, or to a greater extent than, the Guarantees are so subordinated as
provided in this Article ("Permitted Guarantor Junior Securities")) on
account of the Guarantee of such Guarantor (other than amounts previously set
aside with the Trustee, or payments previously made, in either case, pursuant
to the provisions of Sections 402 and 403 of this Indenture); and
(2) any payment or distribution of assets of any Guarantor of any
kind or character, whether in cash, property or securities (excluding
Permitted Guarantor Junior Securities), by set-off or otherwise, to which the
Holders or the Trustee would be entitled but for the provisions of this
Article shall be paid by the liquidating trustee or agent or other Person
making such payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or otherwise, directly to the holders of
Senior Guarantor Indebtedness or their representative or representatives or
to the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Guarantor Indebtedness may have been issued,
ratably according to the aggregate amounts remaining unpaid on account of the
Senior Guarantor Indebtedness held or represented by each, to the extent
necessary to make payment in full of all Senior Guarantor Indebtedness
remaining unpaid, after giving effect
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to any concurrent payment or distribution to the holders of such Senior
Guarantor Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of any Guarantor of any kind
or character, whether in cash, property or securities (excluding Permitted
Guarantor Junior Securities), in respect the Guarantee of such Guarantor
before all Senior Guarantor Indebtedness is paid in full, then and in such
event such payment or distribution (excluding Permitted Guarantor Junior
Securities) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payments or distributions of assets of such Guarantor for
application to the payment of all Senior Guarantor Indebtedness remaining
unpaid, to the extent necessary to pay all Senior Guarantor Indebtedness in
full after giving effect to any concurrent payment or distribution to or for
the holders of Senior Guarantor Indebtedness.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another Person or the liquidation or dissolution of
any Guarantor following the sale, assignment, conveyance, transfer, lease or
other disposal of its properties and assets substantially as an entirety to
another Person upon the terms and conditions set forth in Article Eight shall
not be deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshaling of assets and
liabilities of such Guarantor for the purposes of this Section if the Person
formed by such consolidation or the surviving entity of such merger or the
Person which acquires by sale, assignment, conveyance, transfer, lease or
other disposal of such properties and assets substantially as an entirety, as
the case may be, shall, as a part of such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposal, comply with the
conditions set forth in Article Eight.
Section 1418. DEFAULT ON SENIOR GUARANTOR INDEBTEDNESS.
(a) Upon the maturity of any Senior Guarantor Indebtedness by
lapse of time, acceleration or otherwise, all principal thereof and interest
thereon and other amounts due in connection therewith shall first be paid in
full or such payment duly provided for before any payment is made by any of
the Guarantors or any Person acting on behalf of any of the Guarantors in
respect of the Guarantee of such Guarantor.
(b) No payment (excluding payments in the form of Permitted
Guarantor Junior Securities) shall be made by any Guarantor in respect of its
Guarantee during the period in which Section 1417 shall be applicable, during
any suspension of payments in effect under Section 1303(a) of this Indenture
or during any Payment Blockage Period in effect under Sections 1303(b) and
(c) of this Indenture.
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(c) In the event that, notwithstanding the foregoing, any
Guarantor shall make any payment to the Trustee or the Holder of its
Guarantee prohibited by the foregoing provisions of this Section, then and in
such event such payment shall be paid over and delivered forthwith to the
representatives of the holders of the Senior Guarantor Indebtedness or as a
court of competent jurisdiction shall direct.
Section 1419. PAYMENT PERMITTED BY EACH OF THE GUARANTORS IF NO
DEFAULT.
Nothing contained in this Article, elsewhere in this Indenture or
in any of the Securities shall prevent any Guarantor, at any time except
during the pendency of any case, proceeding, dissolution, liquidation or
other winding-up, assignment for the benefit of creditors or other marshaling
of assets and liabilities of such Guarantor referred to in Section 1417 or
under the conditions described in Section 1418, from making payments at any
time of principal of, premium, if any, or interest on the Securities.
Section 1420. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR GUARANTOR
INDEBTEDNESS.
After the payment in full of all Senior Guarantor Indebtedness, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Senior Guarantor Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Guarantor Indebtedness
until the principal of, premium, if any, and interest on, the Securities
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of Senior Guarantor Indebtedness of any cash,
property or securities to which the Holders of the Securities 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
Guarantor Indebtedness by Holders of the Securities or the Trustee, shall, as
among any Guarantor, its creditors other than holders of Senior Guarantor
Indebtedness, and the Holders of the Securities, be deemed to be a payment or
distribution by such Guarantor to or on account of the Senior Guarantor
Indebtedness.
Section 1421. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of Sections 1416 through 1429 of this Indenture are
intended solely for the purpose of defining the relative rights of the
Holders of the Securities on the one hand and the holders of Senior Guarantor
Indebtedness on the other hand. Nothing contained in this Article or
elsewhere in this Indenture or in the Securities is intended to or shall (a)
impair, as among any Guarantor, its creditors other than holders of Senior
Guarantor Indebtedness and the Holders of the Securities, the obligation such
Guarantor, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of, premium, if any, and interest on, the Securities
as and when the same shall become due and payable in accordance with their
terms; or (b) affect the relative rights against each of the Guarantors of
the Holders of the Securities and creditors of each of the Guarantors other
than the holders
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of Senior Guarantor Indebtedness; or (c) prevent the Trustee or the Holder of
any Security 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 Guarantor Indebtedness (1) in any case,
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshaling of assets and liabilities of the
Guarantors referred to in Section 1417, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable
or deliverable to the Trustee or such Holder, or (2) under the conditions
specified in Section 1418, to prevent any payment prohibited by such Section
or enforce their rights pursuant to Section 1418(c).
Section 1422. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by such Holder's 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 such Holder's
attorney-in-fact for any and all such purposes, including, in the event of
any dissolution, winding-up, liquidation or reorganization of any Guarantor
whether in bankruptcy, insolvency, receivership proceedings, or otherwise,
the timely filing of a claim for the unpaid balance of the indebtedness of
any Guarantor owing to such Holder in the form required in such proceedings
and the causing of such claim to be approved.
Section 1423. NO WAIVER OF SUBORDINATION PROVISIONS.
(a) No right of any present or future holder of any Senior
Guarantor 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 any Guarantor or by any act or failure to act, in good faith, by
any such holder, or by any non-compliance by any Guarantor with the terms,
provisions and covenants of this Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section, the holders of Senior Guarantor Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the Holders of
the Securities and without impairing or releasing the subordination provided
in this Article or the obligations hereunder of the Holders of the Securities
to the holders of Senior Guarantor Indebtedness, do any one or more of the
following: (1) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Guarantor Indebtedness or any
instrument evidencing the same or any agreement under which Senior Guarantor
Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Guarantor
Indebtedness; (3) release any Person liable in any manner for the collection
or payment of Senior Guarantor Indebtedness; and (4) exercise or refrain from
exercising any rights against any of the Guarantors and any other Person;
PROVIDED, HOWEVER,
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that in no event shall any such actions limit the right of the Holders of the
Securities to take any action to accelerate the maturity of the Securities
pursuant to Article Five of this Indenture or to pursue any rights or
remedies hereunder or under applicable laws if the taking of such action does
not otherwise violate the terms of this Article.
Section 1424. NOTICE TO TRUSTEE BY EACH OF THE GUARANTORS.
(a) Each Guarantor shall give prompt written notice to the
Trustee of any fact known to such Guarantor which would prohibit the making
of any payment to or by the Trustee in respect of the Guarantee.
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 Securities, unless and until the Trustee shall have
received written notice thereof from any Guarantor or a holder of Senior
Guarantor Indebtedness or any trustee, fiduciary or agent therefor; and,
prior to the receipt of any such written notice, the Trustee 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 by Noon, Eastern Time, on the Business Day 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, premium, if
any, or interest on any Security), then, anything herein contained to the
contrary notwithstanding but without limiting the rights and remedies of the
holders of Senior Guarantor Indebtedness or any trustee, fiduciary or agent
thereof, 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 after such date; nor shall the Trustee be charged with knowledge of the
curing of any such default or the elimination of the act or condition
preventing any such payment unless and until the Trustee shall have received
an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it
of a written notice to the Trustee and each Guarantor by a Person which
represents itself as a representative of one or more holders of Guarantor
Senior or a holder of Senior Guarantor Indebtedness (or a trustee, fiduciary
or agent therefor) to establish that such notice has been given by a
representative of or a holder of Senior Guarantor Indebtedness (or a trustee,
fiduciary or agent therefor); PROVIDED, HOWEVER, that failure to give such
notice to the Company or any Guarantor shall not affect in any way the
ability of the Trustee to rely on such notice. 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 Guarantor 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 Guarantor 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
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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 1425. RELIANCE ON JUDICIAL ORDERS OR CERTIFICATES.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article, the Trustee and the Holders of the Securities
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 Securities for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Guarantor Indebtedness and other
indebtedness of such Guarantor, 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 the foregoing shall apply only if
such court has been fully apprised of the provisions of this Article.
Section 1426. RIGHTS OF TRUSTEE AS A HOLDER OF SENIOR GUARANTOR
INDEBTEDNESS; PRESERVATION OF TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Guarantor
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Guarantor 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 1427. 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 under this Indenture,
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 1426 shall not apply to the
Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
Section 1428. NO SUSPENSION OF REMEDIES.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Securities to take any action to accelerate the
maturity of the Securities pursuant
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to Article Five of this Indenture or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article of the holders, from time to time, of Senior Guarantor Indebtedness
to receive the cash, property or securities receivable upon the exercise of
such rights or remedies.
Section 1429. TRUSTEE'S RELATION TO SENIOR GUARANTOR INDEBTEDNESS.
With respect to the holders of Senior Guarantor Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of Senior Guarantor
Indebtedness shall be read into this Article against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Guarantor Indebtedness and the Trustee shall not be liable to any
holder of Senior Guarantor Indebtedness if it shall in good faith mistakenly
(absent willful misconduct) pay over or deliver to Holders, the Company or
any other Person moneys or assets to which any holder of Senior Guarantor
Indebtedness shall be entitled by virtue of this Article or otherwise.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the day and year first above written.
JO-ANN STORES, INC.
By: /s/ Alan Rosskamm
----------------------------------
Name: Alan Rosskamm
Title: CEO
Attest: /s/ Brian P. Carney
-----------------------------------
Name: Brian P. Carney
Title: CFO
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FCA FINANCIAL, INC.
FABRI-CENTERS OF SOUTH DAKOTA, INC.
FABRI-CENTERS OF CALIFORNIA, INC.
FCA OF OHIO, INC.
HOUSE OF FABRICS, INC.
By: Alan Rosskamm
--------------------------------------
Name: Alan Rosskamm
Title: CEO
Attest: Brian P. Carney
-----------------------------
Name: Brian P. Carney
Title: Vice President
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HARRIS TRUST AND SAVINGS BANK
By: /s/ J. Bartolini
---------------------------------
Name: J. Bartolini
Title: Vice President
-169-
<PAGE>
STATE OF OHIO )
) ss.:
COUNTY OF SUMMIT )
On the 3rd day of May, 1999, before me personally came ALAN ROSSKAMM,
to me known, who, being by me duly sworn, did depose and say that he resides
at GATES MILLS; that he is CEO of Jo-Ann Stores, Inc., an Ohio corporation,
FCA Financial, Inc., an Ohio corporation, Fabri-Centers of South Dakota,
Inc., an Ohio corporation, Fabri-Centers of California, Inc., an Ohio
corporation, FCA of Ohio, Inc., an Ohio corporation, and House of Fabrics,
Inc., a Delaware corporation, each of which is a corporation described in and
which executed the foregoing instrument; and that he signed his name thereto
pursuant to authority of the Board of Directors of each of such corporations.
(NOTARIAL SEAL)
/s/ Rosetta Saraniti
--------------------------
-1-
<PAGE>
STATE OF ILLINOIS )
) ss.:
COUNTY OF COOK )
On the 28th day of April, 1999, before me personally came J. BARTOLINI,
to me known, who, being by me duly sworn, did depose and say that she resides
at VERNON HILLS, IL; that she is A VICE PRESIDENT of Harris Trust and Savings
Bank, a corporation described in and which executed the foregoing instrument;
and that he signed his name thereto pursuant to authority of the Board of
Directors of such corporation.
(NOTARIAL SEAL)
/s/ Jacqueline L. Mason
------------------------------
-1-
<PAGE>
ANNEX A
INTERCOMPANY NOTE
, 19
---------- --
Evidences of all loans or advances ("Loans") made hereunder shall
be reflected on the grid attached hereto. FOR VALUE RECEIVED,
__________, a _________ corporation (the "Maker"), HEREBY PROMISES TO PAY ON
DEMAND to the order of _______________ (the "Holder") the principal sum of
the aggregate unpaid principal amount of all Loans (plus accrued interest
thereon) at any time and from time to time made hereunder which has not been
previously paid.
All capitalized terms used herein that are defined in, or by
reference in, the Indenture among Jo-Ann Stores, Inc., an Ohio corporation
(the "Company"), FCA Financial, Inc., an Ohio corporation, Fabri-Centers of
South Dakota, Inc., an Ohio corporation, Fabri-Centers of California, Inc.,
an Ohio corporation, FCA of Ohio, Inc., an Ohio corporation, and House of
Fabrics, Inc., a Delaware corporation, and Harris Trust and Savings Bank, as
trustee, dated as of May 5, 1999 (the "Indenture"), have the meanings
assigned to such terms therein, or by reference therein, unless otherwise
defined.
ARTICLE I
TERMS OF INTERCOMPANY NOTE
-1-
<PAGE>
Section 1.01 NOTE NOT FORGIVABLE. Unless the Maker of the Loan
hereunder is the Company or any Guarantor, the Holder may not forgive any
amounts owing under this intercompany note.
Section 1.02 INTEREST: PREPAYMENT. (a) The interest rate
("Interest Rate") on the Loans shall be a rate per annum reflected on the
grid attached hereto.
(b) The interest, if any, payable on each of the Loans shall
accrue from the date such Loan is made and, subject to Section 2.01, shall be
payable upon demand of the Holder.
(c) To the extent permitted by law, if the principal or accrued
interest, if any, of the Loans is not paid on the date demand is made,
interest on the unpaid principal and interest will accrue at a rate equal to
the Interest Rate, if any, plus 100 basis points per annum from maturity
until the principal and interest on such Loans are fully paid.
(d) Subject to Section 2.01, any amounts hereunder may be repaid
at any time by the Maker.
Section 1.02 SUBORDINATION. Subject to Section 2.01, all Loans
hereunder shall be subordinated in right of payment to the payment and
performance of the obligations of the Company and any Subsidiary (which
Subsidiary is also an obligor under the Indenture, the Securities, a
Guarantee or other Senior Indebtedness or Pari Passu Indebtedness, as the
case may be, whether as a borrower or guarantor) under the Indenture, the
Securities, the Guarantees or any other Indebtedness ranking senior to or
PARI PASSU with the Securities.
ARTICLE II
EVENTS OF DEFAULT
Section 2.01 EVENTS OF DEFAULT. If after the date of issuance of this
Loan (i) an Event of Default has occurred under the Indenture, (ii) an Event
of Default (as defined) has occurred under the Credit Facility or (iii) an
"event of default" (as defined) has occurred under any other Indebtedness of
the Company or any Subsidiary, then (x) in the event the Maker is (A) a
Subsidiary which is not a Guarantor or (B) a Guarantor in the case where the
Holder is the Company, all amounts owing under the Loans hereunder shall be
immediately due and payable to the Holder, (y) in the event the Maker is the
Company, the amounts owing under the Loans hereunder shall not be due and
payable at any time and shall not be paid and (z) in the event the Maker is a
Guarantor and the Holder is not the Company or any Guarantor, the amounts
owing under the Loans hereunder shall not be due and payable at any time and
shall not be paid; PROVIDED, HOWEVER, that if such Event of Default or event
of default has been waived, cured or rescinded, such amounts shall no longer
be due and payable in the case of clause (x), and such amounts may be paid in
the case of clauses (y) and
-2-
<PAGE>
(z). If the Holder is a Subsidiary, then the Holder hereby agrees that if it
receives any payments or distributions on any Loan from the Company or a
Guarantor which is not payable pursuant to clause (y) or (z) of the prior
sentence after any Event of Default described in clauses (i) or (ii) or any
event of default described in clause (iii) above has occurred, is continuing
and has not been waived, cured or rescinded, it will pay over and deliver
forthwith to the Company or such Guarantor, as the case may be, all such
payments and distributions.
ARTICLE III
MISCELLANEOUS
Section 3.01 AMENDMENTS, ETC. No amendment or waiver of any
provision of this intercompany note, or consent to depart herefrom is
permitted at any time for any reason, except with the consent of the Holders
of not less than a majority in aggregate principal amount of the Outstanding
Securities.
Section 3.02 ASSIGNMENT. No party to this Agreement may assign,
in whole or in part, any of its rights and obligations under this
intercompany note, except to its legal successor in interest.
Section 3.03 THIRD PARTY BENEFICIARIES. The holders of the
Securities or any other Indebtedness ranking PARI PASSU with or senior to,
the Securities or any Guarantees, including without limitation, any
Indebtedness incurred under the New Credit Facility, shall be third party
beneficiaries to this intercompany note and upon an Event of Default shall
have the right to enforce this intercompany note against the Company or any
of its Subsidiaries.
Section 3.04 HEADINGS. Article and Section headings in this
intercompany note are included for convenience of reference only and shall
not constitute a part of this intercompany note for any other purpose.
Section 3.05 ENTIRE AGREEMENT. This intercompany note sets forth
the entire agreement of the parties with respect to its subject matter and
supersedes all previous understandings, written or oral, in respect thereof.
Section 3.06 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
-3-
<PAGE>
Section 3.07 WAIVERS. The Maker hereby waives presentment,
demand for payment, notice of protest and all other demands and notices in
connection with the delivery, acceptance, performance or enforcement hereof.
By:
--------------------------
-4-
<PAGE>
BORROWINGS, MATURITIES, AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Maturity of Amount
Borrowing/ Borrowing/ Interest Principal Paid Unpaid Principal Notation
Date Principal Principal Rate or Prepaid Balance Made by
- ------ ------------ -------------- ---------- ---------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
-5-
<PAGE>
SCHEDULE I
EXISTING INDEBTEDNESS
Uncommitted Lines of Credit, as of May 4, 1999
- - $23.6 million borrowed with three banks
- - Borrowings are on an overnight basis
Guarantor on $490,000 of $1.0 million line of credit that The Country Sampler
Store, L.L.C. (Of which Jo-Ann Stores has a 49% interest) has with American
National Bank and Trust Company of Chicago.
Trade Letters of Credit, as of May 4, 1999
- - Approximately $43,751,000 million consisting of $32,793,000 million of
outstanding trade letters of credit and $10,958,000 million of related
acceptances
Insurance Standby Letter of Credit, as of May 4, 1999
- - $1,941,000 for Workers' Compensation, General Liability and Auto Insurance
- - Beneficiary: Kemper Insurance
Lease Standby Letter of Credit, as of May 4, 1999
- - $100,000 covering lease
- - Beneficiary: Echo, L.L.C.
-1-
<PAGE>
SCHEDULE II
EXITING DIVIDEND RESTRICTIONS
NONE
-1-
<PAGE>
EXHIBIT A
REGULATION S CERTIFICATE
(For transfers pursuant to section 307(a)(i) of the Indenture)
HARRIS TRUST AND SAVINGS BANK
311 WEST MONROE STREET
CHICAGO, ILLINOIS 60606
RE: 10 3/8% Senior Subordinated Notes due 2007 of Jo-Ann Stores, Inc.
(the "Securities")
------------------------------
Reference is made to the Indenture, dated as of May 5, 1999 (the
"Indenture"), among Jo-Ann Stores, Inc., a Ohio corporation (the "Company"),
FCA Financial, Inc., an Ohio corporation, Fabri-Centers of South Dakota,
Inc., an Ohio corporation, Fabri-Centers of California, Inc., an Ohio
corporation, FCA of Ohio, Inc., an Ohio corporation, House of Fabrics, Inc.,
a Delaware corporation, and Harris Trust and Savings Bank, as Trustee. Terms
used herein and defined in the Indenture or in Regulation S or Rule 144 under
the U.S. Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to US$____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them
to do so. Such beneficial owner or owners are referred to herein collectively
as the "Owner." The Specified Securities are represented by a Global
Security and are held through the Depositary or an Agent Member in the name
of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to
a person (the "Transferee") who will take delivery in the form of a
Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that, unless such transfer is being effected pursuant to an
effective registration statement under the Securities Act, it is being
-1-
<PAGE>
effected in accordance with Rule 904 or Rule 144 under the Securities Act and
with all applicable securities laws of the states of the United States and
other jurisdictions. Accordingly, the Owner hereby further certifies as
follows:
(1) RULE 904 TRANSFERS. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or through
the facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner nor
any person acting on its behalf knows that the transaction has
been prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(2) RULE 144 TRANSFERS. If the transfer is being effected pursuant
to Rule 144:
-2-
<PAGE>
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
-3-
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated: ____________________________
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this certificate.)
By:
-------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of
the Undersigned must be stated.)
-4-
<PAGE>
EXHIBIT B
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to section 307(a)(ii) of the Indenture)
HARRIS TRUST AND SAVINGS BANK
311 WEST MONROE STREET
CHICAGO, ILLINOIS 60606
RE: 10 3/8% Senior Subordinated Notes due 2007 of Jo-Ann
Stores, Inc. (the "Securities")
------------------
Reference is made to the Indenture, dated as of May 5, 1999 (the
"Indenture"), among Jo-Ann Stores, Inc., a Ohio corporation (the "Company"),
FCA Financial, Inc., an Ohio corporation, Fabri-Centers of South Dakota,
Inc., an Ohio corporation, Fabri-Centers of California, Inc., an Ohio
corporation, FCA of Ohio, Inc., an Ohio corporation, House of Fabrics, Inc.,
a Delaware corporation, and Harris Trust and Savings Bank, as Trustee. Terms
used herein and defined in the Indenture or in Rule 144A or Rule 144 under
the U.S. Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
ISIN No(s). If any. ____________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial
owner of the Specified Securities or (ii) it is acting on behalf of all the
beneficial owners of the Specified Securities and is duly authorized by them
to do so. Such beneficial owner or owners are referred to herein collectively
as the "Owner." The Specified Securities are represented by a Global
Security and are held through the Depositary or an Agent Member in the name
of the Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to
a person (the "Transferee") who will take delivery in the form of a
Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an
effective registration statement under the Securities Act, it is being
effected in accordance with Rule 144A or Rule 144 under the Securities Act
and all applicable securities
-1-
<PAGE>
laws of the states of the United States and other jurisdictions.
Accordingly, the Owner hereby further certifies as follows:
(1) RULE 144A TRANSFERS. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a
person that the Owner and any person acting on its behalf reasonably
believe is a "qualified institutional buyer" within the meaning of
Rule 144A, acquiring for its own account or for the account of a
qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(2) RULE 144 TRANSFERS. If the transfer is being effected pursuant
to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
-2-
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated: ____________________________
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this certificate.)
By:
-------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of
the Undersigned must be stated.)
-3-
<PAGE>
EXHIBIT C
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to section 307(b))
HARRIS TRUST AND SAVINGS BANK
311 WEST MONROE STREET
CHICAGO, ILLINOIS 60606
RE: 10 3/8% Senior Subordinated Notes due 2007 of Jo-Ann
Stores, Inc. (the "Securities")
Reference is made to the Indenture, dated as of May 5, 1999, among
Jo-Ann Stores, Inc., a Ohio corporation (the "Company"), FCA Financial, Inc.,
an Ohio corporation, Fabri-Centers of South Dakota, Inc., an Ohio
corporation, Fabri-Centers of California, Inc., an Ohio corporation, FCA of
Ohio, Inc., an Ohio corporation, House of Fabrics, Inc., a Delaware
corporation, and Harris Trust and Savings Bank, as Trustee. Terms used
herein and defined in the Indenture or in Rule 144 under the U.S. Securities
Act of 1933 (the "Securities Act") are used herein as so defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Security, they
are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Private Placement Legend pursuant to Section 307(b) of the
Indenture. In connection with such exchange, the Owner hereby certifies that
the exchange is occurring after a holding period of at least two years (computed
in accordance with paragraph (d) of Rule 144) has elapsed since the Specified
Securities were last acquired from the Company
-1-
<PAGE>
or from an affiliate of the Company, whichever is later, and the Owner is
not, and during the preceding three months has not been, an affiliate of the
Company. The Owner also acknowledges that any future transfers of the
Specified Securities must comply with all applicable securities laws of the
states of the United States and other jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated: _________________________________
(Print the name of the Undersigned, as such term is
defined in the second paragraph of this certificate.)
By:
-------------------------------------------
Name:
Title:
(If the Undersigned is a corporation, partnership or
fiduciary, the title of the person signing on behalf of
the Undersigned must be stated.)
-2-
<PAGE>
APPENDIX I
[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 Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES FOR SERIES A SECURITIES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Security occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
May 5, 2001, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933 provided by Rule
144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
-1-
<PAGE>
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Security 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 to this assignment
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: _____________________________
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security 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 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 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 authorized signatory
-2-
<PAGE>
APPENDIX II
FORM OF TRANSFEREE CERTIFICATE
I OR WE ASSIGN AND TRANSFER THIS SECURITY TO:
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
Print or type name, address and zip code of assignee and irrevocably
appoint________________________________________________________________
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated ____________________ Signed _______________________________________
(Sign exactly as name appears on the other side of this Security)
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
-1-
<PAGE>
REGULATION S CERTIFICATE
(For transfers pursuant to Section 307(a)(i) of the Indenture)
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Re: 10 3/8% Senior Subordinated Notes due 2007 of Jo-Ann Stores, Inc.
(THE "SECURITIES")
Reference is made to the Indenture, dated as of May 5, 1999 (the
"Indenture"), among Jo-Ann Stores, Inc., a Ohio corporation (the "Company"),
FCA Financial, Inc., an Ohio corporation, Fabri-Centers of South Dakota, Inc.,
an Ohio corporation, Fabri-Centers of California, Inc., an Ohio corporation, FCA
of Ohio, Inc., an Ohio corporation, House of Fabrics, Inc., a Delaware
corporation, and Harris Trust and Savings Bank, as Trustee. Terms used herein
and defined in the Indenture or in Regulation S or Rule 144 under the U.S.
Securities Act of 1933 (the "Securities Act") are used herein as so defined.
This certificate relates to US$____________ principal amount of Securities,
which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner." The Specified Securities are represented by a Global Security and are
held through the Depositary or an Agent Member in the name of the Undersigned,
as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of a Regulation S
Global Security. In connection with such transfer, the Owner hereby certifies
that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) RULE 904 TRANSFERS. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
-1-
<PAGE>
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and any
person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or through the
facilities of the Eurobond market, as regulated by the
Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner nor
any person acting on its behalf knows that the transaction has
been prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(2) RULE 144 TRANSFERS. If the transfer is being effected pursuant
to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
-2-
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:_______________________________________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
-3-
<PAGE>
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to Section 307(a)(ii) of the Indenture)
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Re: 10 3/8% Senior Subordinated Notes due 2007 of Jo-Ann
Stores, Inc. (THE "SECURITIES")
Reference is made to the Indenture, dated as of May 5, 1999 (the
"Indenture"), among Jo-Ann Stores, Inc., a Ohio corporation (the "Company"), FCA
Financial, Inc., an Ohio corporation, Fabri-Centers of South Dakota, Inc., an
Ohio corporation, Fabri-Centers of California, Inc., an Ohio corporation, FCA of
Ohio, Inc., an Ohio corporation, House of Fabrics, Inc., a Delaware corporation,
and Harris Trust and Savings Bank, as Trustee. Terms used herein and defined in
the Indenture or in Rule 144A or Rule 144 under the U.S. Securities Act of 1933
(the "Securities Act") are used herein as so defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ______________________________
ISIN No(s). If any. ____________________
CERTIFICATE No(s). ________________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner." The Specified Securities are represented by a Global Security and are
held through the Depositary or an Agent Member in the name of the Undersigned,
as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred to a
person (the "Transferee") who will take delivery in the form of a Restricted
Security. In connection with such transfer, the Owner hereby certifies that,
unless such transfer is being effected pursuant to an effective registration
statement under the Securities Act, it is being effected in accordance with Rule
144A or Rule 144 under the Securities Act and all applicable securities laws of
the states of the United States and other jurisdictions. Accordingly, the Owner
hereby further certifies as follows:
(1) RULE 144A TRANSFERS. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a
person that the Owner and any person acting on its behalf reasonably
believe is a "qualified institutional buyer" within the meaning of
Rule 144A, acquiring for its own account or for the account of a
qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(2) RULE 144 TRANSFERS. If the transfer is being effected pursuant
to Rule 144:
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<PAGE>
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
-2-
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated:
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:_______________________________________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
-3-
<PAGE>
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to Section 307(b))
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Re: 10 3/8% Senior Subordinated Notes due 2007 of Jo-Ann
Stores, Inc. (THE "SECURITIES")
Reference is made to the Indenture, dated as of May 5, 1999, among Jo-Ann
Stores, Inc., a Ohio corporation (the "Company"), FCA Financial, Inc., an Ohio
corporation, Fabri-Centers of South Dakota, Inc., an Ohio corporation,
Fabri-Centers of California, Inc., an Ohio corporation, FCA of Ohio, Inc., an
Ohio corporation, House of Fabrics, Inc., a Delaware corporation, and Harris
Trust and Savings Bank, as Trustee. Terms used herein and defined in the
Indenture or in Rule 144 under the U.S. Securities Act of 1933 (the "Securities
Act") are used herein as so defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Security, they
are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Private Placement Legend pursuant to Section 307(b) of the
Indenture. In connection with such exchange, the Owner hereby certifies that
the exchange is occurring after a holding period of at least two years (computed
in accordance with paragraph (d) of Rule 144) has elapsed since the Specified
Securities were last acquired from the Company or from an affiliate of the
Company, whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company. The Owner also
acknowledges that any future transfers of the Specified Securities must comply
with all applicable securities laws of the states of the United States and other
jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated:
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:_______________________________________________
Name:
Title:
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<PAGE>
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
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<PAGE>
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 Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES FOR SERIES A SECURITIES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Security occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
May 5, 2001, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Security and
the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Security 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 to this assignment
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: _____________________________
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15]
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<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
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 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
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 authorized signatory
-2-
<PAGE>
TRANSFEREE CERTIFICATE
I OR WE ASSIGN AND TRANSFER THIS SECURITY TO:
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
Print or type name, address and zip code of assignee and irrevocably
appoint________________________________________________________________
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated ____________________ Signed ____________________________
(Sign exactly as name appears on the other side of this Security)
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
-1-
<PAGE>
----------------------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 5, 1999
AMONG
JO-ANN STORES, INC.(AN OHIO CORPORATION),
FCA FINANCIAL, INC. (AN OHIO CORPORATION),
FABRI-CENTERS OF SOUTH DAKOTA, INC. (AN OHIO CORPORATION),
FABRI-CENTERS OF CALIFORNIA, INC. (AN OHIO CORPORATION),
FCA OF OHIO, INC. (AN OHIO CORPORATION) AND
HOUSE OF FABRICS, INC. (A DELAWARE CORPORATION)
AND
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
GOLDMAN, SACHS & CO.
AND
BANC ONE CAPITAL MARKETS, INC.
----------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Definitions..............................................................................................1
2. Registration Under the 1933 Act..........................................................................5
2.1 Exchange Offer..................................................................................5
2.2 Shelf Registration..............................................................................7
2.3 Expenses........................................................................................9
2.4. Effectiveness...................................................................................9
2.5 Interest........................................................................................9
3. Registration Procedures.................................................................................10
4. Indemnification; Contribution...........................................................................18
5. Miscellaneous...........................................................................................22
5.1 Rule 144 and Rule 144A.........................................................................22
5.2 No Inconsistent Agreements.....................................................................22
5.3 Amendments and Waivers.........................................................................22
5.4 Notices........................................................................................23
5.5 Successor and Assigns..........................................................................23
5.6 Third Party Beneficiaries......................................................................23
5.7. Specific Enforcement...........................................................................24
5.8. Restriction on Resales.........................................................................24
5.9 Counterparts...................................................................................24
5.10 Headings.......................................................................................24
5.11 GOVERNING LAW..................................................................................24
5.12 Severability...................................................................................24
</TABLE>
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into this 5th day of May, 1999, among Jo-Ann Stores, Inc., an Ohio corporation
(the "Company"), FCA Financial, Inc. (an Ohio corporation), Fabri-Centers of
South Dakota, Inc. (an Ohio corporation), Fabri-Centers of California, Inc. (an
Ohio corporation), FCA of Ohio, Inc. (an Ohio corporation) and House of Fabrics,
Inc. (a Delaware corporation) (collectively, the "Guarantors"), and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. and Banc One
Capital Markets, Inc. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated April 30,
1999, among the Company, the Guarantors and the Initial Purchasers (the
"Purchase Agreement"), which provides for (i) the sale by the Company to the
Initial Purchasers of an aggregate of $150 million principal amount of the
Company's 10 3/8% Senior Subordinated Notes due 2007, Series A (the
"Securities") and (ii) the issue and sale by the Guarantors and the purchase by
the Initial Purchasers of the guarantees (the "Guarantees") of the Company's
obligations under the Securities. In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Company and the Guarantors have agreed to
provide to the Initial Purchasers and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of l934, as amended.
"CLOSING DATE" shall mean the Closing Time as defined in the Purchase
Agreement.
"COMPANY" shall have the meaning set forth in the preamble and shall also
include the Company's successors.
"DEPOSITARY" shall mean The Depository Trust Company, or any other
depositary appointed by the Company and the Guarantors, PROVIDED, HOWEVER, that
such depositary must have an address in the Borough of Manhattan, in the City of
New York.
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<PAGE>
"EXCHANGE OFFER" shall mean the exchange offer by the Company and the
Guarantors of Exchange Securities (and related Guarantees) for Registrable
Securities pursuant to Section 2.1 hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933 Act
effected pursuant to Section 2.1 hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form or on any successor form used for substantially the same transactions), and
all amendments and supplements to such registration statement, including the
Prospectus contained therein, all exhibits thereto and all documents
incorporated by reference therein.
"EXCHANGE PERIOD" shall have the meaning set forth in Section 2.1 hereof.
"EXCHANGE SECURITIES" shall mean, collectively, the 10 3/8% Senior
Subordinated Notes due 2007, Series B issued by the Company under the Indenture
and the related guarantees issued by the Guarantors under the Indenture,
containing terms identical to the Securities and the Guarantees in all material
respects (except for references to certain interest rate provisions,
restrictions on transfers and restrictive legends), to be offered to Holders of
Securities and Guarantees in exchange for Registrable Securities pursuant to the
Exchange Offer.
"GUARANTORS" shall have the meaning set forth in the preamble and shall
also include the Guarantors' successors.
"HOLDER" shall mean an Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Securities
under the Indenture and each Participating Broker-Dealer that holds Exchange
Securities for so long as such Participating Broker-Dealer is required to
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Securities.
"INDENTURE" shall mean the Indenture relating to the Securities and the
Guarantees, dated as of May 5, 1999, among the Company, the Guarantors and
Harris Trust and Savings Bank, as trustee, as the same may be amended,
supplemented, waived or otherwise modified from time to time in accordance with
the terms thereof.
"INITIAL PURCHASER" or "INITIAL PURCHASERS" shall have the meaning set
forth in the preamble.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate
principal amount of Outstanding (as defined in the Indenture) Registrable
Securities; PROVIDED that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company,
2
<PAGE>
the Guarantors and other obligors on the Securities or Guarantees or any
Affiliate (as defined in the Indenture) of the Company or any Guarantor shall be
disregarded in determining whether such consent or approval was given by the
Holders of such required percentage amount.
"PARTICIPATING BROKER-DEALER" shall mean any of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co. and Banc One Capital Markets,
Inc. and any other broker-dealer which makes a market in the Securities and
Guarantees and exchanges Registrable Securities in the Exchange Offer for
Exchange Securities.
"PERSON" shall mean an individual, partnership (general or limited),
corporation, limited liability company, trust or unincorporated organization, or
a government or agency or political subdivision thereof.
"PRIVATE EXCHANGE" shall have the meaning set forth in Section 2.1 hereof.
"PRIVATE EXCHANGE SECURITIES" shall have the meaning set forth in Section
2.1 hereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including any such
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Shelf Registration Statement, and by
all other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"PURCHASE AGREEMENT" shall have the meaning set forth in the preamble.
"REGISTRABLE SECURITIES" shall mean, collectively, the Securities, the
Guarantees, and, if issued, the Private Exchange Securities; PROVIDED, HOWEVER,
that Securities, Guarantees and, if issued, the Private Exchange Securities,
shall cease to be Registrable Securities when (i) a Registration Statement with
respect to such Securities and Guarantees shall have been declared effective
under the 1933 Act and such Securities and Guarantees shall have been disposed
of pursuant to such Registration Statement, (ii) such Securities and Guarantees
have been sold to the public pursuant to Rule l44 (or any similar provision then
in force, but not Rule 144A) under the 1933 Act, (iii) such Securities and
Guarantees shall have ceased to be outstanding or (iv) the Exchange Offer is
consummated (except in the case of Securities and Guarantees purchased from the
Company and the Guarantors and continued to be held by the Initial Purchasers or
Securities which may not be exchanged in the Exchange Offer).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company and the Guarantors with this
Agreement, including without limitation: (i) all SEC, stock exchange or National
Association of Securities
3
<PAGE>
Dealers, Inc. (the "NASD") registration and filing fees, including, if
applicable, the fees and expenses of any "qualified independent underwriter"
(and its counsel) that is required to be retained by any holder of Registrable
Securities in accordance with the rules and regulations of the NASD, (ii) all
fees and expenses incurred in connection with compliance with state securities
or blue sky laws and compliance with the rules of the NASD (including reasonable
fees and disbursements of counsel for any underwriters or Holders in connection
with blue sky qualification of any of the Exchange Securities or Registrable
Securities and any filings with the NASD), (iii) all expenses of any Persons in
preparing or assisting in preparing, wor processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this Agreement,
(iv) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges, (v)
all rating agency fees, (vi) the fees and disbursements of counsel for the
Company and the Guarantors and of the independent public accountants of the
Company and the Guarantors, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, (vii) the fees and expenses of the Trustee, and any escrow agent or
custodian, (viii) the reasonable fees and disbursements of Fried, Frank, Harris,
Shriver & Jacobson, special counsel representing the Holders of Registrable
Securities and (ix) any fees and disbursements of the underwriters customarily
required to be paid by issuers or sellers of securities and the fees and
expenses of any special experts retained by the Company and the Guarantors in
connection with any Registration Statement, but excluding underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of Registrable Securities by a Holder.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company and the Guarantors which covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission or any successor
agency or government body performing the functions currently performed by the
United States Securities and Exchange Commission.
"SHELF REGISTRATION" shall mean a registration effected pursuant to Section
2.2 hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration statement
of the Company and the Guarantors pursuant to the provisions of Section 2.2 of
this Agreement which covers all of the Registrable Securities or all of the
Private Exchange Securities on an appropriate form under Rule 415 under the 1933
Act, or any successor or similar rule
4
<PAGE>
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"TRUSTEE" shall mean the trustee with respect to the Securities and the
Guarantees under the Indenture.
2. REGISTRATION UNDER THE 1933 ACT.
2.1 EXCHANGE OFFER. The Company and the Guarantors shall, for the benefit
of the Holders, at the Company's cost, (A) prepare and, as soon as practicable
but not later than 45 days following the Closing Date, file with the SEC an
Exchange Offer Registration Statement on an appropriate form under the 1933 Act
with respect to a proposed Exchange Offer and the issuance and delivery to the
Holders, in exchange for the Registrable Securities (other than Private Exchange
Securities), of a like principal amount of Exchange Securities, (B) use its best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the 1933 Act within 120 days of the Closing Date, (C) use its
best efforts to keep the Exchange Offer Registration Statement effective until
the closing of the Exchange Offer and (D) use its best efforts to cause the
Exchange Offer to be consummated not later than 150 days following the Closing
Date. The Exchange Securities wil be issued under the Indenture. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company and the
Guarantors shall commence the Exchange Offer as promptly as practicable, it
being the objective of such Exchange Offer to enable each Holder eligible and
electing to exchange Registrable Securities for Exchange Securities (assuming
that such Holder (a) is not an affiliate of the Company or any of the Guarantors
within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer
tendering Registrable Securities acquired directly from the Company or any of
the Guarantors for its own account, (c) acquired or will acquire the Exchange
Securities in the ordinary course of such Holder's business and (d) has no
arrangements or understandings with any Person to participate in the Exchange
Offer for the purpose of distributing the Exchange Securities) to transfer such
Exchange Securities from and after their receipt without any limitations or
restrictions under the 1933 Act and under state securities or blue sky laws.
In connection with the Exchange Offer, the Company and the Guarantors
shall:
(a) mail, as promptly as practicable after the effectiveness of the
Exchange Offer Registration Statement, to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a period of not less
than 20 business days after the date notice thereof is mailed to the Holders (or
longer if required by applicable law) (such period referred to herein as the
"Exchange Period");
(c) utilize the services of the Depositary for the Exchange Offer;
5
<PAGE>
(d) permit Holders to withdraw tendered Registrable Securities at any time
prior to 5:00 p.m. (Eastern Time), on the last business day of the Exchange
Period, by sending to the institution specified in the notice, a telegram,
telex, facsimile transmission or letter setting forth the name of such Holder,
the principal amount of Registrable Securities delivered for exchange, and a
statement that such Holder is withdrawing such Holder's election to have such
Securities and Guarantees exchanged;
(e) notify each Holder that any Registrable Security not tendered will
remain outstanding and continue to accrue interest, but will not retain any
rights under this Agreement (except in the case of the Initial Purchasers and
Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all respects with all applicable laws relating to
the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial Purchasers
hold any Securities acquired by them and having the status of an unsold
allotment in the initial distribution, the Company upon the request of any
Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in
exchange (the "Private Exchange") for the Securities held by such Initial
Purchaser, a like principal amount of debt securities of the Company, guaranteed
by the Guarantors, that are identical (except that such securities shall bear
appropriate transfer restrictions) to the Exchange Securities (the "Private
Exchange Securities").
The Exchange Securities and the Private Exchange Securities shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), or is exempt from such
qualification and shall provide that the Exchange Securities shall not be
subject to the transfer restrictions set forth in the Indenture but that the
Private Exchange Securities shall be subject to such transfer restrictions. The
Indenture or such indenture shall provide that the Exchange Securities, the
Private Exchange Securities and the Securities (and related Guarantees) shall
vote and consent together on all matters as one class and that none of the
Exchange Securities, the Private Exchange Securities or the Securities (and
related Guarantees) will have the right to vote or consent as a separate class
on any matter. The Private Exchange Securities shall be of the same series as
and the Company and the Guarantors shall use all commercially reasonable efforts
to have the Private Exchange Securities bear the same CUSIP number as the
Exchange Securities.
As soon as practicable after the close of the Exchange Offer and/or the
Private Exchange, as the case may be, the Company and the Guarantors shall:
(i) accept for exchange all Registrable Securities validly tendered
and not validly withdrawn pursuant to the Exchange Offer in accordance
with the
6
<PAGE>
terms of the Exchange Offer Registration Statement and the letter of
transmittal which shall be an exhibit thereto;
(ii) accept for exchange all Securities validly tendered pursuant to
the Private Exchange;
(iii) deliver to the Trustee for cancellation all Registrable Securities
so accepted for exchange; and
(iv) cause the Trustee promptly to authenticate and deliver Exchange
Securities or Private Exchange Securities, as the case may be, to each
Holder of Registrable Securities so accepted for exchange in a principal
amount equal to the principal amount of the Registrable Securities of such
Holder so accepted for exchange.
Interest on each Exchange Security and Private Exchange Security will
accrue from the last date on which interest was paid on the Registrable
Securities surrendered in exchange therefor or, if no interest has been paid on
the Registrable Securities, from the date of original issuance of the
Registrable Securities. The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than (i) that the Exchange Offer or the Private
Exchange, or the making of any exchange by a Holder, does not violate applicable
law or any applicable interpretation of the staff of the SEC, (ii) the valid
tendering of Registrable Securities in accordance with the Exchange Offer and
the Private Exchange, (iii) that each Holder of Registrable Securities exchanged
in the Exchange Offer shall have represented that all Exchange Securities to be
received by it shall be acquired in the ordinary course of its business and that
at the time of the consummation of the Exchange Offer it shall have no
arrangement or understanding with any person to participate in the distribution
(within the meaning of the 1933 Act) of the Exchange Securities and shall have
made such other representations as may be reasonably necessary under applicable
SEC rules, regulations or interpretations and (iv) that no action or proceeding
shall have been instituted or threatened in any court or by or before any
governmental agency with respect to the Exchange Offer or the Private Exchange
which, in the Company's and the Guarantors' judgment, would reasonably be
expected to impair the ability of the Company and the Guarantors to proceed with
the Exchange Offer or the Private Exchange. The Company and the Guarantors shall
inform the Initial Purchasers of the names and addresses of the Holders to whom
the Exchange Offer is made, and the Initial Purchasers shall have the right to
contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
2.2 SHELF REGISTRATION. (i) If, because of any changes in law, SEC rules or
regulations or applicable interpretations thereof by the staff of the SEC, the
Company or the Guarantors are not permitted to effect the Exchange Offer as
contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange
Offer Registration Statement is not declared effective within 120 days following
the original issue of the Registrable Securities or the Exchange Offer is not
consummated within 150 days after the original issue of the Registrable
Securities,
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(iii) upon the request of any of the Initial Purchasers or (iv) upon the
request of any Holder that is not permitted to participate in the Exchange Offer
or does not receive fully tradeable Exchange Securities pursuant to the Exchange
Offer, then in case of each of clauses (i) through (iv) the Company and the
Guarantors shall, at their cost:
(a) As promptly as practicable, file with the SEC, and thereafter
shall use their best efforts to cause to be declared effective as promptly
as practicable but no later than 150 days after the original issue of the
Registrable Securities or 45 days after the occurrence of any of the events
listed in clauses (iii) and (iv) above, whichever is later, a Shelf
Registration Statement relating to the offer and sale of the Registrable
Securities by the Holders from time to time in accordance with the methods
of distribution elected by the Majority Holders participating in the Shelf
Registration and set forth in such Shelf Registration Statement.
(b) Use their best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of two years from the date the
Shelf Registration Statement is declared effective by the SEC, or for such
shorter period that will terminate when all Registrable Securities covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or cease to be outstanding or otherwise to be
Registrable Securities (the "Effectiveness Period"); PROVIDED, HOWEVER,
that the Effectiveness Period in respect of the Shelf Registration
Statement shall be extended to the extent required to permit dealers to
comply with the applicable prospectus delivery requirements under the 1933
Act and as otherwise provided herein; PROVIDED, FURTHER, that any such
extension pursuant to the preceding proviso shall extend no more than 90
days.
(c) Notwithstanding any other provisions hereof, use their best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933 Act and
the rules and regulations thereunder, (ii) any Shelf Registration Statement
and any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), does not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements, in light of the circumstances under which they were made,
not misleading.
The Company and the Guarantors shall not permit any securities other
than Registrable Securities to be included in the Shelf Registration
Statement. The Company and the Guarantors further agree, if necessary, to
supplement or amend the Shelf Registration Statement,
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as required by Section 3(b) below, and to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly
after its being used or filed with the SEC.
2.3 EXPENSES. The Company and the Guarantors shall pay all Registration
Expenses in connection with the registration pursuant to Section 2.1 or 2.2.
Each Holder shall pay all underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
2.4. EFFECTIVENESS. (a) The Company and the Guarantors will be deemed not
to have used their best efforts to cause the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, to become, or
to remain, effective during the requisite period if the Company or any Guarantor
voluntarily takes any action that would, or omits to take any action which
omission would, result in any such Registration Statement not being declared or
remaining effective or in the Holders of Registrable Securities covered thereby
not being able to exchange or offer and sell such Registrable Securities during
that period as and to the extent contemplated hereby, unless such action is
required by applicable law.
(b) An Exchange Offer Registration Statement pursuant to Section 2.1 hereof
or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be
deemed to have become effective unless it has been declared effective by the
SEC; PROVIDED, HOWEVER, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to an Exchange Offer Registration
Statement or a Shelf Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed not to
have become effective during the period of such interference, until the offering
of Registrable Securities pursuant to such Registration Statement may legally
resume.
2.5 INTEREST. The Indenture executed in connection with the Securities and
the Guarantees will provide that in the event that either (a) the Exchange Offer
Registration Statement is not filed with the SEC on or prior to the 45th
calendar day following the date of original issue of the Securities and the
Guarantees, (b) the Exchange Offer Registration Statement has not been declared
effective on or prior to the 120th calendar day following the date of original
issue of the Securities and the Guarantees, (c) the Exchange Offer is not
consummated on or prior to the 150th calendar day following the date of original
issue of the Securities and the Guarantees, (d) a Shelf Registration Statement
required to be filed pursuant to Section 2.2 is not declared effective on or
prior to the later of 150 days after the original issuance of the Registrable
Securities or 45 days after the occurrence of the applicable event listed in
clauses (iii) or (iv) of Section 2.2, whichever is later, or (e) the Shelf
Registration Statement is declared effective but shall thereafter (during the
period it is required to be effective) become unusable for more than 30 days in
the aggregate (each such event referred to in clauses (a) through (e) above, a
"Registration Default"), the interest rate borne by the Securities shall be
increased ("Additional Interest") by one-quarter of one percent per annum upon
the occurrence of each Registration Default, which rate (a so increased) will
increase by one quarter of one percent each 90-day period that such Additional
Interest continues to accrue under any such circumstance, provided
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<PAGE>
that the maximum aggregate increase in the interest rate will in no event
under this Agreement exceed one percent (1%) per annum. Immediately following
the cure of a Registration Default the accrual of Additional Interest with
respect to that particular Registration Default will cease.
If the Shelf Registration Statement is unusable by the Holders for any
reason during the period it is required to be effective, and the aggregate
number of days in any consecutive twelve-month period for which the Shelf
Registration Statement shall not be usable exceeds 30 days in the aggregate,
then the interest rate borne by the Securities will be increased by 0.25% per
annum of the principal amount of the Securities for the first 90-day period (or
portion thereof) beginning on the 31st such date that such Shelf Registration
Statement ceases to be usable, which rate shall be increased by an additional
0.25% per annum of the principal amount of the Securities at the beginning of
each subsequent 90-day period, provided that the maximum aggregate increase in
the interest rate under this Agreement will in no event exceed one percent (1%)
per annum. Any amounts payable under this paragraph shall also be deemed
"Additional Interest" for purposes of this Agreement. Immediately upon the Shelf
Registration Statement once again becoming usable, the interest rate borne by
the Securities will be reduced to the original interest rate. Additional
Interest shall be computed based on the actual number of days elapsed in each
90-day period in which the Shelf Registration Statement is unusable.
The Company shall notify the Trustee within three business days after each
and every date on which an event occurs in respect of which Additional Interest
is required to be paid (an "Event Date"). Additional Interest shall be paid by
depositing with the Trustee, in trust, for the benefit of the Holders of
Registrable Securities, on or before the applicable semiannual interest payment
date, immediately available funds in sums sufficient to pay the Additional
Interest then due. The Additional Interest due shall be payable on each interest
payment date to the record Holder of Securities entitled to receive the interest
payment to be paid on such date as set forth in the Indenture. Each obligation
to pay Additional Interest shall be deemed to accrue from and including the day
following the applicable Event Date.
3. REGISTRATION PROCEDURES.
In connection with the obligations of the Company and the Guarantors with
respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the
Company and the Guarantors shall:
(a) prepare and file with the SEC a Registration Statement, within the
relevant time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company and the Guarantors,
(ii) shall, in the case of a Shelf Registration, be available for the sale of
the Registrable Securities by the selling Holders thereof, (iii) shall comply as
to form in all material respects with the requirements of the applicable form
and include or incorporate by reference all financial statements required by the
SEC to be filed therewith or incorporated by reference therein, and (iv) shall
comply in all respects with the requirements of Regulation S-T under the 1933
Act, and use their best efforts to cause such
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Registration Statement to become effective and remain effective in
accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under applicable
law to keep such Registration Statement effective for the applicable period
required by this Agreement or by law; and cause each Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provision then in force) under the
1933 Act and comply with the provisions of the 1933 Act, the 1934 Act and the
rules and regulations thereunder applicable to them with respect to the
disposition of all securities covered by each Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the selling Holders thereof (including sales by any
Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each affected Holder of
Registrable Securities, at least five business days prior to filing, that a
Shelf Registration Statement with respect to the Registrable Securities is being
filed and advising such Holders that the distribution of Registrable Securities
will be made in accordance with the method selected by the Majority Holders
participating in the Shelf Registration; (ii) furnish to each Holder of
Registrable Securities and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules and, if the
Holder so requests, all exhibits to the related registration statement in order
to facilitate the public sale or other disposition of the Registrable
Securities; and (iii) hereby consent to the use of the Prospectus or any
amendment or supplement thereto by each of the selling Holders of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or any amendment or supplement thereto;
(d) use their best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a Registration
Statement and each underwriter of an underwritten offering of Registrable
Securities shall reasonably request by the time the applicable Registration
Statement is declared effective by the SEC, and do any and all other acts and
things which may be reasonably necessary or advisable to enable each such Holder
and underwriter to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; PROVIDED, HOWEVER, that the Company
and the Guarantors shall not be required to (i) qualify as a foreign corporation
or as a dealer in securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), or (ii) take any action which
would subject it to general service of process or taxation in any such
jurisdiction where it is not then so subject;
(e) notify promptly each Holder of Registrable Securities under a Shelf
Registration or any Participating Broker-Dealer who has notified the Company and
the
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<PAGE>
Guarantors that it is utilizing the Exchange Offer Registration Statement as
provided in paragraph (f) below and, if requested by such Holder or
Participating Broker-Dealer, confirm such advice in writing promptly (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by the
SEC or any state securities authority for post-effective amendments and
supplements to a Registration Statement and Prospectus or for additional
information after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) in the case o a Shelf Registration, if,
between the effective date of a Registration Statement and the closing of any
sale of Registrable Securities covered thereby, the representations and
warranties of the Company or any Guarantor contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects,
(v) of the happening of any event or the discovery of any facts during the
period a Shelf Registration Statement is effective which makes any statement
made in such Registration Statement or the related Prospectus untrue in any
material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements therein not
misleading, (vi) of the receipt by the Company or any Guarantor of any
notification with respect to the suspension of the qualification of the
Registrable Securities or the Exchange Securities, as the cas may be, for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose and (vii) of any determination by the Company or any Guarantor that a
post-effective amendment to such Registration Statement would be appropriate;
(f) in the case of the Exchange Offer Registration Statement (i) include in
the Exchange Offer Registration Statement a section entitled "Plan of
Distribution" which section shall be acceptable to Merrill Lynch on behalf of
the Participating Broker-Dealers, and which shall contain a summary statement of
the positions taken or policies made by the staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that holds Registrable
Securitie acquired for its own account as a result of market-making activities
or other trading activities and that will be the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act) of Exchange Securities to be received by such
broker-dealer in the Exchange Offer, whether such positions or policies have
been publicly disseminated by the staff of the SEC or such positions or
policies, in the judgment of Merrill Lynch on behalf of the Participating
Broker-Dealers and its counsel, represent the prevailing views of the staff of
the SEC, including a statement that any such broker-dealer who receives Exchange
Securities for Registrable Securities pursuant to the Exchange Offer may be
deemed a statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such Exchange
Securities, (ii) furnish to each Participating Broker-Dealer who has delivered
to the Company and the Guarantors the notice referred to in Section 3(e),
without charge, as many copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary prospectus, and any amendment
or supplement thereto, as such Participating Broker-Dealer may reasonably
request, (iii) hereby consent to the use of the Prospectus forming part of the
Exchange Offer Registration Statement or any amendment or supplement thereto, by
any Person subject to the prospectus delivery requirements of the SEC, including
all Participating
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<PAGE>
Broker-Dealers, in connection with the sale or transfer of the Exchange
Securities covered by such Prospectus or any amendment or supplement thereto,
and (iv) include in the transmittal letter or similar documentation to be
executed by an exchange offeree in order to participate in the Exchange Offer
(x) the following provision (or any other similar provision requested by Merrill
Lynch on behalf of the Participating Broker-Dealers):
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it must deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale
of Exchange Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer;" and
(y) a statement to the effect that by a broker-dealer making the acknowledgment
described in clause (x) and by delivering a Prospectus in connection with the
exchange of Registrable Securities, the broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the 1933 Act;
(g) (i) in the case of an Exchange Offer, furnish counsel for the Initial
Purchasers and (ii) in the case of a Shelf Registration, furnish counsel for the
Holders of Registrable Securities copies of any comment letters received from
the SEC or any other request by the SEC or any state securities authority for
amendments or supplements to a Registration Statement and Prospectus or for
additional information;
(h) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, and each underwriter, if any, without charge, at least
one conformed copy of each Registration Statement and any post-effective
amendment thereto, including financial statements and schedules (without
documents incorporated therein by reference and all exhibits thereto, unless
requested);
(j) in the case of a Shelf Registration, cooperate with the selling Holders
of Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Securities to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Holders or the underwriters, if any, may reasonably
request at least three business days prior to the closing of any sale of
Registrable Securities;
(k) in the case of a Shelf Registration, upon the occurrence of any event
or the discovery of any facts, each as contemplated by Sections 3(e)(v) and
3(e)(vi) hereof, as promptly as practicable after the occurrence of such an
event, use their best efforts to prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus or any
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<PAGE>
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable Securities
or Participating Broker-Dealers, such Prospectus will not contain at the time of
such delivery any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or will remain so
qualified. At such time as such public disclosure is otherwise made or the
Company determines that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include any omitted material
fact, the Company and the Guarantors agree promptly to notify each Holder of
such determination and to furnish each Holder such number of copies of the
Prospectus as amended or supplemented, as such Holder may reasonably request;
(l) in the case of a Shelf Registration, a reasonable time prior to the
filing of any Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration Statement
or a Prospectus after initial filing of a Registration Statement, provide copies
of such document to the Initial Purchasers on behalf of such Holders; and make
representatives of the Company and the Guarantors as shall be reasonably
requested by the Holders of Registrable Securities, or the Initial Purchasers on
behalf of such Holders, available for discussion of such document;
(m) obtain a CUSIP number for all Exchange Securities, Private Exchange
Securities or Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement, and provide the Trustee with printed
certificates for the Exchange Securities, Private Exchange Securities or the
Registrable Securities, as the case may be, in a form eligible for deposit with
the Depositary;
(n) (i) cause the Indenture to be qualified under the Trust Indenture Act
of 1939 (the "TIA") in connection with the registration of the Exchange
Securities or Registrable Securities, as the case may be, (ii) cooperate with
the Trustee and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms of
the TIA and (iii) execute, and use its best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(o) in the case of a Shelf Registration, enter into agreements (including
underwriting agreements) and take all other customary and appropriate actions in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connection whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration:
(i) make such representations and warranties to the Holders of such
Registrable Securities and the underwriters, if any, in form, substance
and scope
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<PAGE>
as are customarily made by issuers to underwriters in similar
underwritten offerings as may be reasonably requested by them;
(ii) obtain opinions of counsel to the Company and the Guarantors and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any, and
the holders of a majority in principal amount of the Registrable Securities
being sold) addressed to each selling Holder and the underwriters, if any,
covering the matters customarily covered in opinions requested in sales of
securities or underwritten offerings and such other matters as may be
reasonably requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from the
Company's and the Guarantors' independent certified public accountants
(and, if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company
for which financial statements are, or are required to be, included in the
Registration Statement) addressed to the underwriters, if any, and use
reasonable efforts to have such letter addressed to the selling Holders of
Registrable Securities (to the extent consistent with Statement on Auditing
Standards No. 72 of the American Institute of Certified Public Accounts),
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in connection
with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders and an
agent of the Holders providing for, among other things, the appointment of
such agent for the selling Holders for the purpose of soliciting purchases
of Registrable Securities, which agreement shall be in form, substance and
scope customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the same to set
forth indemnification provisions and procedures substantially equivalent to
the indemnification provisions and procedures set forth in Section 4 hereof
with respect to the underwriters and all other parties to be indemnified
pursuant to said Section or, at the request of any underwriters, in the
form customarily provided to such underwriters in similar types of
transactions; and
(vi) deliver such documents and certificates as may be reasonably
requested and as are customarily delivered in similar offerings to the
Holders of a majority in principal amount of the Registrable Securities
being sold and the managing underwriters, if any.
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The above shall be done at (i) the effectiveness of such Registration Statement
(and each post-effective amendment thereto) and (ii) each closing under any
underwriting or similar agreement as and to the extent required thereunder;
(p) in the case of a Shelf Registration or if a Prospectus is required
to be delivered by any Participating Broker-Dealer in the case of an Exchange
Offer, make available for inspection by representatives of the Holders of the
Registrable Securities, any underwriters participating in any disposition
pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and
any counsel or accountant retained by any of the foregoing, all financial and
other records, pertinent corporate documents and properties of the Company and
the Guarantors reasonably requested by any such persons, and cause the
respective officers, directors, employees, and any other agents of the Company
and the Guarantors to supply all information reasonably requested by any such
representative, underwriter, special counsel or accountant in connection with a
Registration Statement, and make such representatives of the Company and the
Guarantors available for discussio of such documents as shall be reasonably
requested by the Initial Purchasers;
(q) (i) in the case of an Exchange Offer Registration Statement, a
reasonable time prior to the filing of any Exchange Offer Registration
Statement, any Prospectus forming a part thereof, any amendment to an Exchange
Offer Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Initial Purchasers and to counsel to the
Holders of Registrable Securities and make such changes in any such document
prior to the filing thereof as the Initial Purchasers or counsel to the Holders
of Registrable Securities may reasonably request and, except as otherwise
required by applicable law, not file any such document in a form to which the
Initial Purchasers on behalf of the Holders of Registrable Securities and
counsel to the Holders of Registrable Securities shall not have previously been
advised and furnished a copy of or to which the Initial Purchasers on behalf of
the Holders of Registrable Securities or counsel to the Holders of Registrable
Securities shall reasonably object, and make the representatives of the Company
and the Guarantors available for discussion of such documents as shall be
reasonably requested by the Initial Purchasers; and
(ii) in the case of a Shelf Registration, a reasonable time prior to
filing any Shelf Registration Statement, any Prospectus forming a part thereof,
any amendment to such Shelf Registration Statement or amendment or supplement to
such Prospectus, provide copies of such document to the Holders of Registrable
Securities, to the Initial Purchasers, to counsel for the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable
Securities, if any, make such changes in any such document prior to the filing
thereof as the Initial Purchasers, the counsel to the Holders or the underwriter
or underwriters reasonably request and not file any such document in a form to
which the Majority Holders, the Initial Purchasers on behalf of the Holders of
Registrable Securities, counsel for the Holders of Registrable Securities or any
underwriter shall not have previously been advised and furnished a copy of or to
which the Majority Holders, the Initial Purchasers on behalf of the Holders of
Registrable Securities, counsel to the Holders of Registrable Securities or any
underwriter shall reasonably object, and make the representatives of the Company
and the Guarantors available for
16
<PAGE>
discussion of such document as shall be reasonably requested by the
Holders of Registrable Securities, the Initial Purchasers on behalf of such
Holders, counsel for the Holders of Registrable Securities or any underwriter.
(r) in the case of a Shelf Registration, use its best efforts to cause
all Registrable Securities to be listed on any securities exchange on which
similar debt securities issued by the Company or any Guarantor are then listed
if requested by the Majority Holders, or if requested by the underwriter or
underwriters of an underwritten offering of Registrable Securities, if any;
(s) in the case of a Shelf Registration, use its best efforts to cause
the Registrable Securities to be rated by the appropriate rating agencies, if so
requested by the Majority Holders, or if requested by the underwriter or
underwriters of an underwritten offering of Registrable Securities, if any;
(t) otherwise comply with all applicable rules and regulations of the
SEC and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering at least 12 months which shall
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(u) cooperate and assist in any filings required to be made with the
NASD and, in the case of a Shelf Registration, in the performance of any due
diligence investigation by any underwriter and its counsel (including any
"qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD); and
(v) upon consummation of an Exchange Offer or a Private Exchange,
obtain a customary opinion of counsel to the Company and the Guarantors
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or Private Exchange, and which
includes an opinion that (i) the Company, and the Guarantors, as the case may
be, have duly authorized, executed and delivered the Exchange Securities and/or
Private Exchange Securities, as applicable, and the related indenture, and (ii)
each of the Exchange Securities and related indenture constitute a legal, valid
and binding obligation of the Company and the Guarantors, as the case may be,
enforceable against the Company and the Guarantors, as the case may be, in
accordance with its respective terms (with customary exceptions).
If following the date hereof there has been a change in SEC policy
with respect to exchange offers such as the Exchange Offer, such that in the
opinion of counsel to the Company or the Holders there is a substantial question
as to whether the Exchange Offer is permitted by applicable federal law, the
Company and the Guarantors hereby agree to seek a no-action letter or other
favorable decision from the SEC allowing the Company and the Guarantors to
consummate an Exchang Offer for the Notes. The Company and the Guarantors hereby
agree to pursue the issuance of such a decision to the SEC staff level. In
connection with the foregoing, the Company and the Guarantors hereby agree to
take all such other actions as are requested by the SEC or otherwise required in
connection with the issuance of such decision, including without
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limitation (A) participating in telephonic conferences with the SEC,
(B) delivering to the SEC staff an analysis prepared by counsel to the Company
and the Guarantors, setting forth the legal basis, if any, upon which such
counsel has concluded that such an Exchange Offer shall be permitted and (C)
diligently pursuing a resolution (which need not be favorable) by the SEC staff
of such submission.
In the case of a Shelf Registration Statement, the Company and the
Guarantors may (as a condition to such Holder's participation in the Shelf
Registration) require each Holder of Registrable Securities to furnish to the
Company and the Guarantors such information regarding the Holder and the
proposed distribution by such Holder of such Registrable Securities as the
Company and the Guarantors may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company and the Guarantors of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, and, if so directed by the Company and the Guarantors, such
Holder will deliver to the Company and the Guarantors (at their expense) all
copies in such Holder's possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be acceptable to the Company and the Guarantors. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
4. INDEMNIFICATION; CONTRIBUTION.
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless the Initial Purchasers, each Holder, each
Participating Broker-Dealer, each Person who participates as an underwriter (any
such Person being an "Underwriter") and each Person, if any, who controls any
Holder or Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement (or any
18
<PAGE>
amendment or supplement thereto) pursuant to which Exchange
Securities or Registrable Securities were registered under the 1933
Act, including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fac required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 4(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by any
indemnified party), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any
suc expense is not paid under subparagraph (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company or the
Guarantors by the Holder or Underwriter expressly for use in a Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(b) Each Holder severally, but not jointly, agrees to indemnify and hold
harmless the Company, the Guarantors, the Initial Purchasers, each Underwriter
and the other selling Holders, and each of their respective directors and
officers, and each Person, if any, who controls the Company, any of the
Guarantors, the Initial Purchasers, any Underwriter or any other selling Holder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section 4(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Shelf Registration Statement (or any amendment thereto) or any
Prospectus included therein (or any amendment or supplement thereto) in reliance
upon and in conformity with written information with respect to such Holder
furnished to the Company or the Guarantors by such Holder expressly for use in
the
19
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Shelf Registration Statement (or any amendment thereto) or such Prospectus
(or any amendment or supplement thereto); PROVIDED, HOWEVER, that no such Holder
shall be liable for any claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Registrable Securities pursuant to such
Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action or proceeding commenced
against it in respect of which indemnity may be sought hereunder, but failure so
to notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 4 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) If the indemnification provided for in this Section 4 is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, in such proportion as is appropriate to reflect the relative
fault of the Company and the Guarantors on the one hand and the Holders and the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in
20
<PAGE>
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative fault of the Company and the Guarantors on the one hand and
the Holders and the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company, the Guarantors, the Holders
or the Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors, the Holders and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this Section
4 were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 4. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
4 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 4, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities and Guarantees sold by it were offered
exceeds the amount of any damages which such Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution under this
Section 4 from any Person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 4, each Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser or Holder, and each director of the Company or any Guarantor,
and each Person, if any, who controls the Company or any Guarantor within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as the Company or such Guarantor. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 7 are
several in proportion to the principal amount of Securities set forth opposite
their respective names in Schedule A to the Purchase Agreement and not joint.
5. MISCELLANEOUS.
5.1 RULE 144 AND RULE 144A. For so long as the Company or any Guarantor is
subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the
Company and each
21
<PAGE>
Guarantor covenants that they will file the reports required to be filed by
them under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules
and regulations adopted by the SEC thereunder. If the Company and the Guarantors
cease to be so required to file such reports, the Company and the Guarantors
covenant that they will upon the request of any Holder of Registrable Securities
(a) make publicly available such information as is necessary to permit sales
pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a
prospective purchaser as is necessary to permit sales pursuant to Rule 144A
under the 1933 Act and will take such further action as any Holder of
Registrable Securities may reasonably request, and (c) take such further action
that is reasonable in the circumstances, in each case, to the extent required
from time to time to enable such Holder to sell its Registrable Securities
without registration under the 1933 Act within the limitation of the exemptions
provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from
time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended
from time to time, or (iii) any similar rules or regulations hereafter adopted
by the SEC. Upon the request of any Holder of Registrable Securities, the
Company and the Guarantors will deliver to such Holder a written statement as to
whether they have complied with such requirements.
5.2 NO INCONSISTENT AGREEMENTS. The Company and each Guarantor have not
entered into and the Company and each Guarantor will not after the date of this
Agreement enter into any agreement which is inconsistent with the rights granted
to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not and will not for the term of this Agreement in any way conflict
with the rights granted to the holders of the Company's and each Guarantors'
other issued and outstanding securities under any such agreements.
5.3 AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company and the Guarantors have obtained the written consent of
Holders of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure.
5.4 NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if
to a Holder, at the most current address given by such Holder to the Company and
the Guarantors by means of a notice given in accordance with the provisions of
this Section 5.4, which address initially is the address set forth in the
Purchase Agreement with respect to the Initial Purchasers; and (b) if to the
Company or any Guarantor, initially at the Company's or such Guarantor's address
set forth in the Purchase Agreement, and thereafter at such other address of
which notice is given in accordance with the provisions of this Section 5.4.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two business days
after being deposited in the
22
<PAGE>
mail, postage prepaid, if mailed; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and on the next business day if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
5.5 SUCCESSOR AND ASSIGNS. This Agreement shall inure to the benefit of and
be binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders; PROVIDED that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Registrable Securities in violation
of the terms of the Purchase Agreement or the Indenture. If any transferee of
any Holder shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be held subject
to all of the terms of this Agreement, and by taking and holding such
Registrable Securities such person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such person shall be entitled to receive
the benefits hereof.
5.6 THIRD PARTY BENEFICIARIES. The Initial Purchasers (even if the
Initial Purchasers are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company and
the Guarantors, on the one hand, and the Holders, on the other hand, and
shall have the right to enforce such agreements directly to the extent they
deem such enforcement necessary or advisable to protect their rights or the
rights of Holders hereunder. Each Holder of Registrable Securities shall be
a third party beneficiary to the agreements made hereunder between the
Company and the Guarantors, on the one hand, and the Initial Purchasers, on
the other hand, and shall have the right to enforce such agreements directly
to the extent it deems such enforcement necessary or advisable to protect its
rights hereunder.
5.7. SPECIFIC ENFORCEMENT. Without limiting the remedies available to the
Initial Purchasers and the Holders, the Company and the Guarantors acknowledge
that any failure by the Company and the Guarantors to comply with their
obligations under Sections 2.1 through 2.4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders for which there is
no adequate remedy at law, that it would not be possible to measure damages for
such injuries precisely and that, in the event of any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantors' obligations under
Sections 2.1 through 2.4 hereof.
5.8. RESTRICTION ON RESALES. Until the expiration of two years after the
original issuance of the Securities and the Guarantees, the Company and the
Guarantors will not, and will cause their "affiliates" (as such term is
defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities
and Guarantees which are "restricted securities" (as such term is defined
23
<PAGE>
under Rule 144(a)(3) under the 1933 Act) that have been reacquired by any of
them and shall immediately upon any purchase of any such Securities and
Guarantees submit such Securities and Guarantees to the Trustee for
cancellation.
5.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
5.10 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.12 SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Very truly yours,
JO-ANN STORES
By /s/ Brian P. Carney
------------------------------
Name: Brian P. Carney
Title: CFO
FCA FINANCIAL, INC.
FABRI-CENTERS OF SOUTH DAKOTA, INC.
FABRI-CENTERS OF CALIFORNIA, INC.
FCA OF OHIO, INC.
HOUSE OF FABRICS, INC.
By /s/ Brian P. Carney
--------------------------
Name: Brian P. Carney
Title: Vice President
25
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
BANC ONE CAPITAL MARKETS, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Chantal D. Simon
--------------------------------------------
Authorized Signatory
26
<PAGE>
[THOMPSON HINE & FLORY LLP LETTERHEAD]
June 16, 1999
Jo-Ann Stores, Inc.
5555 Darrow Road
Hudson, Ohio 44236
Re: Registration Statement on Form S-4 relating to the Exchange
Offer respecting 10 3/8% Senior Subordinated Notes due 2007
in the aggregate principle amount of $150,000,000
Ladies and Gentlemen:
As counsel to Jo-Ann Stores, Inc., an Ohio corporation (the "Company"),
we are rendering this opinion as to the legality of the $150,000,000
aggregate principal amount of the Company's 10 3/8% Senior Subordinated Notes
due 2007 (the "Securities") to be registered pursuant to the above-captioned
Registration Statement on Form S-4 (the "Registration Statement") filed on
the date hereof by the Company with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated thereunder (the "Rules").
Except as otherwise defined herein, capitalized terms are used as defined in
the Registration Statement.
In connection herewith, we have examined originals or copies of (i) the
Registration Statement, (ii) an executed copy of the Indenture (the
"Indenture"), between the Company and FCA Financial, Inc., Fabri-Centers of
South Dakota, Inc., Fabri-Centers of California, Inc., FCA of Ohio, Inc., and
House of Fabrics, Inc., as guarantors, and Harris Trust and Savings Bank, as
trustee (the "Trustee"), (iii) an executed copy of the Registration Rights
Agreement among the Company, FCA Financial, Inc., Fabri-Centers of South
Dakota, Inc., Fabri-Centers of California, Inc., FCA of Ohio, Inc., and House
of Fabrics, Inc., and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co., and Banc One Capital Markets, Inc., (iv) the Amended
Articles of Incorporation and Code of Regulations of the Company, as amended
to date, (v) records of certain corporate proceedings of the Company relating
to, among other things, the issuance of the Securities, the Indenture, the
Exchange Offer and related matters, (vi) the form T-1 of the Trustee filed as
an exhibit to the Registration Statement, and (vii) the form of the
Securities included as an exhibit to the Indenture. We have also examined
originals or copies, certified or otherwise identified to our satisfaction,
of such records of the Company, and such agreements, certificates of public
officials, certificates of officers or other representatives of the Company
and others, and such other documents, certificates and records as we have
deemed
<PAGE>
[LETTERHEAD]
Jo-Ann Stores, Inc.
June 16, 1999
Page 2
necessary or appropriate as a basis for the opinions set forth herein. In
addition, we have made such other examinations of law and fact as we
considered necessary in order to form a basis for the opinion hereinafter
expressed.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed, we have assumed that
such parties thereto, other than the Company, had or will have the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof on such parties. As to any facts material
to the opinions expressed herein which we did not independently establish or
verify, we have relied upon oral or written statements and representations of
officers, trustees and other representatives of the Company and others.
In rendering the opinion set forth below, we have also assumed that (i)
the Registration Statement, and any amendments thereto, will have become
effective, (ii) all Securities will have been issued in compliance with
applicable federal and states securities laws, (iii) the Trustee is validly
existing with all requisite power and authority to enter into the Indenture
and perform its obligations thereunder, (iv) the Indenture has been duly
executed and delivered by the Trustee and the Indenture will have become
qualified under the Trust Indenture Act of 1939, as amended, and (v) the
Securities will have been duly executed by the Company, authenticated by the
Trustee, and issued and delivered against receipt of the consideration
therefor approved by the Company, in each case as provided in the Indenture.
Based upon and subject to the foregoing and limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that when
the Securities (in the form examined by us) have been duly executed by the
Company and authenticated by the Trustee in accordance with the provisions of
the Indenture and have been delivered upon consummation of the Exchange
Offer, the Securities will constitute legal, valid and binding obligations of
the Company, entitled to the benefits of the Indenture and enforceable against
the Company in
<PAGE>
[LETTERHEAD]
Jo-Ann Stores, Inc.
June 16, 1999
Page 3
accordance with their terms, except to the extent that enforcement thereof
may be limited by (1) bankruptcy, insolvency, reorganization, receivership,
arrangement, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (2) general
principles of equity, regardless of whether enforceability is considered in a
proceeding in equity or at law.
In rendering the foregoing, we have assumed that the execution and
delivery by the Company of the Securities and the Indenture and the
performance by the Company of its obligations thereunder do not and will not
violate, conflict with or constitute a default under (i) any agreement or
instrument to which the Company or any of its properties is subject (except
that we do not make the assumptions set forth in this clause (i) with respect
to the Amended Articles of Incorporation or Code of Regulations of the
Company), (ii) any law, rule or regulation to which the Company is subject
(except that we do not make the assumption set forth in this clause (ii)
with respect to the laws of the State of Ohio, the federal laws of the United
States of America and the General Corporation Law of the State of Delaware,
it being understood that we have made no special investigation with respect
to any other laws, rules or regulations), (iii) any judicial or regulatory
order or decree of any governmental authority, or (iv) any consent, approval,
license, authorization or validation of, or filing, recording or registration
with any governmental authority.
Our opinions expressed above is rendered only with respect to the laws
of the State of Ohio, the federal laws of the United States of America and
the General Corporation Law of the State of Delaware.
<PAGE>
[LETTERHEAD]
Jo-Ann Stores, Inc.
June 16, 1999
Page 4
We hereby consent to the use of our name in the Registration Statement,
in the related prospectus as the same appears under the caption "Legal
Matters" and in any supplement to such prospectus, and to the use of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Thompson Hine & Flory LLP
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF
MAY 5, 1999
AMONG
JO-ANN STORES, INC.
AS BORROWER
THE LENDING INSTITUTIONS NAMED THEREIN
AS LENDERS
THE FIRST NATIONAL BANK OF CHICAGO
AS DOCUMENTATION AGENT
COMERICA BANK
NATIONAL CITY BANK
AS CO-AGENTS
[LOGO]
KEYBANK NATIONAL ASSOCIATION
AS A LENDER, THE SWING LINE LENDER, THE ISSUING BANK AND
AS ADMINISTRATIVE AGENT
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
1.1. CERTAIN DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . 1
1.2. COMPUTATION OF TIME PERIODS . . . . . . . . . . . . . . . . . . .18
1.3. ACCOUNTING TERMS. . . . . . . . . . . . . . . . . . . . . . . . .18
1.4. TERMS GENERALLY . . . . . . . . . . . . . . . . . . . . . . . . .19
1.5. CURRENCY EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . .19
SECTION 2. AMOUNT AND TERMS OF LOANS . . . . . . . . . . . . . . . . . . . .19
2.1. COMMITMENTS FOR LOANS . . . . . . . . . . . . . . . . . . . . . .19
2.2. PROCEDURES FOR BORROWING. . . . . . . . . . . . . . . . . . . . .20
2.3. REFUNDING OF, OR PARTICIPATION IN, SWING LINE LOANS . . . . . . .22
2.4. NOTES; LOAN ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . .23
2.5. CONVERSIONS OF BORROWINGS UNDER THE GENERAL REVOLVING FACILITY. .24
2.6. INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
2.7. SELECTION AND CONTINUATION OF INTEREST PERIODS. . . . . . . . . .27
2.8. INCREASED COSTS, ILLEGALITY, ETC. . . . . . . . . . . . . . . . .27
2.9. BREAKAGE COMPENSATION . . . . . . . . . . . . . . . . . . . . . .29
2.10. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS. . . . . . . . .30
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . .30
3.1. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . .30
3.2. LETTER OF CREDIT REQUESTS: NOTICES OF ISSUANCE. . . . . . . . . .31
3.3. AGREEMENT TO REPAY LC DISBURSEMENTS . . . . . . . . . . . . . . .32
3.4. PARTICIPATIONS IN LETTERS OF CREDIT . . . . . . . . . . . . . . .33
3.5. INCREASED COSTS . . . . . . . . . . . . . . . . . . . . . . . . .34
3.6. GUARANTY OF SUBSIDIARY LETTER OF CREDIT OBLIGATIONS . . . . . . .35
SECTION 4. FEES AND COMMISSIONS; TERMINATION
AND REDUCTION OF COMMITMENTS. . . . . . . . . . . . . . . . . .36
4.1. FEES AND COMMISSIONS. . . . . . . . . . . . . . . . . . . . . . .36
4.2. VOLUNTARY TERMINATION/REDUCTION OF COMMITMENTS. . . . . . . . . .38
4.3. MANDATORY TERMINATION/ADJUSTMENTS OF COMMITMENTS, ETC.. . . . . .38
4.4. EXTENSION OF MATURITY DATE. . . . . . . . . . . . . . . . . . . .38
SECTION 5. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
5.1. VOLUNTARY PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . .39
5.2. MANDATORY PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . .39
5.3. METHOD AND PLACE OF PAYMENT . . . . . . . . . . . . . . . . . . .41
5.4. NET PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 6. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . .43
6.1. CONDITIONS PRECEDENT AT CLOSING DATE. . . . . . . . . . . . . . .43
6.2. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS . . . . . . . . . . . .44
SECTION 7. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . .44
7.1. CORPORATE STATUS, ETC.. . . . . . . . . . . . . . . . . . . . . .44
7.2. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . .45
7.3. CORPORATE POWER AND AUTHORITY, ETC. . . . . . . . . . . . . . . .45
7.4. NO VIOLATION. . . . . . . . . . . . . . . . . . . . . . . . . . .45
i
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PAGE
7.5. GOVERNMENTAL APPROVALS. . . . . . . . . . . . . . . . . . . . . . 45
7.6. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
7.7. USE OF PROCEEDS; MARGIN REGULATIONS . . . . . . . . . . . . . . .45
7.8. FINANCIAL STATEMENTS, ETC.. . . . . . . . . . . . . . . . . . . .46
7.9. NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . .46
7.10. TAX RETURNS AND PAYMENTS. . . . . . . . . . . . . . . . . . . . .46
7.11. TITLE TO PROPERTIES, ETC. . . . . . . . . . . . . . . . . . . . .46
7.12. LAWFUL OPERATIONS, ETC. . . . . . . . . . . . . . . . . . . . . .47
7.13. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . .47
7.14. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . . .47
7.15. INTELLECTUAL PROPERTY, ETC. . . . . . . . . . . . . . . . . . . .47
7.16. INVESTMENT COMPANY. . . . . . . . . . . . . . . . . . . . . . . .47
7.17. LABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . .47
7.18. EXISTING INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . .48
7.19. YEAR 2000 COMPUTER MATTERS. . . . . . . . . . . . . . . . . . . .48
7.20. TRUE AND COMPLETE DISCLOSURE. . . . . . . . . . . . . . . . . . .48
SECTION 8. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . .49
8.1. REPORTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . .49
8.2. BOOKS, RECORDS AND INSPECTIONS. . . . . . . . . . . . . . . . . .51
8.3. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
8.4. PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . . . . . .52
8.5. CORPORATE FRANCHISES. . . . . . . . . . . . . . . . . . . . . . .52
8.6. GOOD REPAIR . . . . . . . . . . . . . . . . . . . . . . . . . . .52
8.7. COMPLIANCE WITH STATUTES, ETC.. . . . . . . . . . . . . . . . . .52
8.8. COMPLIANCE WITH ENVIRONMENTAL LAWS. . . . . . . . . . . . . . . .52
8.9. FISCAL YEARS, FISCAL QUARTERS . . . . . . . . . . . . . . . . . .53
8.10. CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY . . . . . . .53
8.11. HEDGE AGREEMENTS, ETC.. . . . . . . . . . . . . . . . . . . . . .54
8.12. MOST FAVORED COVENANT STATUS. . . . . . . . . . . . . . . . . . .54
8.13. SENIOR DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 9. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . .54
9.1. CHANGES IN BUSINESS . . . . . . . . . . . . . . . . . . . . . . .54
9.2. CONSOLIDATION, MERGER, ACQUISITIONS, ASSET SALES, ETC.. . . . . .55
9.3. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
9.4. INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . . .57
9.5. ADVANCES, INVESTMENTS, LOANS AND GUARANTY OBLIGATIONS . . . . . .58
9.6. MINIMUM CONSOLIDATED NET WORTH . . . . . . . . . . . . . . . . .59
9.7. SENIOR LEVERAGE RATIO . . . . . . . . . . . . . . . . . . . . . .60
9.8. TOTAL LEVERAGE RATIO. . . . . . . . . . . . . . . . . . . . . . .60
9.9. FIXED CHARGE COVERAGE RATIO . . . . . . . . . . . . . . . . . . .60
9.10. RATIO OF CONSOLIDATED CURRENT ASSETS/CONSOLIDATED CURRENT
LIABILITIES PLUS CONSOLIDATED TOTAL SENIOR BALANCE
SHEET DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.11. ANNUAL CLEAN DOWN . . . . . . . . . . . . . . . . . . . . . . . .60
9.12. LIMITATION ON SUBSIDIARY INDEBTEDNESS . . . . . . . . . . . . . .61
9.13. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. . . . . . . . . . .61
9.14. PREPAYMENTS AND REFINANCINGS OF OTHER DEBT, ETC.. . . . . . . . .61
9.15. TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . . .62
9.16. PLAN TERMINATIONS, MINIMUM FUNDING, ETC.. . . . . . . . . . . . .62
ii
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PAGE
SECTION 10. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . .62
10.1. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . .62
10.2. ACCELERATION, ETC.. . . . . . . . . . . . . . . . . . . . . . . .64
10.3. APPLICATION OF LIQUIDATION PROCEEDS . . . . . . . . . . . . . . .64
SECTION 11. THE ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . . . . .65
11.1. APPOINTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .65
11.2. DELEGATION OF DUTIES. . . . . . . . . . . . . . . . . . . . . . .65
11.3. EXCULPATORY PROVISIONS. . . . . . . . . . . . . . . . . . . . . .65
11.4. RELIANCE BY ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . .66
11.5. NOTICE OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . .66
11.6. NON-RELIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . .66
11.7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .67
11.8. THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY . . . . . . . . .67
11.9. SUCCESSOR ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . .67
11.10. OTHER AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .67
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .67
12.1. PAYMENT OF EXPENSES ETC.. . . . . . . . . . . . . . . . . . . . .67
12.2. RIGHT OF SETOFF . . . . . . . . . . . . . . . . . . . . . . . . .69
12.3. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
12.4. BENEFIT OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . .69
12.5. NO WAIVER: REMEDIES CUMULATIVE. . . . . . . . . . . . . . . . . .72
12.6. PAYMENTS PRO RATA . . . . . . . . . . . . . . . . . . . . . . . .72
12.7. CALCULATIONS: COMPUTATIONS. . . . . . . . . . . . . . . . . . . .72
12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . .73
12.9. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . .73
12.10. EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . . . . .73
12.11. HEADINGS DESCRIPTIVE. . . . . . . . . . . . . . . . . . . . . . .73
12.12. AMENDMENT OR WAIVER . . . . . . . . . . . . . . . . . . . . . . .73
12.13. SURVIVAL OF INDEMNITIES . . . . . . . . . . . . . . . . . . . . .74
12.14. DOMICILE OF LOANS . . . . . . . . . . . . . . . . . . . . . . . .74
12.15. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . .74
12.16. LENDER REGISTER . . . . . . . . . . . . . . . . . . . . . . . . .75
12.17. LIMITATIONS ON LIABILITY OF THE ISSUING BANKS . . . . . . . . . .75
12.18. GENERAL LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . .75
12.19. NO DUTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
12.20. LENDERS AND AGENT NOT FIDUCIARY TO BORROWER, ETC. . . . . . . . .76
12.21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . .76
12.22. INTEREST RATE LIMITATION. . . . . . . . . . . . . . . . . . . . .76
12.23. JUDGMENT CURRENCY . . . . . . . . . . . . . . . . . . . . . . . .76
</TABLE>
iii
<PAGE>
ANNEX I - INFORMATION AS TO LENDERS
ANNEX II - INFORMATION AS TO SUBSIDIARIES
ANNEX III - DESCRIPTION OF EXISTING INDEBTEDNESS
ANNEX IV - DESCRIPTION OF EXISTING LIENS
ANNEX V - DESCRIPTION OF EXISTING ADVANCES, LOANS,
INVESTMENTS AND GUARANTEES
ANNEX VI - DESCRIPTION OF LETTERS OF CREDIT DEEMED ISSUED
UNDER THE CREDIT AGREEMENT
EXHIBIT A-1 - FORM OF GENERAL REVOLVING NOTE
EXHIBIT A-2 - FORM OF SWING LINE NOTE
EXHIBIT B-1 - FORM OF NOTICE OF BORROWING
EXHIBIT B-2 - FORM OF NOTICE OF CONVERSION
EXHIBIT B-3 - FORM OF LETTER OF CREDIT REQUEST
EXHIBIT C - FORM OF SUBSIDIARY GUARANTY
EXHIBIT D - FORM OF OPINION OF SPECIAL COUNSEL TO THE BORROWER
EXHIBIT E - FORM OF ASSIGNMENT AGREEMENT
EXHIBIT F - FORM OF SECTION 5.4(b)(ii) CERTIFICATE
iv
<PAGE>
CREDIT AGREEMENT, dated as of May 5, 1999, among the following:
(i) JO-ANN STORES, INC., an Ohio corporation (herein, together
with its successors and assigns, the "BORROWER");
(ii) the lending institutions listed in Annex I hereto (herein,
together with their respective successors and assigns, each a "LENDER" and
collectively, the "LENDERS");
(iii) THE FIRST NATIONAL BANK OF CHICAGO, one of the Lenders, in its
capacity as Documentation Agent (the "DOCUMENTATION AGENT");
(iv) COMERICA BANK, one of the Lenders, and NATIONAL CITY BANK, one
of the Lenders, each in their capacity as a Co-Agent (a "CO-AGENT"); and
(v) KEYBANK NATIONAL ASSOCIATION, a national banking association,
as a Lender, the Swing Line Lender, the Issuing Bank and as the
Administrative Agent
PRELIMINARY STATEMENTS:
(1) Unless otherwise defined herein, all capitalized terms used herein and
defined in section 1 are used herein as so defined.
(2) The Borrower has applied to the Lenders for credit facilities in the
aggregate amount of $300,000,000 in order to refinance certain Indebtedness of
the Borrower, to finance Acquisitions and in order to provide working capital
and funds for other lawful purposes.
(3) Subject to and upon the terms and conditions set forth herein, the
Lenders are willing to make available to the Borrower the credit facilities
provided for herein.
NOW, THEREFORE, it is agreed:
SECTION 1. DEFINITIONS AND TERMS.
1.1. CERTAIN DEFINED TERMS. As used herein, the following terms shall have
the meanings herein specified unless the context otherwise requires:
"ACQUISITION" shall mean and include (i) any acquisition on a going concern
basis (whether by purchase, lease or otherwise) of any facility and/or business
operated by any person who is not a Subsidiary of the Borrower, and (ii)
acquisitions of a majority of the outstanding equity or other similar interests
in any such person (whether by merger, stock purchase or otherwise).
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (i) the LIBO Rate for such Interest Period,
MULTIPLIED BY (ii) the Statutory Reserve Rate.
"ADMINISTRATIVE AGENT" shall have the meaning provided in the first
paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to section 11.9.
<PAGE>
"AFFILIATE" shall mean, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such person. A person shall be deemed to control a second
person if such first person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors or managers of such second person or (ii) to direct or cause the
direction of the management and policies of such second person, whether through
the ownership of voting securities, by contract or otherwise. Notwithstanding
the foregoing, (x) a director, officer or employee of a person shall not, solely
by reason of such status, be considered an Affiliate of such person; and (y)
neither the Administrative Agent nor any Lender shall in any event be considered
an Affiliate of the Borrower or any other Credit Party or any of their
respective Subsidiaries.
"AGREEMENT" shall mean this Credit Agreement, as the same may be from time
to time further modified, amended and/or supplemented.
"ALTERNATIVE CURRENCY" shall mean and include any lawful currency other
than Dollars which is (i) readily and freely transferable and convertible into
Dollars, and (ii) is acceptable to the Required Lenders and any applicable
Issuing Bank.
"APPLICABLE EURODOLLAR MARGIN" shall have the meaning provided in section
2.6(g).
"APPLICABLE FACILITY FEE RATE" shall have the meaning provided in section
4.1(a).
"APPLICABLE LENDING OFFICE" shall mean, (i) with respect to each Lender
with a General Revolving Commitment, (A) such Lender's Domestic Lending Office
in the case of Borrowings consisting of Prime Rate Loans, and (B) such Lender's
Eurodollar Lending Office in the case of Borrowings consisting of Eurodollar
Loans, and (ii) with respect to the Swing Line Lender, its Domestic Lending
Office.
"ASSET SALE" shall mean the sale, transfer or other disposition (including
by means of Sale and Lease-Back Transactions, and by means of mergers,
consolidations, and liquidations of a corporation, partnership or limited
liability company of the interests therein of the Borrower or any Subsidiary) by
the Borrower or any Subsidiary to any person other than the Borrower or any
Subsidiary of any of their respective assets, PROVIDED that the term Asset Sale
specifically excludes any sales, transfers or other dispositions of inventory,
or obsolete or excess furniture, fixtures, equipment or other property, tangible
or intangible, in each case in the ordinary course of business.
"ASSIGNMENT AGREEMENT" shall mean an Assignment Agreement substantially in
the form of Exhibit E hereto.
"AUTHORIZED OFFICER" shall mean any officer or employee of the Borrower
designated as such in writing to the Administrative Agent by the Borrower.
"BANKRUPTCY CODE" shall have the meaning provided in section 10.1(h).
"BORROWER" shall have the meaning provided in the first paragraph of this
Agreement.
"BORROWING" shall mean and include:
(i) the incurrence of General Revolving Loans, consisting of
one Type of Loan, by the Borrower from all of the Lenders having
Commitments in respect thereof on a PRO RATA basis on a given date
(or resulting from a Conversion or a Continuation on a given date),
having in the case of Eurodollar Loans the same Interest Period;
and/or
(ii) the incurrence of a single Type of Swing Line Loan by
the Borrower from the Swing Line Lender on a given date.
2
<PAGE>
"BUSINESS DAY" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in the city in which the Payment Office is located a legal holiday or a day on
which banking institutions are authorized by law or other governmental actions
to close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day which
is a Business Day described in clause (i) and which is also a day for trading by
and between banks in U.S. dollar deposits in the interbank Eurodollar market.
"CAPITAL LEASE" as applied to any person shall mean any lease of any
property (whether real, personal or mixed) by that person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that person.
"CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations under Capital
Leases of the Borrower or any of its Subsidiaries in each case taken at the
amount thereof accounted for as liabilities identified as "capital lease
obligations" (or any similar words) on a consolidated balance sheet of the
Borrower and its Subsidiaries prepared in accordance with GAAP.
"CASH EQUIVALENTS" shall mean any of the following:
(i) securities issued or directly and fully guaranteed or
insured by the United States of America or any agency or
instrumentality thereof (PROVIDED that the full faith and credit of
the United States of America is pledged in support thereof) having
maturities of not more than one year from the date of acquisition;
(ii) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of (x) any Lender or (y) any bank
whose short-term commercial paper rating from S&P is at least A-1 or
the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank, an "APPROVED BANK"), in each case
with maturities of not more than 180 days from the date of
acquisition;
(iii) commercial paper issued by any Lender or Approved Bank
or by the parent company of any Lender or Approved Bank and
commercial paper issued by, or guaranteed by, any industrial or
financial company with a short- term commercial paper rating of at
least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's, or guaranteed by any industrial
company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case
may be, and in each case maturing within 270 days after the date of
acquisition;
(iv) investments in money market funds substantially all the
assets of which are comprised of securities of the types described
in clauses (i) through (iii) above;
(v) investments in money market funds access to which is
provided as part of "sweep" accounts maintained with a Lender or an
Approved Bank;
(vi) investments in industrial development revenue bonds
which (i) "re-set" interest rates not less frequently than
quarterly, (ii) are entitled to the benefit of a remarketing
arrangement with an established broker dealer, and (iii) are
supported by a direct pay letter of credit covering principal and
accrued interest which is issued by an Approved Bank; and
(vii) investments in pooled funds or investment accounts
consisting of investments of the nature described in the foregoing
clause (vi).
3
<PAGE>
"CHANGE OF CONTROL" shall mean and include any of the following:
(i) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted the
Borrower's Board of Directors (together with any new directors (x)
whose election by the Borrower's Board of Directors was, or (y)
whose nomination for election by the Borrower's shareholders was
(prior to the date of the proxy or consent solicitation relating to
such nomination), approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for
election was previously so approved), cease for any reason to
constitute a majority of the directors then in office;
(ii) any person or group (as such term is defined in section
13(d)(3) of the 1934 Act), OTHER THAN (x) the Borrower, (y) any
trustee or other fiduciary holding securities under an employee
benefit plan of the Borrower and (z) the Current Holder Group, shall
acquire, directly or indirectly, beneficial ownership (within the
meaning of Rule 13d-3 and 13d-5 of the 1934 Act) of more than 33%,
on a fully diluted basis, of the economic or voting interest in the
Borrower's capital stock;
(iii) the shareholders of the Borrower approve a merger or
consolidation of the Borrower with any other person, OTHER than a
merger or consolidation which would result in the voting securities
of the Borrower outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted or
exchanged for voting securities of the surviving or resulting
entity) more than 75% of the combined voting power of the voting
securities of the Borrower or such surviving or resulting entity
outstanding after such merger or consolidation;
(iv) the shareholders of the Borrower approve a plan of
complete liquidation of the Borrower or an agreement or agreements
for the sale or disposition by the Borrower of all or substantially
all of the Borrower's assets; and/or
(v) any "Change of Control" or similar term as defined in
any agreement or instrument evidencing or governing Indebtedness of
the Borrower in an original aggregate principal amount of at least
$10,000,000.
As used in this definition, the term "CURRENT HOLDER GROUP" shall mean (i) those
persons who are officers and directors of the Borrower at the Effective Date,
(ii) the spouses, heirs, legatees, descendants and blood relatives to the third
degree of consanguinity of any such person, (iii) the executors and
administrators of the estate of any such person, and any court appointed
guardian of any such person, and (iv) any trust, family partnership or similar
investment entity for the benefit of any such person referred to in the
foregoing clauses (i) and (ii) or any other persons, so long as one or more
members of the Current Holder Group has the exclusive or a joint right to
control the voting and disposition of securities held by such trust, family
partnership or other investment entity.
"CLOSING DATE" shall mean the date, on or after the Effective Date, upon
which the conditions specified in section 6.1 are satisfied.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the Effective
Date and any subsequent provisions of the Code, amendatory thereof, supplemental
thereto or substituted therefor.
"COMMITMENT" shall mean, with respect to each Lender, its General Revolving
Commitment or its Swing Line Commitment, or both, if such Lender shall have both
a General Revolving Commitment or its Swing Line Commitment.
4
<PAGE>
"CONSOLIDATED AMORTIZATION EXPENSE" shall mean, for any period, all
amortization expenses of the Borrower and its Subsidiaries, all as determined
for the Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED CAPITAL EXPENDITURES" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including in all events amounts expended or capitalized under Capital Leases
but excluding any amount representing capitalized interest) by the Borrower and
its Subsidiaries during that period that, in conformity with GAAP, are or are
required to be included in the property, plant or equipment reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries. Notwithstanding
the foregoing, amounts expended to complete, or capitalized in connection with
the completion of, Permitted Acquisitions, shall not constitute Consolidated
Capital Expenditures.
"CONSOLIDATED CURRENT ASSETS" shall mean, as at the date of any
determination, the net book value of all assets of the Borrower and its
Subsidiaries that would be classified as current assets in accordance with GAAP
on a consolidated balance sheet of the Borrower and its Subsidiaries as of such
date prepared in accordance with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" shall mean, as at the date of any
determination, all liabilities of the Borrower and its Subsidiaries that would
be classified as current liabilities in accordance with GAAP on a consolidated
balance sheet of the Borrower and its Subsidiaries as of such date prepared in
accordance with GAAP; PROVIDED that for purposes of this definition no portion
of the principal amount of the Loans shall in any event be treated as a current
liability.
"CONSOLIDATED DEPRECIATION EXPENSE" shall mean, for any period, all
depreciation expenses of the Borrower and its Subsidiaries, all as determined
for the Borrower and its Subsidiaries on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED INCOME TAX EXPENSE" shall mean, for any period, all
provisions for taxes based on the net income of the Borrower or any of its
Subsidiaries (including, without limitation, any additions to such taxes, and
any penalties and interest with respect thereto), all as determined for the
Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET FIXED REAL PROPERTY LEASE CHARGES" shall mean, for any
period, (i) all fixed rental expenses of the Borrower and its Subsidiaries
arising under all leases of Real Property (including Capital Leases and
"operating leases") for such period, LESS (ii) any sublease rentals receivable
by the Borrower and its Subsidiaries for such period for the sublease to persons
other than Affiliates of any such Real Property, in each case determined on a
consolidated basis for the Borrower and its Subsidiaries for such period in
accordance with GAAP. In the case of any lease or sublease covering both Real
Property and personal property, the component of rental expense or rental income
relating to the personal property shall be excluded from the determination of
Consolidated Net Fixed Real Property Lease Charges.
"CONSOLIDATED NET INCOME" shall mean for any period, the net income (or
loss) of the Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP.
"CONSOLIDATED NET INTEREST EXPENSE" shall mean, for any period, (i) total
interest expense (including that which is capitalized and that which is
attributable to Capital Leases, in accordance with GAAP) of the Borrower and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of the Borrower and its Subsidiaries including, without limitation,
net costs under Hedge Agreements, but excluding, however, any amortization of
deferred financing costs, LESS (ii) net interest income of the Borrower and its
Subsidiaries on a consolidated basis, all as determined for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.
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"CONSOLIDATED NET WORTH" shall mean at any time for the determination
thereof all amounts which, in conformity with GAAP, would be included under the
caption "total stockholders' equity" (or any like caption) on a consolidated
balance sheet of the Borrower as at such date, PROVIDED that in no event shall
Consolidated Net Worth include any amounts in respect of Redeemable Stock.
"CONSOLIDATED TOTAL ASSETS" shall mean, at any time, the total net book
value of all assets of the Borrower and its Subsidiaries which would be shown as
assets on a consolidated balance sheet of the Borrower and its Subsidiaries at
such time prepared in accordance with GAAP, after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.
"CONSOLIDATED TOTAL BALANCE SHEET DEBT" shall mean, without duplication, at
any date of determination (i) the principal amount of all Indebtedness for
borrowed money or represented by bonds, notes or debentures, (ii) all
Capitalized Lease Obligations, and (iii) all other amounts representing or
equivalent to the principal amount of Indebtedness, in all such cases only to
the extent the same would appear as liabilities on a consolidated balance sheet
of the Borrower and its Subsidiaries as of such date which is prepared in
accordance with GAAP.
"CONSOLIDATED TOTAL CAPITAL" shall mean, as of any date of determination,
the sum of (i) Consolidated Total Balance Sheet Debt and (ii) Consolidated Net
Worth.
"CONSOLIDATED TOTAL SENIOR BALANCE SHEET DEBT" shall mean without
duplication, at any date of determination, (i) Consolidated Total Balance Sheet
Debt, LESS (ii) the aggregate outstanding principal amount of the Subordinated
Notes.
"CONTINUE", "CONTINUATION" and "CONTINUED" each refers to a continuation of
General Revolving Loans consisting of Eurodollar Loans for an additional
Interest Period as provided in section 2.7.
"CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of
General Revolving Loans of one Type into General Revolving Loans of another
Type, pursuant to section 2.5, 2.7(b), 2.8(b) or 5.2.
"CREDIT DOCUMENTS" shall mean this Agreement, the Notes, the Subsidiary
Guaranty and any Letter of Credit Document.
"CREDIT EVENT" shall mean the making of any Loans and/or the issuance of
any Letter of Credit.
"CREDIT PARTY" shall mean the Borrower and each of its Subsidiaries which
is a party to any Credit Document.
"DEFAULT" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"DEFAULTING LENDER" shall mean any Lender with respect to which a Lender
Default is in effect.
"DOCUMENTARY LETTER OF CREDIT" shall have the meaning provided in section
3.1(a).
"DOLLARS", "U.S. DOLLARS", "U.S.DOLLARS", "DOLLARS" and the sign "$" each
means lawful money of the United States.
"DOMESTIC LENDING OFFICE" shall mean, with respect to any Lender, the
office of such Lender specified as its Domestic Lending Office in Annex I or in
the Assignment Agreement pursuant to which it became a Lender, or such other
office of such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"EFFECTIVE DATE" shall have the meaning provided in section 12.10.
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"ELIGIBLE TRANSFEREE" shall mean and include a commercial bank, financial
institution or other "accredited investor" (as defined in SEC Regulation D), in
each case which
(i) is not disapproved in writing by the Borrower in a
notice given to a requesting Lender and the Administrative Agent,
specifying the reasons for such disapproval, within two Business
Days following the giving of notice to the Borrower of the identity
of any proposed transferee (any such disapproval by the Borrower
must be reasonable), PROVIDED that the Borrower shall not be
entitled to exercise the foregoing right of disapproval if and so
long as any Default under section 10.1(a) or Event of Default shall
have occurred and be continuing; and
(ii) is not a direct competitor of the Borrower or engaged
in the same or similar principal lines of business as the Borrower
and its Subsidiaries considered as a whole, or is not an Affiliate
of any such competitor of the Borrower and its Subsidiaries.
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Materials or to
health and safety matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the
Effective Date and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA AFFILIATE" shall mean each person (as defined in section 3(9) of
ERISA) which together with the Borrower or a Subsidiary of the Borrower would be
deemed to be a "single employer" (i) within the meaning of section 414(b),(c),
(m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary of
the Borrower being or having been a general partner of such person.
"EURODOLLAR BORROWING" shall mean a Borrowing under the General Revolving
Facility consisting of Eurodollar Loans.
"EURODOLLAR LENDING OFFICE" shall mean, with respect to any Lender, the
office of such Lender specified as its Eurodollar Lending Office in Annex I or
in the Assignment Agreement pursuant to which it became a Lender, or such other
office or offices for Eurodollar Loans of such Lender as such Lender may from
time to time specify to the Borrower and the Administrative Agent.
"EURODOLLAR LOANS" shall mean each General Revolving Loan bearing interest
at the rates provided in section 2.6(b).
"EVENT OF DEFAULT" shall have the meaning provided in section 10.1.
"EXISTING INDEBTEDNESS" shall have the meaning provided in section 7.18.
"EXISTING INDEBTEDNESS AGREEMENTS" shall have the meaning provided in
section 7.18.
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"EXISTING LETTER OF CREDIT" shall have the meaning provided in section
3.1(e).
"FACILITY" shall mean either the General Revolving Facility or the Swing
Line Facility, or both, if the context so requires.
"FACILITY FEE" shall have the meaning provided in section 4.1(a).
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, 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 the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"FEES" shall mean all fees, commissions and other amounts payable pursuant
to, or referred to in, section 4.1 hereof.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any Testing Period, the ratio
of
(i) Consolidated Net Income for such Testing Period, PLUS
the following, to the extent deducted in determining such
Consolidated Net Income: (A) Consolidated Net Interest Expense, (B)
Consolidated Income Tax Expense, (C) Consolidated Depreciation, (D)
Consolidated Amortization, (E) Consolidated Net Fixed Real Property
Lease Charges, and (F) in the case of any Testing Period which
includes any portion of the Borrower's 1999 fiscal year, the charges
during such Testing Period related to the acquisition of House of
Fabrics, Inc. (such charges aggregated not more than $16,000,000 on
an after tax basis for the 1999 fiscal year),
TO
(ii) the sum for such Testing Period of: (A) Consolidated
Net Fixed Real Property Lease Charges, (B) Consolidated Net Interest
Expense, (C) scheduled or mandatory repayments, prepayments or
redemptions of the principal of Indebtedness (including required
reductions in committed credit facilities), and (D) without
duplication of any amount included under the preceding clause (C),
scheduled payments representing the principal portion of Capitalized
Lease Obligations,
in each case on a consolidated basis for the Borrower and its Subsidiaries for
such Testing Period; PROVIDED that, notwithstanding anything to the contrary
contained herein, the Borrower's Fixed Charge Coverage Ratio for any Testing
Period shall be computed by giving PRO FORMA effect to (x) the inclusion of the
appropriate financial items for any person or business unit which has been
acquired by the Borrower for any portion of such Testing Period prior to the
date of acquisition, and (y) the exclusion of the appropriate financial items
for any person or business unit which has been disposed of by the Borrower, for
the portion of such Testing Period prior to the date of disposition.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary (i) which is not
incorporated in the United States and substantially all of whose assets and
properties are located, or substantially all of whose business is carried on,
outside the United States, or (ii) substantially all of whose assets consist of
Subsidiaries that are Foreign Subsidiaries as defined in clause (i) of this
definition.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time; it being understood and agreed
that determinations in accordance with GAAP for purposes of section 9, including
defined terms as used therein, are subject (to the extent provided therein) to
sections 1.3 and 12.7(a).
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"GENERAL REVOLVING COMMITMENT" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name in Annex I as its "General
Revolving Commitment" as the same may be reduced from time to time pursuant to
section 4.2, adjusted from time to time as a result of assignments to or from
such Lender pursuant to section 12.4(c), or terminated pursuant to section 4.2,
4.3 or 10.2.
"GENERAL REVOLVING CREDIT EXPOSURE" shall mean, for any Lender at any time,
its General Revolving Facility Percentage of the Total General Revolving Credit
Exposure at such time.
"GENERAL REVOLVING FACILITY" shall mean the Facility evidenced by the Total
General Revolving Commitment.
"GENERAL REVOLVING FACILITY PERCENTAGE" shall mean at any time for any
Lender with a General Revolving Commitment, the percentage obtained by dividing
such Lender's General Revolving Commitment by the Total General Revolving
Commitment, PROVIDED, that if the Total General Revolving Commitment has been
terminated, the General Revolving Facility Percentage for each Lender shall be
determined by dividing such Lender's General Revolving Commitment immediately
prior to such termination by the Total General Revolving Commitment immediately
prior to such termination.
"GENERAL REVOLVING LOAN" shall have the meaning provided in section 2.1(a).
"GENERAL REVOLVING NOTE" shall have the meaning provided in section 2.4(a).
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTY OBLIGATIONS" shall mean as to any person (without duplication)
any obligation of such person guaranteeing any Indebtedness ("PRIMARY
INDEBTEDNESS") 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, (a) to purchase any such primary
Indebtedness or any property constituting direct or indirect security therefor,
(b) to advance or supply funds (i) for the purchase or payment of any such
primary Indebtedness or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary Indebtedness of the
ability of the primary obligor to make payment of such primary Indebtedness, or
(d) otherwise to assure or hold harmless the owner of such primary Indebtedness
against loss in respect thereof, PROVIDED, HOWEVER, that the term Guaranty
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guaranty
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary Indebtedness in respect of which such Guaranty Obligation
is made (taking into account, if applicable, any percentage or monetary
limitation upon the liability of such person under such Guaranty Obligation) 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.
"HAZARDOUS MATERIALS" shall mean (i) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (ii) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "restricted hazardous materials", "extremely hazardous
wastes", "restrictive hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants" or "pollutants", or words of similar meaning and regulatory
effect, under any applicable Environmental Law.
"HEDGE AGREEMENT" shall mean (i) any interest rate swap agreement, any
interest rate cap agreement, any interest rate collar agreement or other similar
agreement or arrangement designed to protect against fluctuations in
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interest rates, and (ii) any currency swap agreement, forward currency purchase
agreement or similar agreement or arrangement designed to protect against
fluctuations in currency exchange rates.
"INDEBTEDNESS" of any person shall mean without duplication:
(i) all indebtedness of such person for borrowed money;
(ii) all bonds, notes, debentures and similar debt
securities of such person;
(iii) the deferred purchase price of capital assets or
services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such person;
(iv) the face amount of all letters of credit issued for the
account of such person and, without duplication, all drafts drawn
thereunder;
(v) all obligations, contingent or otherwise, of such person
in respect of bankers' acceptances;
(vi) all indebtedness of a second person secured by any Lien
on any property owned by such first person, whether or not such
indebtedness has been assumed;
(vii) all Capitalized Lease Obligations of such person;
(viii) the present value, determined on the basis of the
implicit interest rate, of all basic rental obligations under all
Synthetic Leases of such person;
(ix) all obligations of such person to pay a specified
purchase price for goods or services whether or not delivered or
accepted, I.E., take-or-pay and similar obligations;
(x) all net obligations of such person under Hedge
Agreements;
(xi) the full outstanding balance of trade receivables,
notes or other instruments sold with full recourse (and the portion
thereof subject to potential recourse, if sold with limited
recourse), other than in any such case any thereof sold solely for
purposes of collection of delinquent accounts;
(xii) the stated value, or liquidation value if higher, of
all Redeemable Stock of such person; and
(xiii) all Guaranty Obligations of such person;
PROVIDED that (x) neither trade payables nor other similar accrued expenses, in
each case arising in the ordinary course of business, nor obligations in respect
of insurance policies or performance or surety bonds which themselves are not
guarantees of Indebtedness (nor drafts, acceptances or similar instruments
evidencing the same nor obligations in respect of letters of credit supporting
the payment of the same), shall constitute Indebtedness; and (y) the
Indebtedness of any person shall in any event include (without duplication) the
Indebtedness of any other entity (including any general partnership in which
such person is a general partner) to the extent such person is liable thereon as
a result of such person's ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide expressly
that such person is not liable thereon.
"INTEREST PERIOD" with respect to any Eurodollar Loan shall mean the
interest period applicable thereto, as determined pursuant to section 2.7.
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<PAGE>
"ISSUING BANK" shall mean (i) in respect of each Existing Letter of Credit,
the Lender that has issued same as of the Effective Date; and/or (ii) in respect
of any Letter of Credit issued after the Effective Date for any of the purposes
contemplated by section 3, the Lender which has issued same, which shall be (1)
KeyBank, or (2) such other Lender as may (x) be designated by the Borrower as a
replacement for the then incumbent Issuing Bank upon not less than 30 days'
prior written notice to all of the Lenders and (y) agree to so act in a
contemporaneous written notice given by such other Lender to the Borrower, the
Administrative Agent and all of the Lenders other than itself.
"KEYBANK" shall mean KeyBank National Association, a national banking
association, together with its successors and assigns.
"LC DISBURSEMENT" shall mean shall mean a payment made by the Issuing Bank
pursuant to a Letter of Credit to the beneficiary thereof (or its assignee),
including (without limitation) any payment made by the Issuing Bank under a
banker's acceptance or sight or time draft drawn on the Issuing Bank in
connection with a Letter of Credit.
"LC EXPOSURE" shall mean, for any Lender at any time, its General Revolving
Facility Percentage of the Total LC Exposure at such time.
"LEASEHOLDS" of any person means all the right, title and interest of such
person as lessee or licensee in, to and under leases or licenses of land,
improvements and/or fixtures.
"LENDER" shall have the meaning provided in the first paragraph of this
Agreement.
"LENDER DEFAULT" shall mean (i) the refusal (which has not been retracted)
of a Lender in violation of the requirements of this Agreement to make available
its portion of any incurrence of Loans or to fund its Swing Line Participation
Amount under section 2.3(b) or its portion of any unreimbursed payment under
section 3.4(c), or (ii) a Lender having notified the Administrative Agent and/or
the Borrower that it does not intend to comply with the obligations under
section 2.1, 2.3 and/or 3.4(c), in the case of either (i) or (ii) 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.
"LENDER REGISTER" shall have the meaning provided in section 12.16.
"LETTER OF CREDIT" shall have the meaning provided in section 3.1(a).
"LETTER OF CREDIT DOCUMENTS" shall have the meaning specified in section
3.2(a).
"LETTER OF CREDIT FEE" shall have the meaning provided in section 4.1(b).
"LETTER OF CREDIT REQUEST" shall have the meaning provided in section
3.2(a).
"LIBO RATE" shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO RATE" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate (rounded
upwards, if necessary, to the next 1/16th of 1%) at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered to
the Reference Banks in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
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"LIEN" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any lease
in the nature thereof).
"LOAN" shall have the meaning provided in section 2.1. As provided herein,
(i) Loans under the General Revolving Facility are General Revolving Loans, and
General Revolving Loans may be Eurodollar Loans or Prime Rate Loans, which are
the only Types of General Revolving Loans which can be outstanding hereunder;
and (ii) Loans under the Swing Line Facility are Swing Line Loans, and Swing
Line Loans may be Money Market Rate Loans or Prime Rate Loans, which are the
only Types of Swing Line Loans which can be outstanding hereunder.
"MARGIN STOCK" shall have the meaning provided in Regulation U.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (i) the
business, operations, property, assets, liabilities or financial condition of,
(x) when used with reference to the Borrower or any of its Subsidiaries, the
Borrower and its Subsidiaries, taken as a whole, or (y) when used with reference
to any other person, such person and its Subsidiaries, taken as a whole, as the
case may be; (ii) the ability of the Borrower and the other Credit Parties to
perform their obligations under the Credit Documents; or (iii) the rights of or
benefits available to the Administrative Agent, any Issuing Bank, the Swing Line
Lender and the Lenders under the Credit Documents.
"MATERIAL SUBSIDIARY" shall mean, at any time, with reference to any
person, any Subsidiary of such person (i) that has assets at such time
comprising 5% or more of the consolidated assets of such person and its
Subsidiaries, or (ii) whose operations in the current fiscal year are expected
to, or whose operations in the most recent fiscal year did (or would have if
such person had been a Subsidiary for such entire fiscal year), represent 5% or
more of the consolidated earnings before interest, taxes, depreciation and
amortization of such person and its Subsidiaries for such fiscal year.
"MATURITY DATE" shall mean April 30, 2004, as such date may be extended in
accordance with section 4.4, or in any event such earlier date when the Total
Commitment is terminated.
"MINIMUM BORROWING AMOUNT" shall mean:
(i) for a Prime Rate Borrowing under the General Revolving
Facility, $1,000,000, with minimum increments thereafter of
$100,000, EXCEPT that (x) a Prime Rate Borrowing incurred under the
General Revolving Facility to finance payment of an LC Disbursement
in accordance with section 3.3(a) may be in such different amount as
is necessary for such purpose, and (y) a Prime Rate Borrowing under
the General Revolving Facility may in any event be in an amount
equal to the entire Unutilized Total General Revolving Commitment;
(ii) for a Eurodollar Borrowing under the General Revolving
Facility, $5,000,000, with minimum increments thereafter of
$1,000,000; or
(iii) for a Swing Line Loan, $100,000, with minimum
increments thereafter of $50,000.
"MONEY MARKET RATE LOAN" shall mean a Swing Line Loan, denominated in U.S.
Dollars, bearing interest at a Quoted Rate.
"MOODY'S" shall mean Moody's Investors Service, Inc. and its successors.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan, as defined in section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or
accruing an obligation to make contributions or has within any of the preceding
three plan years made or accrued an obligation to make contributions.
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"MULTIPLE EMPLOYER PLAN" shall mean an employee benefit plan, other than a
Multiemployer Plan, to which the Borrower or any ERISA Affiliate, and one or
more employers other than the Borrower or an ERISA Affiliate, is making or
accruing an obligation to make contributions or, in the event that any such plan
has been terminated, to which the Borrower or an ERISA Affiliate made or accrued
an obligation to make contributions during any of the five plan years preceding
the date of termination of such plan.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"NON-DEFAULTING LENDER" shall mean each Lender other than a Defaulting
Lender.
"NOTE" shall mean a General Revolving Note or a Swing Line Note, as
applicable.
"NOTICE OF BORROWING" shall have the meaning provided in section 2.2(a).
"NOTICE OF CONVERSION" shall have the meaning provided in section 2.5.
"NOTICE OFFICE" shall mean the office of the Administrative Agent at Key
Center, 127 Public Square, Cleveland, Ohio 44114, Attention: Large Corporate
Group (facsimile: (216) 689-4981), or such other office, located in a city in
the United States Eastern Time Zone, as the Administrative Agent may designate
to the Borrower from time to time.
"NOTICE OF SWING LINE REFUNDING" shall have the meaning provided in section
2.3(a).
"OBLIGATIONS" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing by the
Borrower or any other Credit Party to the Administrative Agent, any Issuing
Bank, the Swing Line Lender or any Lender pursuant to the terms of this
Agreement or any other Credit Document.
"OPERATING LEASE" as applied to any person shall mean any lease of any
property (whether real, personal or mixed) by that person as lessee which, in
conformity with GAAP, is not accounted for as a Capital Lease on the balance
sheet of that person.
"PARTICIPANT" shall have the meaning provided in section 3.4(a).
"PAYMENT OFFICE" shall mean the office of the Administrative Agent at Key
Center, 127 Public Square, Cleveland, Ohio 44114, Attention: Diane Cox of the
Large Corporate Group (telephone: (216) 689-4450; facsimile: (216) 689-4981), or
such other office, located in a city in the United States Eastern Time Zone, as
the Administrative Agent may designate to the Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.
"PERMITTED ACQUISITION" shall mean and include any Acquisition as to which
all of the following conditions are satisfied:
(i) such Acquisition (A) involves a line or lines of
business which is complementary to the lines of business in which
the Borrower and its Subsidiaries, considered as an entirety, are
engaged on the Effective Date, and (B) involves a line or lines of
business which has generated a positive earnings before interest,
income taxes, depreciation and amortization for its most recently
completed four full fiscal quarters for which financial information
is available, UNLESS the Required Lenders specifically approve or
consent to such Acquisition in writing;
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(ii) such Acquisition is not actively opposed by the Board
of Directors (or similar governing body) of the selling person or
the person whose equity interests are to be acquired, UNLESS all of
the Lenders specifically approve or consent to such Acquisition in
writing;
(iii) the Borrower would, after giving effect to such
Acquisition, be in compliance, on a PRO FORMA basis, with the
financial covenants contained in sections 9.7, 9.8, 9.9 and 9.10;
(iv) the cumulative aggregate consideration for such
Acquisition and all other Acquisitions completed during the
preceding 12 months, including the principal amount of any assumed
Indebtedness and (without duplication) any Indebtedness of any
acquired person or persons, but excluding the value of any
consideration for an Acquisition paid in the form of capital stock
of the Borrower which is not Redeemable Stock, does not exceed an
amount equal to 15% of the Borrower's Consolidated Net Worth as of
the end of the most recent fiscal period for which financial
statements have been delivered to the Lenders hereunder; and
(v) if the aggregate consideration for such Acquisition,
including the principal amount of any assumed Indebtedness and
(without duplication) any Indebtedness of any acquired person or
persons, exceeds $20,000,000, at least 10 Business Days prior to the
completion of such transaction the Borrower shall have delivered to
the Lenders a certificate of a responsible financial or accounting
officer of the Borrower demonstrating, in reasonable detail, the
computation of the ratios referred to in sections 9.7, 9.8, 9.9 and
9.10 on a PRO FORMA basis, such PRO FORMA ratios being determined as
if (x) such Acquisition had been completed at the beginning of the
most recent period of four consecutive fiscal quarters of the
Borrower for which financial information for the Borrower and the
business or person to be acquired, is available and has been
delivered to the Lenders at least 10 Business Days prior to the
completion of such transaction (which shall in the case of the
acquired business include audited financial statements for the most
recent fiscal year, unless the same are unavailable and unaudited
financial statements are acceptable to the Required Lenders), and
(y) any such Indebtedness, or other Indebtedness incurred to finance
such Acquisition, had been outstanding for such period;
PROVIDED, that the term Permitted Acquisition specifically excludes any loans,
advances or minority investments otherwise permitted pursuant to section 9.5.
"PERMITTED LIENS" shall mean Liens described in section 9.3.
"PERSON" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"PLAN" shall mean any multiemployer or single-employer plan as defined in
section 4001 of ERISA, which is maintained or contributed to by (or to which
there is an obligation to contribute by) the Borrower or a Subsidiary of the
Borrower or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Borrower, or a Subsidiary of
the Borrower or an ERISA Affiliate maintained, contributed to or had an
obligation to contribute to such plan.
"PRIME RATE" shall mean, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall at all
times be equal to the rate of interest established by the Administrative Agent
at its principal office, from time to time, as its prime rate, whether or not
publicly announced, which interest rate may or may not be the lowest rate
charged by it for commercial loans or other extensions of credit.
"PRIME RATE BORROWING" shall mean a Borrowing consisting of Prime Rate
Loans.
"PRIME RATE LOAN" shall mean each Loan bearing interest at the rate
provided in section 2.6(a).
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"PROHIBITED TRANSACTION" shall mean a transaction with respect to a Plan
that is prohibited under section 4975 of the Code or section 406 of ERISA and
not exempt under section 4975 of the Code or section 408 of ERISA.
"QUOTED RATE" shall have the meaning provided in section 2.3(c).
"REAL PROPERTY" of any person shall mean all of the right, title and
interest of such person in and to land, improvements and fixtures, including
Leaseholds.
"REDEEMABLE STOCK" shall mean with respect to any person any capital stock
or similar equity interests of such person that (i) is by its terms subject to
mandatory redemption, in whole or in part, pursuant to a sinking fund, scheduled
redemption or similar provisions, at any time prior to the Maturity Date; or
(ii) otherwise is required to be repurchased or retired on a scheduled date or
dates, upon the occurrence of any event or circumstance, at the option of the
holder or holders thereof, or otherwise, at any time prior to the Maturity Date,
other than any such repurchase or retirement occasioned by a "change of control"
or similar event.
"REFERENCE BANKS" shall mean (i) KeyBank, and (ii) any other Lender or
Lenders selected as a Reference Bank by the Administrative Agent and the
Required Lenders, PROVIDED, that if any of such Reference Banks is no longer a
Lender, such other Lender or Lenders as may be selected by the Administrative
Agent acting on instructions from the Required Lenders.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"REGULATION U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"REPORTABLE EVENT" shall mean an event described in section 4043 of ERISA
or the regulations thereunder with respect to a Plan, other than those events as
to which the notice requirement is waived under subsections .22, .23, .25, .27,
.28, .29, .30, .31, .32, .34, .35, .62, .63, .64, .65 or .67 of PBGC Regulation
section 4043.
"REQUIRED LENDERS" shall mean Non-Defaulting Lenders whose outstanding
General Revolving Loans and Unutilized General Revolving Commitments constitute
more than 66+2/3% of the sum of the total outstanding General Revolving Loans
and Unutilized General Revolving Commitments of Non-Defaulting Lenders (PROVIDED
that, for purposes hereof, neither the Borrower, nor any of its Affiliates,
shall be included in (i) the Lenders holding such amount of the General
Revolving Loans or having such amount of the Unutilized General Revolving
Commitments, or (ii) determining the aggregate unpaid principal amount of the
General Revolving Loans or Unutilized General Revolving Commitments).
"SALE AND LEASE-BACK TRANSACTION" shall mean any arrangement with any
person providing for the leasing by the Borrower or any Subsidiary of the
Borrower of any property (except for temporary leases for a term, including any
renewal thereof, of not more than one year and except for leases between the
Borrower and a Subsidiary or between Subsidiaries), which property has been or
is to be sold or transferred by the Borrower or such Subsidiary to such person.
"S&P" shall mean Standard & Poor's Ratings Group, and its successors.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC REGULATION D" shall mean Regulation D as promulgated under the
Securities Act of 1933, as amended, as the same may be in effect from time to
time.
"SECTION 5.4(b)(ii) CERTIFICATE" shall have the meaning provided in section
5.4(b)(ii).
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"STANDARD PERMITTED LIENS" shall mean the following:
(i) Liens for taxes not yet delinquent or Liens for taxes
being contested in good faith and by appropriate proceedings for
which adequate reserves (in the good faith judgment of the
management of the Borrower) have been established;
(ii) Liens in respect of property or assets imposed by law
which were incurred in the ordinary course of business, such as
carriers', warehousemen's, materialmen's and mechanics' Liens and
other similar Liens arising in the ordinary course of business,
which do not in the aggregate materially detract from the value of
such property or assets or materially impair the use thereof in the
operation of the business of the Borrower and its Subsidiaries
considered as an entirety;
(iii) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under section
10.1(g);
(iv) Liens (other than any Lien imposed 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; and mechanic's Liens, carrier's Liens, and other
Liens to secure the performance of tenders, statutory obligations,
contract bids, 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 the payment for
borrowed money), whether pursuant to statutory requirements, common
law or consensual arrangements;
(v) Leases or subleases granted to others not interfering in
any material respect with the business of the Borrower or any of its
Subsidiaries and any interest or title of a lessor under any lease
not in violation of this Agreement;
(vi) easements, rights-of-way, zoning or deed restrictions,
minor defects or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the
ordinary conduct of the business of the Borrower or any of its
Subsidiaries considered as an entirety; and
(vii) Liens on property subject to leases not in violation
of the requirements of this Agreement, PROVIDED that such Liens are
only in respect of the property subject to, and secure only, the
respective lease (and any other lease with the same or an affiliated
lessor).
"STANDBY LETTER OF CREDIT" shall have the meaning provided in section
3.1(a).
"STATED AMOUNT" of each Letter of Credit shall mean the maximum available
to be drawn thereunder, including any amounts which can be drawn under any
banker's acceptances or sight or time drafts which have or could be issued or
presented thereunder (regardless of whether any conditions or other requirements
for drawing could then be met).
"STATUTORY RESERVE RATE" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Federal Reserve Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar Loans shall be
deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such Regulation D or
any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
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"SUBORDINATED INDEBTEDNESS" shall mean (i) the Subordinated Notes; and (ii)
any other Indebtedness which has been subordinated to the Obligations in such
manner and to such extent as the Administrative Agent (acting on instructions
from the Required Lenders) may require.
"SUBORDINATED NOTE INDENTURE" shall have the meaning provided in section
6.1(h).
"SUBORDINATED NOTES" shall have the meaning provided in section 6.1(h).
"SUBSIDIARY" of any person shall mean and include (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"SUBSIDIARY GUARANTOR" shall mean any Subsidiary which is a party to the
Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" shall have the meaning provided in section 6.1(c).
"SWING LINE COMMITMENT" shall mean, with respect to the Swing Line Lender,
the amount set forth opposite such Lender's name in Annex I as its "Swing Line
Commitment" as the same may be reduced from time to time pursuant to section
4.2, adjusted from time to time as a result of assignments to or from such
Lender pursuant to section 12.4(c), or terminated pursuant to section 4.2, 4.3
or 10.2.
"SWING LINE FACILITY" shall mean the credit facility evidenced by the Swing
Line Commitment.
"SWING LINE LENDER" shall mean the Lender which has the Swing Line
Commitment.
"SWING LINE LOAN" shall have the meaning provided in section 2.1(b).
"SWING LINE NOTE" shall have the meaning provided in section 2.4(a).
"SWING LINE PARTICIPATION AMOUNT" shall have the meaning provided in
section 2.3(b).
"SYNTHETIC LEASE" shall mean any lease (i) which is accounted for by the
lessee as an Operating Lease, and (ii) under which the lessee is intended to be
the "owner" of the leased property for Federal income tax purposes.
"TAXES" shall have the meaning provided in section 5.4.
"TESTING PERIOD" shall mean for any determination a single period
consisting of the four consecutive fiscal quarters of the Borrower then last
ended (whether or not such quarters are all within the same fiscal year), EXCEPT
that if a particular provision of this Agreement indicates that a Testing Period
shall be of a different specified duration, such Testing Period shall consist of
the particular fiscal quarter or quarters then last ended which are so indicated
in such provision.
"TOTAL COMMITMENT" shall mean the sum of all of the Commitments of all of
the Lenders hereunder.
"TOTAL GENERAL REVOLVING COMMITMENT" shall mean the sum of the General
Revolving Commitments of the Lenders.
"TOTAL GENERAL REVOLVING CREDIT EXPOSURE" shall mean at any time the sum at
such time of (i) the outstanding principal amount of the General Revolving
Loans; (ii) the Total LC Exposure; and (iii) the outstanding
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principal amount of the Swing Line Loans which have been or could be, subject to
the terms and conditions of section 2.3, made the subject of a Swing Line
Refunding Notice.
"TOTAL LC EXPOSURE" shall mean, at any time, the sum, without duplication,
of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii)
the aggregate amount of all LC Disbursements that have not yet been reimbursed
by or on behalf of the Borrower (and its Subsidiaries which are account parties)
at such time.
"TYPE" shall mean any type of Loan determined with respect to the interest
option applicable thereto, I.E., (i) in the case of General Revolving Loans, a
Prime Rate Loan or a Eurodollar Loan, and (ii) in the case of a Swing Line Loan,
a Prime Rate Loan or a Money Market Rate Loan.
"UCC" shall mean the Uniform Commercial Code.
"UNFUNDED CURRENT LIABILITY" of any Plan shall mean the amount, if any, by
which the actuarial present value of the accumulated plan benefits under the
Plan as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.
"UNITED STATES" and "U.S." each means United States of America.
"UNUTILIZED GENERAL REVOLVING COMMITMENT" shall mean, at any time, for any
Lender with a General Revolving Commitment, the excess at such time of (i) such
Lender's General Revolving Commitment, OVER (ii) the sum of (x) the principal
amount of General Revolving Loans made by such Lender and outstanding at such
time, and (y) such Lender's General Revolving Facility Percentage of the Total
LC Exposure at such time.
"UNUTILIZED SWING LINE COMMITMENT" shall mean, at any time, the excess of
(i) the Swing Line Commitment at such time, OVER (ii) the aggregate principal
amount of all Swing Line Loans then outstanding.
"UNUTILIZED TOTAL GENERAL REVOLVING COMMITMENT" shall mean, at any time,
the excess at such time of (i) the Total General Revolving Commitment at such
time, OVER (ii) the sum of (x) the aggregate principal amount of all General
Revolving Loans then outstanding, and (y) the Total LC Exposure at such time.
"WHOLLY-OWNED SUBSIDIARY" shall mean each Subsidiary of the Borrower at
least 95% of whose capital stock, equity interests and partnership interests,
other than director's qualifying shares or similar interests, are owned directly
or indirectly by the Borrower.
"WRITTEN", "WRITTEN" or "IN WRITING" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
1.2. COMPUTATION OF TIME PERIODS. In this Agreement in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each means "to but
excluding".
1.3. ACCOUNTING TERMS. Except as otherwise specifically provided herein,
all terms of an accounting or financial nature shall be construed in accordance
with GAAP, as in effect from time to time; PROVIDED that, if the Borrower
notifies the Administrative Agent that the Borrower requests an amendment to any
provision of section 8 or 9 hereof to eliminate the effect of any change
occurring after the Effective Date in GAAP or in the application thereof to such
provision (or if the Administrative Agent notifies the Borrower that the
Required Lenders request an amendment to any such provision hereof for such
purposes), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance with the requirements of this
Agreement.
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1.4. TERMS GENERALLY. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise, (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any person shall be construed to include such person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to sections, Annexes
and Exhibits shall be construed to refer to sections of, and Annexes and
Exhibits to, this Agreement, and (e) the words "asset" and "property" shall be
construed to have the same meaning and effect and to refer to any and all real
property, tangible and intangible assets and properties, including cash,
securities, accounts and contract rights, and interests in any of the foregoing.
1.5. CURRENCY EQUIVALENTS. For purposes of this Agreement, except as
otherwise specified herein, (i) the equivalent in Dollars of any Alternative
Currency shall be determined by using the quoted spot rate at which the
Administrative Agent offers to exchange Dollars for such Alternative Currency at
its Payment Office at 9:00 A.M. (local time at the Payment Office) two Business
Days prior to the date on which such equivalent is to be determined, and (ii)
the equivalent in any Alternative Currency of Dollars shall be determined by
using the quoted spot rate at which the Administrative Agent's Payment Office
offers to exchange such Alternative Currency for Dollars at the Payment Office
at 9:00 A.M. (local time at the Payment Office) two Business Days prior to the
date on which such equivalent is to be determined; PROVIDED, that (A) the
equivalent in Dollars of any LC Disbursement in respect of any Letter of Credit
denominated in an Alternative Currency shall be determined at the time the
drawing under such Letter of Credit was paid or disbursed by the applicable
Issuing Bank; (B) for purposes of sections 2.1, 3.1(b) and 5.2, the equivalent
in Dollars of the Stated Amount of any Letter of Credit denominated in an
Alternative Currency shall be calculated (x) on the date of the issuance of the
respective Letter of Credit, (y) on the first Business Day of each calendar
month thereafter and (z) in any other case where the same is required or
permitted to be calculated, on such other day as the Administrative Agent may,
in its sole discretion, consider appropriate; and (C) for purposes of sections
4.1(c) and (e), the equivalent in Dollars of the Stated Amount of any Letter of
Credit denominated in an Alternative Currency shall be calculated on the first
day of each calendar month in the quarterly period in which the respective
payment is due pursuant to said sections.
SECTION 2. AMOUNT AND TERMS OF LOANS.
2.1. COMMITMENTS FOR LOANS. Subject to and upon the terms and conditions
herein set forth, each Lender severally agrees to make a loan or loans (each a
"LOAN" and, collectively, the "LOANS") to the Borrower, which Loans shall be
drawn, to the extent a Lender has a commitment under a Facility for the
Borrower, under the applicable Facility, as set forth below:
(a) GENERAL REVOLVING FACILITY. Loans to the Borrower under the
General Revolving Facility (each a "GENERAL REVOLVING LOAN" and
collectively, the "GENERAL REVOLVING LOANS"): (i) may be incurred by the
Borrower at any time and from time to time on and after the Closing Date
and prior to the Maturity Date; (ii) except as otherwise provided, may, at
the option of the Borrower, be incurred and maintained as, or Converted
into, General Revolving Loans which are Prime Rate Loans or Eurodollar
Loans, in each case denominated in Dollars, PROVIDED that all General
Revolving Loans made as part of the same Borrowing shall, unless otherwise
specifically provided herein, consist of General Revolving Loans of the
same Type; (iii) may be repaid or prepaid and reborrowed in accordance with
the provisions hereof; (iv) may only be made if after giving effect thereto
the Unutilized Total General Revolving Commitment exceeds the outstanding
Swing Line Loans; and (v) in the case of any Lender with a General
Revolving Commitment, may not be incurred if after giving effect thereto
such Lender's General Revolving Credit Exposure would exceed its General
Revolving Commitment as then in effect.
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(b) SWING LINE FACILITY. Loans to the Borrower under the Swing Line
Facility (each a "SWING LINE LOAN" and, collectively, the "SWING LINE
LOANS") (i) shall be made only by the Swing Line Lender, (ii) may be made
at any time and from time to time on and after the Closing Date and prior
to the Maturity Date; (iii) shall be made only in U.S. Dollars; (iv) shall
have a maturity of not more than 7 days; (v) shall be incurred only for
working capital requirements of the Borrower and its Subsidiaries; (vi) may
only be incurred as Prime Rate Loans or as Money Market Rate Loans; (vii)
may be repaid or prepaid and reborrowed in accordance with the provisions
hereof; (viii) may only be made if after giving effect thereto the
Unutilized Total General Revolving Commitment exceeds the outstanding Swing
Line Loans; and (ix) shall not exceed for the Swing Line Lender at any time
outstanding its Swing Line Commitment at such time.
2.2. PROCEDURES FOR BORROWING. (a) NOTICE OF BORROWING. Whenever the
Borrower desires to incur Loans, it shall give the Administrative Agent at its
Notice Office,
(A) EURODOLLAR BORROWINGS UNDER THE GENERAL REVOLVING FACILITY:
prior to 11:00 A.M. (local time at its Notice Office), at least three
Business Days' prior written or telephonic notice (in the case of
telephonic notice, promptly confirmed in writing if so requested by the
Administrative Agent) of each Eurodollar Borrowing to be made under the
General Revolving Facility,
(B) PRIME RATE BORROWINGS UNDER ANY FACILITY: prior to 12:00 noon
(local time at its Notice Office) on the proposed date thereof written or
telephonic notice (in the case of telephonic notice, promptly confirmed in
writing if so requested by the Administrative Agent) of each Prime Rate
Borrowing to be made hereunder; or
(C) BORROWINGS UNDER THE SWING LINE FACILITY OF MONEY MARKET RATE
LOANS: in the case of any Borrowing under the Swing Line Facility of a
Money Market Rate Loan to be made hereunder, if the Administrative Agent
shall have furnished the Borrower with a Quoted Rate therefor, prior to
11:00 A.M. (local time at its Notice Office) on the proposed date thereof
(which shall be within such period as the Administrative Agent shall have
specified for such Quoted Rate) written or telephonic notice thereof (in
the case of telephonic notice, promptly confirmed in writing if so
requested by the Administrative Agent).
Each such notice (each such notice, a "NOTICE OF BORROWING") shall (if requested
by the Administrative Agent to be confirmed in writing), be substantially in the
form of Exhibit B-1, and in any event shall be irrevocable and shall specify:
(i) the Facility under which the Borrowing is to be incurred, (ii) the aggregate
principal amount of the Loans to be made pursuant to such Borrowing; (iii) the
date of the Borrowing (which shall be a Business Day); (iv) whether the
Borrowing shall consist of Prime Rate Loans, Eurodollar Loans or Money Market
Rate Loans; (v) if the requested Borrowing consists of Eurodollar Loans, the
Interest Period to be initially applicable thereto; and (vi) if the Borrowing
consists of a Swing Line Loan, the maturity date thereof (which shall be not
more than 7 days), and if such Swing Line Loan is a Money Market Rate Loan, the
Quoted Rate therefor. If the Borrower fails to specify in a Notice of Borrowing
the maturity date of any Swing Line Loan, such maturity date shall be deemed to
be 7 days. The Administrative Agent shall promptly give each Lender which has a
Commitment under any applicable Facility written notice (or telephonic notice
promptly confirmed in writing) of each proposed Borrowing under the applicable
Facility, of such Lender's proportionate share thereof and of the other matters
covered by the Notice of Borrowing relating thereto.
(b) BORROWINGS OF MONEY MARKET RATE LOANS. Whenever the Borrower proposes
to submit a Notice of Borrowing with respect to a Swing Line Loan which will be
a Money Market Rate Loan, it will prior to submitting such Notice of Borrowing
notify the Administrative Agent of its intention and request the Administrative
Agent to quote a fixed or floating interest rate (the "QUOTED RATE") to be
applicable thereto prior to the proposed maturity thereof. The Administrative
Agent will immediately so notify the Swing Line Lender, and if the Swing Line
Lender is agreeable to a particular interest rate for the proposed maturity of
such Money Market Rate Loan if such Loan is made on or prior to a specified
date, the Administrative Agent shall quote such interest rate to the Borrower as
the Quoted Rate applicable to such proposed Money Market Rate Loan if made on or
before such specified date for a maturity as so proposed by the Borrower. The
Swing Line Lender contemplates that any Quoted Rate will be a rate
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of interest which reflects a margin corresponding to the sum of (x) the
Applicable Eurodollar Margin in effect at the time of quotation of any Quoted
Rate, PLUS (y) the Applicable Facility Fee Rate in effect at such time, over the
then prevailing Federal Funds Effective Rate, commercial paper, call money,
overnite repurchase or other commonly quoted interest rate, or the Swing Line
Lender's average fully absorbed cost of short term funds, in each case as
selected and determined by the Swing Line Lender in its sole and absolute
discretion. Nothing herein shall be deemed to permit any Lender other than the
Swing Line Lender any right of approval with respect to a Quoted Rate.
(c) ACTIONS BY ADMINISTRATIVE AGENT ON TELEPHONE NOTICE. Without in any way
limiting the obligation of the Borrower to confirm in writing any telephonic
notice permitted to be given hereunder, the Administrative Agent may act prior
to receipt of written confirmation without liability upon the basis of such
telephonic notice believed by the Administrative Agent in good faith to be from
an Authorized Officer of the Borrower entitled to give telephonic notices under
this Agreement on behalf of the Borrower. In each such case, the Administrative
Agent's record of the terms of such telephonic notice shall be conclusive absent
manifest error.
(d) MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount of each
Borrowing by the Borrower under a Facility shall not be less than the Minimum
Borrowing Amount for such Borrowing. More than one Borrowing may be incurred by
the Borrower on any day, PROVIDED that (i) if there are two or more Eurodollar
Borrowings on a single day by the Borrower under the General Revolving Facility,
each such Borrowing shall have a different initial Interest Period, (ii) at no
time shall there be more than 10 Eurodollar Borrowings outstanding hereunder
(including any such Borrowings resulting from the incurrence of General
Revolving Loans or Continuations or Conversions), and (iii) only one Borrowing
may be made on any day under the Swing Line Facility.
(e) PRO RATA BORROWINGS. All Borrowings of Loans under a Facility shall be
made by the Lenders having Commitments under such Facility PRO RATA on the basis
of their respective Commitments under such Facility. It is understood that no
Lender shall be responsible for any default by any other Lender in its
obligation to make Loans hereunder and that each Lender shall be obligated to
make the Loans provided to be made by it hereunder, regardless of the failure of
any other Lender to fulfill its Commitments hereunder.
(f) DISBURSEMENT OF FUNDS. (i) No later than 2:00 P.M. (local time at the
Payment Office) on the date specified in each Notice of Borrowing, each Lender
with a Commitment under the applicable Facility relating to the Borrowing
covered thereby will make available its PRO RATA share of each Borrowing
requested to be made on such date in the manner provided below. All amounts
shall be made available to the Administrative Agent in U.S. dollars and
immediately available funds at the Payment Office and the Administrative Agent
promptly will make available to the Borrower by depositing to its account at the
Payment Office the aggregate of the amounts so made available in the type of
funds received. Unless the Administrative Agent shall have been notified by any
Lender prior to the date of Borrowing that such Lender does not intend to make
available to the Administrative Agent its portion of the Borrowing or Borrowings
to be made on such date, the Administrative Agent may assume that such Lender
has made such amount available to the Administrative Agent on such date of
Borrowing, and the Administrative Agent, in reliance upon such assumption, may
(in its sole discretion and without any obligation to do so) make available to
the Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Lender and the Administrative
Agent has made available same to the Borrower, the Administrative Agent shall be
entitled to recover such corresponding amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the Borrower,
and the Borrower shall immediately pay such corresponding amount to the
Administrative Agent. The Administrative Agent shall also be entitled to recover
from such Lender or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower to the
date such corresponding amount is recovered by the Administrative Agent, at a
rate per annum equal to (x) if paid by such Lender, the overnight Federal Funds
Effective Rate or (y) if paid by the Borrower, the then applicablE rate of
interest, calculated in accordance with section 2.6, for the respective Loans
(but without any requirement to pay any amounts in respect thereof pursuant to
section 2.9).
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<PAGE>
(ii) Nothing herein and no subsequent termination of the Commitments
pursuant to section 4.2 or 4.3 shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments hereunder and in existence from time to
time or to prejudice any rights which the Borrower may have against any Lender
as a result of any default by such Lender hereunder.
2.3. REFUNDING OF, OR PARTICIPATION IN, SWING LINE LOANS. (a) If any Event
of Default exists, the Swing Line Lender may, in its sole and absolute
discretion, direct that the Swing Line Loans owing to it be refunded by
delivering a notice to such effect to the Administrative Agent, specifying the
aggregate principal amount thereof (a "NOTICE OF SWING LINE REFUNDING").
Promptly upon receipt of a Notice of Swing Line Refunding, the Administrative
Agent shall give notice of the contents thereof to the Lenders with General
Revolving Commitments and, unless an Event of Default specified in section
10.1(h) in respect of the Borrower has occurred, also to the Borrower. Each such
Notice of Swing Line Refunding shall be deemed to constitute delivery by the
Borrower of a Notice of Borrowing requesting General Revolving Loans consisting
of Prime Rate Loans in the amount of the Swing Line Loans to which it relates.
Each Lender with a General Revolving Commitment (including the Swing Line
Lender, in its capacity as a Lender) hereby unconditionally agrees
(notwithstanding that any of the conditions specified in section 6.2 hereof or
elsewhere in this Agreement shall not have been satisfied, but subject to the
provisions of paragraph sections 2.3(b) and (d) below) to make a General
Revolving Loan to the Borrower in an amount equal to such Lender's General
Revolving Facility Percentage of the aggregate amount of the Swing Line Loans to
which such Notice of Swing Line Refunding relates. Each such Lender shall make
the amount of such General Revolving Loan available to the Administrative Agent
in immediately available funds at the Payment Office not later than 2:00 P.M.
(local time at the Payment Office), if such notice is received by such Lender
prior to 11:00 A.M. (local time at its Domestic Lending Office), or not later
than 2:00 P.M. (local time at the Payment Office) on the next Business Day, if
such notice is received by such Lender after such time. The proceeds of such
General Revolving Loans shall be made immediately available to the Swing Line
Lender and applied by it to repay the principal amount of the Swing Line Loans
to which such Notice of Swing Line Refunding related. The Borrower irrevocably
and unconditionally agrees that, notwithstanding anything to the contrary
contained in this Agreement, General Revolving Loans made as herein provided in
response to a Notice of Swing Lne Refunding shall constitute General Revolving
Loans hereunder consisting of Prime Rate Loans.
(b) If prior to the time a General Revolving Loan would otherwise have been
made as provided above as a consequence of a Notice of Swing Line Refunding, any
of the events specified in section 10.1(h) shall have occurred in respect of the
Borrower or one or more of the Lenders with General Revolving Commitments shall
determine that it is legally prohibited from making a General Revolving Loan
under such circumstances, each Lender (other than the Swing Line Lender), or
each Lender (other than the Swing Line Lender) so prohibited, as the case may
be, shall, on the date such General Revolving Loan would have been made by it
(the "PURCHASE DATE"), purchase an undivided participating interest in the
outstanding Swing Line Loans to which such Notice of Swing Line Refunding
related, in an amount (the "SWING LINE PARTICIPATION AMOUNT") equal to such
Lender's General Revolving Facility Percentage of such Swing Line Loans. On the
Purchase Date, each such Lender or each such Lender so prohibited, as the case
may be, shall pay to the Swing Line Lender, in immediately available funds, such
Lender's Swing Line Participation Amount, and promptly upon receipt thereof the
Swing Line Lender shall, if requested by such other Lender, deliver to such
Lender a participation certificate, dated the date of the Swing Line Lender's
receipt of the funds from, and evidencing such Lender's participating interest
in such Swing Line Loans and its Swing Line Participation Amount in respect
thereof. If any amount required to be paid by a Lender to the Swing Line Lender
pursuant to the above provisions in respect of any Swing Line Participation
Amount is not paid on the date such payment is due, such Lender shall pay to the
Swing Line Lender on demand interest on the amount not so paid at the overnight
Federal Funds Effective Rate from the due date until such amount is paid in
full.
(c) Whenever, at any time after the Swing Line Lender has received from any
other Lender such Lender's Swing Line Participation Amount, the Swing Line
Lender receives any payment from or on behalf of the Borrower on account of the
related Swing Line Loans, the Swing Line Lender will promptly distribute to such
Lender its General Revolving Facility Percentage of such payment on account of
its Swing Line Participation Amount (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender's
participating interest was outstanding and funded); PROVIDED, HOWEVER, that in
the event such payment received by the
22
<PAGE>
Swing Line Lender is required to be returned, such Lender will return to the
Swing Line Lender any portion thereof previously distributed to it by the Swing
Line Lender.
(d) Each Lender's obligation to make General Revolving Loans and/or to
purchase participations in connection with a Notice of Swing Line Refunding
(which shall in all events be within such Lender's Unutilized General Revolving
Commitment, taking into account all outstanding participations in connection
with Swing Line Refundings) shall be subject to the conditions that:
(i) such Lender shall have received a Notice of Swing Line Refunding
complying with the provisions hereof, and
(ii) at the time the Swing Line Loans which are the subject of such
Notice of Swing Line Refunding were made, the Swing Line Lender had (x) no
knowledge that any Default under section 10.1(a) involving the payment of
principal of or interest on any of the Loans had occurred and was
continuing, and (y) no actual written notice from another Lender that an
Event of Default had occurred and was continuing,
but otherwise shall be absolute and unconditional, shall be solely for the
benefit of the Swing Line Lender, and shall not be affected by any circumstance,
including, without limitation, (A) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against any other Lender, any
Credit Party, or any other person, or any Credit Party may have against any
Lender or other person, as the case may be, for any reason whatsoever; (B) the
occurrence or continuance of a Default or Event of Default; (C) any event or
circumstance involving a Material Adverse Effect upon the Borrower; (D) any
breach of any Credit Document by any party thereto; or (E) any other
circumstance, happening or event, whether or not similar to any of the
foregoing.
2.4. NOTES; LOAN ACCOUNTS. (a) NOTES. The Borrower's obligation to pay the
principal of, and interest on, the General Revolving Loans made to it by each
Lender with a General Revolving Commitment shall be evidenced by a promissory
note of the Borrower substantially in the form of Exhibit A-1 (each a "GENERAL
REVOLVING NOTE" and, collectively, the "GENERAL REVOLVING NOTES"). The
Borrower's obligation to pay the principal of, and interest on, the Swing Line
Loans made to it by the Swing Line Lender shall be evidenced by a promissory
note of the Borrower substantially in the form of Exhibit A-2 with blanks
appropriately completed in conformity herewith (the "SWING LINE NOTE").
(b) GENERAL REVOLVING NOTES. The General Revolving Note issued by the
Borrower to a Lender with a General Revolving Commitment shall: (i) be executed
by the Borrower; (ii) be payable to the order of such Lender and be dated on or
prior to the Closing Date (or if later, the date the of the first General
Revolving Loan which is outstanding thereunder); (iii) be in a stated principal
amount equal to the General Revolving Commitment of such Lender; (iv) be payable
in the principal amount of the General Revolving Loans evidenced thereby; (v)
mature on the Maturity Date; (vi) bear interest as provided in section 2.6 in
respect of the Prime Rate Loans or Eurodollar Loans, as the case may be,
evidenced thereby; (vii) be subject to mandatory prepayment as provided in
section 5.2; and (viii) be entitled to the benefits of this Agreement and the
other Credit Documents.
(c) SWING LINE NOTE. The Swing Line Note issued by the Borrower to the
Swing Line Lender shall: (i) be executed by the Borrower; (ii) be payable to the
order of the Swing Line Lender and be dated on or prior to the date of any Swing
Line Loan evidenced thereby; (iii) be in a stated principal amount equal to the
Swing Line Commitment of the Swing Line Lender; (iv) be payable in the principal
amount of Swing Line Loans evidenced thereby; (v) mature as to any Swing Line
Loan evidenced thereby on the maturity date specified in the applicable Notice
of Borrowing (which shall be not more than 7 days following the date such Swing
Line Loan was made); (vi) bear interest as provided in section 2.6 in respect of
the Prime Rate Loans or Money Market Rate Loans, as the case may be, evidenced
thereby; (vii) be subject to mandatory prepayment as provided in section 5.2;
and (viii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(d) LOAN ACCOUNTS OF LENDERS. Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing the indebtedness of the
Borrower to such Lender resulting from each Loan made by
23
<PAGE>
such Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder.
(e) LOAN ACCOUNTS OF ADMINISTRATIVE AGENT. The Administrative Agent shall
maintain accounts in which it shall record (i) the amount of each Loan made
hereunder, the Type thereof, the particular Facility under which such Loan was
made, and (to the extent applicable) the Interest Period if such Loan is a
Eurodollar Loan, or the Quoted Rate and maturity thereof if such Loan is a Money
Market Rate Loan, (ii) the amount of any principal due and payable or to become
due and payable from the Borrower to each Lender hereunder, and (iii) the amount
of any sum received by the Administrative Agent hereunder for the account of the
Lenders and each Lender's share thereof.
(f) EFFECT OF LOAN ACCOUNTS, ETC. The entries made in the accounts
maintained pursuant to section 2.4(d) and (e) shall be PRIMA FACIE evidence of
the existence and amounts and amounts of the obligations recorded therein;
PROVIDED, that the failure of any Lender or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay or prepay the Loans in accordance with the terms of
this Agreement.
(g) ENDORSEMENTS OF AMOUNTS ON NOTES PRIOR TO TRANSFER. Each Lender will,
prior to any transfer of any Note issued to it by the Borrower, endorse on the
reverse side thereof or the grid attached thereto the outstanding principal
amount of Loans evidenced thereby. Failure to make any such notation or any
error in any such notation shall not affect the Borrower's obligations in
respect of such Loans.
2.5. CONVERSIONS OF BORROWINGS UNDER THE GENERAL REVOLVING FACILITY. The
Borrower shall have the option to Convert on any Business Day all or a portion
at least equal to the applicable Minimum Borrowing Amount of the outstanding
principal amount of a Borrowing under the General Revolving Facility into a
Borrowing or Borrowings under the same Facility of another Type of Loans which
can be made hereunder, PROVIDED that:
(a) no partial Conversion of a Eurodollar Borrowing shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto;
(b) any Conversion of a Eurodollar Borrowing into a Prime Rate
Borrowing shall be made on, and only on, the last day of an Interest Period
for such Eurodollar Borrowing;
(c) a Prime Rate Borrowing may only be Converted into a Eurodollar
Borrowing if no Default under section 10.1(a) or Event of Default is in
existence on the date of the Conversion unless the Required Lenders
otherwise agree; and
(d) Eurodollar Borrowings resulting from this section 2.6 shall
conform to the requirements of section 2.2(d).
Each such Conversion shall be effected by the Borrower giving the Administrative
Agent, at its Notice Office, prior written notice (or telephonic notice promptly
confirmed in writing if so requested by the Administrative Agent) (each a
"NOTICE OF CONVERSION"), substantially in the form of Exhibit B-2, specifying
the Loans to be so Converted, the Type of Loans to be Converted into and, if to
be Converted into a Borrowing of Eurodollar Loans, the Interest Period to be
initially applicable thereto. Any Notice of Conversion must be received by the
Administrative Agent (x) prior to 11:00 A.M. (local time at its Notice Office),
at least three Business Days prior to the date of any proposed Conversion into
Eurodollar Loans, or (y) prior to 11:00 A.M. (local time at its Notice Office)
on the same Business Day as the proposed Conversion into Prime Rate Loans. The
Administrative Agent shall give each Lender prompt notice of any such proposed
Conversion affecting any of its Loans. For the avoidance of doubt, the
prepayment or repayment of any Loans out of the proceeds of other Loans by the
Borrower is not considered a Conversion of Loans into other Loans.
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<PAGE>
2.6. INTEREST. (a) INTEREST RATE FOR PRIME RATE LOANS. During such periods
as a General Revolving Loan or a Swing Line Loan is a Prime Rate Loan, the
unpaid principal amount thereof shall bear interest at a fluctuating rate per
annum which shall at all times be equal to the Prime Rate in effect from time to
time.
(b) INTEREST RATE FOR EURODOLLAR LOANS. During such periods as a General
Revolving Loan is a Eurodollar Loan, the unpaid principal amount thereof shall
bear interest at a rate per annum which shall at all times during any Interest
Period applicable thereto be the Applicable Eurodollar Margin (as defined below)
for such Eurodollar Loan PLUS the relevant Adjusted LIBO Rate for such Interest
Period.
(c) INTEREST RATE FOR MONEY MARKET RATE LOANS. During such periods as a
Swing Line Loan is a Money Market Rate Loan, the unpaid principal amount thereof
shall bear interest at a the Quoted Rate therefor.
(d) DEFAULT INTEREST. Notwithstanding the above provisions, if a Default
under section 10.1(a) or Event of Default is in existence, all outstanding
amounts of principal in respect of each and every Loan shall bear interest,
payable on demand, at 2% per annum above the interest rate otherwise applicable
thereto. If any amount (other than the principal of the Loans) payable by the
Borrower under the Credit Documents is not paid when due, such amount shall bear
interest, payable on demand, at a fluctuating rate per annum equal 2% per annum
above the Prime Rate in effect from time to time.
(e) ACCRUAL AND PAYMENT OF INTEREST. Interest shall accrue from and
including the date of any Borrowing to but excluding the date of any prepayment
or repayment thereof and shall be payable:
(i) in the case of any Swing Line Loan, (A) at the maturity date
thereof, which shall in any event be not more than 7 days following the
date such Swing Line Loan is made, (B) on any prepayment (on the amount
prepaid), and (C) after maturity (whether by acceleration or otherwise), on
demand; and
(ii) in the case of any General Revolving Loan, (A) which is a Prime
Rate Loan, quarterly in arrears on the last Business Day of each April,
July, October and January, (B) which is a Eurodollar Loan, on the last day
of each Interest Period applicable thereto and, in the case of an Interest
Period in excess of three months, on the dates which are successively three
months after the commencement of such Interest Period, and (C) on any
repayment, prepayment or Conversion (on the amount repaid, prepaid or
Converted), at maturity (whether by acceleration or otherwise) and, after
such maturity, on demand.
(f) COMPUTATIONS OF INTEREST. All computations of interest hereunder shall
be made in accordance with section 12.7(b).
(g) INFORMATION AS TO INTEREST RATES. If requested to do so by the
Administrative Agent as contemplated by the definition of the term "LIBO Rate",
each Reference Bank agrees to furnish the Administrative Agent timely
information for the purpose of determining the Adjusted LIBO Rate for any
Eurodollar Borrowing. If any one or more of the Reference Banks shall not timely
furnish such information, the Administrative Agent shall determine the Adjusted
LIBO Rate on the basis of timely information furnished by the remaining
Reference Banks. The Administrative Agent upon determining the interest rate for
any Borrowing shall promptly notify the Borrower (on behalf of any applicable
Borrower) and the Lenders thereof.
(h) APPLICABLE EURODOLLAR MARGIN. As used herein, the term "APPLICABLE
EURODOLLAR MARGIN", as applied to any General Revolving Loan which is a
Eurodollar Loan, means the particular rate per annum determined by the
Administrative Agent in accordance with the Pricing Grid Table which appears
below, based on the Borrower's Fixed Charge Coverage Ratio and such Pricing Grid
Table, and the following provisions:
(i) Initially, until changed hereunder in accordance with the
following provisions, the Applicable Eurodollar Margin will be 110 basis
points per annum.
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<PAGE>
(ii) Commencing with the fiscal quarter of the Borrower ended on or
nearest to January 31, 2000, and continuing with each fiscal quarter
thereafter, the Administrative Agent will determine the Applicable
Eurodollar Margin for any Eurodollar Loan in accordance with the Pricing
Grid Table, based on the Borrower's Fixed Charge Coverage Ratio for the
Testing Period ended on the last day of the fiscal quarter, and identified
in such Pricing Grid Table. Changes in the Applicable Eurodollar Margin
based upon changes in such Fixed Charge Coverage Ratio shall become
effective on the first day of the month following the receipt by the
Administrative Agent pursuant to section 8.1(a) or (b) of the financial
statements of the Borrower, accompanied by the certificate and calculations
referred to in section 8.1(c), demonstrating the computation of such Fixed
Charge Coverage Ratio, based upon the Fixed Charge Coverage Ratio in effect
at the end of the applicable period covered (in whole or in part) by such
financial statements.
(iii) Notwithstanding the above provisions, during any period when
(A) the Borrower has failed to timely deliver its consolidated financial
statements referred to in section 8.1(a) or (b), accompanied by the
certificate and calculations referred to in section 8.1(c), (B) a Default
under section 10.1(a) has occurred and is continuing, or (C) an Event of
Default has occurred and is continuing, the Applicable Eurodollar Margin
shall be the highest rate per annum indicated therefor in the Pricing Grid
Table, regardless of the Borrower's Fixed Charge Coverage Ratio at such
time.
(iv) Any changes in the Applicable Eurodollar Margin shall be
determined by the Administrative Agent in accordance with the above
provisions and the Administrative Agent will promptly provide notice of
such determinations to the Borrower and the Lenders. Any such determination
by the Administrative Agent pursuant to this section 2.6(g) shall be
conclusive and binding absent manifest error.
<TABLE>
<CAPTION>
PRICING GRID TABLE
(EXPRESSED IN BASIS POINTS)
- -------------------------------------------------------------------------------
FIXED CHARGE COVERAGE RATIO APPLICABLE APPLICABLE FACILITY
EURODOLLAR FEE RATE
MARGIN
- -------------------------------------------------------------------------------
<S> <C> <C>
Greater than 2.00 to 1.00 75.00 25.00
- -------------------------------------------------------------------------------
Equal to or greater than 1.85 80.00 32.50
to 1.00 and equal to or less
than 2.00 to 1.00
- -------------------------------------------------------------------------------
Equal to or greater than 1.75 to 100.00 37.50
1.00 and less than 1.85 to 1.00
- -------------------------------------------------------------------------------
Equal to or greater than 110.00 40.00
1.625 to 1.00 and less than
1.75 to 1.00
- -------------------------------------------------------------------------------
Less than 1.625 to 1.00 120.00 42.50
- -------------------------------------------------------------------------------
</TABLE>
2.7. SELECTION AND CONTINUATION OF INTEREST PERIODS. (a) The Borrower
shall have the right
(x) at the time it gives a Notice of Borrowing or Notice of
Conversion in respect of the making of or Conversion into a Eurodollar
Borrowing, to select in such Notice the Interest Period to be applicable to
such Eurodollar Borrowing, and
26
<PAGE>
(y) prior to 11:00 A.M. (local time at the Notice Office) on the
third Business Day prior to the expiration of an Interest Period applicable
to a Eurodollar Borrowing, to elect by giving the Administrative Agent
written or telephonic notice (in the case of telephonic notice, promptly
confirmed in writing if so requested by the Administrative Agent) to
Continue all or the Minimum Borrowing Amount of the principal amount of
such Eurodollar Borrowing as one or more Eurodollar Borrowings and to
select the Interest Period to be applicable to any such Eurodollar
Borrowing (any such notice, a "NOTICE OF CONTINUATION"),
which Interest Period shall, at the option of the Borrower, be a one, two, three
or six month period; PROVIDED, that notwithstanding anything to the contrary
contained above, the Borrower's right to select an Interest Period or to effect
any Continuation shall be subject to the applicable provisions of section 2.8
and to the following:
(i) the initial Interest Period for any Eurodollar Borrowing shall
commence on the date of such Borrowing (the date of a Borrowing resulting
from a Conversion or Continuation shall be the date of such Conversion or
Continuation) and each Interest Period occurring thereafter in respect of
such Borrowing shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
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 which 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) no Interest Period for any Eurodollar Borrowing may be selected
which would end after the Maturity Date;
(v) each Eurodollar Borrowing resulting from any Continuation shall
be in at least the Minimum Borrowing Amount applicable thereto; and
(vi) no Interest Period may be elected at any time when a Default
under section 10.1(a) or an Event of Default is then in existence unless
the Required Lenders otherwise agree.
(b) If upon the expiration of any Interest Period the Borrower has failed
to (or may not) elect a new Interest Period to be applicable to the respective
Eurodollar Borrowing as provided above, the Borrower shall be deemed to have
elected to Convert such Borrowing to a Prime Rate Borrowing effective as of the
expiration date of such current Interest Period.
2.8. INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in the
case of clause (i) below, the Administrative Agent or (y) in the case of clauses
(ii) and (iii) below, any Lender, shall have determined on a reasonable basis
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto):
(i) on any date for determining the Adjusted LIBO Rate for any
Interest Period that, by reason of any changes arising after the Effective
Date affecting the interbank Eurodollar market, adequate and fair means do
not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Adjusted LIBO Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder in an amount
which such Lender deems material with respect to any Eurodollar Loans
(other than any increased cost or reduction in the amount received or
receivable resulting
27
<PAGE>
from the imposition of or a change in the rate of taxes or similar charges)
because of (x) any change since the Effective Date in any applicable law,
governmental rule, regulation, guideline, order or request (whether or not
having the force of law), or in the interpretation or administration
thereof and including the introduction of any new law or governmental rule,
regulation, guideline, order or request (such as, for example, but not
limited to, a change in official reserve requirements, but, in all events,
excluding reserves includable in the Adjusted LIBO Rate pursuant to the
definition thereof) and/or (y) other circumstances adversely affecting the
interbank Eurodollar market or the position of such Lender in such market;
or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has become unlawful by compliance by such Lender in good faith with
any change since the Effective Date in any law, governmental rule,
regulation, guideline or order, or the interpretation or application
thereof, or would conflict with any thereof not having the force of law but
with which such Lender customarily complies or has become impracticable as
a result of a contingency occurring after the Effective Date which
materially adversely affects the interbank Eurodollar market;
THEN, and in any such event, such Lender (or the Administrative Agent in the
case of clause (i) above) shall (x) on or promptly following such date or time
and (y) within 10 Business Days of the date on which such event no longer exists
give notice (by telephone confirmed in writing) to the Borrower and to the
Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Lenders). Thereafter (x) in
the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Administrative Agent notifies the Borrower and the
Lenders that the circumstances giving rise to such notice by the Administrative
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by the Borrower with respect to Eurodollar Loans which have not yet been
incurred or Converted shall be deemed rescinded by the Borrower or, in the case
of a Notice of Borrowing, shall, at the option of the Borrower, be deemed
converted into a Notice of Borrowing for Prime Rate Loans to be made on the date
of Borrowing contained in such Notice of Borrowing, (y) in the case of clause
(ii) above, the Borrower shall pay to such Lender, upon written demand therefor,
such additional amounts (in the form of an increased rate of, or a different
method of calculating, interest or otherwise as such Lender shall determine) as
shall be required to compensate such Lender, for such increased costs or
reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Lender, showing the basis for the calculation
thereof, which basis must be reasonable, submitted to the Borrower by such
Lender shall, absent manifest error, be final and conclusive and binding upon
all parties hereto) and (z) in the case of clause (iii) above, the Borrower
shall take one of the actions specified in section 2.8(b) as promptly as
possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the circumstances
described in section 2.8(a)(ii) or (iii), the Borrower may (and in the case of a
Eurodollar Loan affected pursuant to section 2.8(a)(iii) the Borrower shall)
either (i) if the affected Eurodollar Loan is then being made pursuant to a
Borrowing, by giving the Administrative Agent telephonic notice (confirmed
promptly in writing) thereof on the same date that the Borrower was notified by
a Lender pursuant to section 2.8(a)(ii) or (iii), cancel said Borrowing, convert
the related Notice of Borrowing into one requesting a Borrowing of Prime Rate
Loans or require the affected Lender to make its requested Loan as a Prime Rate
Loan, or (ii) if the affected Eurodollar Loan is then outstanding, upon at least
one Business Day's notice to the Administrative Agent, require the affected
Lender to Convert each such Eurodollar Loan into a Prime Rate Loan, PROVIDED
that if more than one Lender is affected at any time, then all affected Lenders
must be treated the same pursuant to this section 2.8(b).
(c) If any Lender shall have determined that after the Effective Date, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
by law with the interpretation or administration thereof, or compliance by such
Lender or its parent corporation with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank, or comparable agency, in each case made subsequent to the Effective Date,
has or would have the effect of reducing by an amount reasonably deemed by such
Lender to be material the rate of return on such Lender's or its parent
corporation's capital or assets as a consequence of such Lender's commitments or
obligations hereunder to a level
28
<PAGE>
below that which such Lender or its parent corporation could have achieved but
for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's or its parent corporation's policies with respect to
capital adequacy), then from time to time, within 15 days after demand by such
Lender (with a copy to the Administrative Agent), the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender or its
parent corporation for such reduction. Each Lender, upon determining in good
faith that any additional amounts will be payable pursuant to this section
2.8(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth, in reasonable detail, the basis of the calculation of such
additional amounts, which basis must be reasonable, although the failure to give
any such notice shall not release or diminish any of the Borrower's obligations
to pay additional amounts pursuant to this section 2.8(c) upon the subsequent
receipt of such notice.
(d) Notwithstanding anything in this Agreement to the contrary, (i) no
Lender shall be entitled to compensation or payment or reimbursement of other
amounts under section 2.8 or 3.5 for any amounts incurred or accruing more than
180 days prior to the giving of notice to the Borrower of additional costs or
other amounts of the nature described in such sections, and (ii) no Lender shall
demand compensation for any reduction referred to in section 2.8(c) or payment
or reimbursement of other amounts under section 3.5 if it shall not at the time
be the general policy or practice of such Lender to demand such compensation,
payment or reimbursement in similar circumstances under comparable provisions of
other credit agreements.
2.9. BREAKAGE COMPENSATION. The Borrower shall compensate each applicable
Lender, upon its written request (which request shall set forth the detailed
basis for requesting and the method of calculating such compensation), for all
reasonable losses, costs, expenses and liabilities (including, without
limitation, any loss, cost, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by such Lender
to fund its Eurodollar Loans or Swing Line Loans) which such Lender may sustain:
(i) if for any reason (other than a default by such Lender or the Administrative
Agent), (x) a Borrowing of Eurodollar Loans does not occur on a date specified
therefor in a Notice of Borrowing, Notice of Conversion or Notice of
Continuation (whether or not withdrawn, rescinded or cancelled by the Borrower
or deemed to be withdrawn, rescinded or cancelled), or (y)a Borrowing of a Swing
Line Loan does not occur on a date specified therefor in a Notice of Borrowing
(whether or not withdrawn, rescinded or cancelled by the Borrower or deemed to
be withdrawn, rescinded or cancelled); (ii) if any repayment, prepayment or
Conversion of any of its Eurodollar Loans occurs on a date which is not the last
day of an Interest Period applicable thereto; (iii) if any repayment or
prepayment of any of its Swing Line Loans occurs on a date which is not the
maturity date thereof; (iv) if any prepayment of any of its Eurodollar Loans or
Swing Line Loans not made on any date specified in a notice of prepayment given
by the Borrower; (v) as a result of an assignment by a Lender of any Eurodollar
Loan other than on the last day of the Interest Period applicable thereto, or
any Swing Line Loan other than on the maturity date thereof, pursuant to a
request by the Borrower pursuant to section 2.10(b); or (vi) as a consequence of
(x) any other default by the Borrower to repay or prepay its Eurodollar Loans
and/or Swing Line Loans when required by the terms of this Agreement or (y) an
election made pursuant to section 2.8(b). Such loss, cst, expense and liability
to any Lender shall be deemed to include an amount determined by such Lender to
be the excess, if any, of (i) the amount of interest which would have accrued on
the principal amount of such Loan had such event not occurred, at the interest
rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor, or
the maturity date thereof in the case of a Swing Line Loan, or in the case of a
failure to effect a Borrowing, Conversion or Continuation, for the period that
would have been the Interest Period for such Loan or the life of such Loan in
the case of a Swing Line Loan, over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
Lender would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market (or the short term funds market, in the case of a Swing Line Loan). A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such request within 10 days after
receipt thereof.
2.10. CHANGE OF LENDING OFFICE; REPLACEMENT OF LENDERS. (a) Each Lender
agrees that, upon the occurrence of any event giving rise to the operation of
section 2.8(a)(ii) or (iii), 2.8(c) or 3.5 with respect to such
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Lender, it will, if requested by the Borrower, use reasonable efforts (subject
to overall policy considerations of such Lender) to designate another Applicable
Lending Office for any Loans or Commitment affected by such event, PROVIDED that
such designation is made on such terms that such Lender and its Applicable
Lending Office suffer no economic, legal or regulatory disadvantage, with the
object of avoiding the consequence of the event giving rise to the operation of
any such section.
(b) If any Lender requests any compensation, reimbursement or other payment
under section 2.8(a)(ii) or (iii), 2.8(c) or 3.5 with respect to such Lender, or
if any Lender is a Defaulting Lender, then the Borrower may, at its sole expense
and effort, upon notice to such Lender and the Administrative Agent, require
such Lender to assign and delegate, without recourse (in accordance with the
restrictions contained in section 12.4(b)), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); PROVIDED that (i) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not be
unreasonably withheld or delayed, (ii) such Lender shall have received payment
of an amount equal to the outstanding principal of its Loans, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts), and (iii) in the case
of any such assignment resulting from a claim for compensation, reimbursement or
other payments required to be made under section 2.8(a)(ii) or (iii), 2.8(c) or
3.5 with respect to such Lender, such assignment will result in a reduction in
such compensation, reimbursement or payments. A Lender shall not be required to
make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.
(c) Nothing in this section 2.10 shall affect or postpone any of the
obligations of the Borrower or the right of any Lender provided in section 2.8
or 3.5.
SECTION 3. LETTERS OF CREDIT.
3.1. LETTERS OF CREDIT. (a) GENERAL. Subject to and upon the terms and
conditions herein set forth, the Borrower may request an Issuing Bank at any
time and from time to time on or after the Closing Date and prior to the date
that is 30 Business Days prior to the Maturity Date to issue, for the account of
the Borrower or any of its Subsidiaries and in support of (i) trade obligations
of the Borrower and its Subsidiaries incurred in the ordinary course of
business, and/or (ii) worker compensation, liability insurance, releases of
contract retention obligations, contract performance guarantee requirements and
other bonding obligations of the Borrower or any such Subsidiary incurred in the
ordinary course of its business, and such other obligations of the Borrower and
its Subsidiaries that are acceptable to the Issuing Bank, and subject to and
upon the terms and conditions herein set forth, such Issuing Bank agrees to
issue from time to time, irrevocable documentary or standby letters of credit
(it being understood that the term "standby" shall include so called "direct
pay" letters of credit) denominated and payable in Dollars or in an Alternative
Currency in such form as may be approved by such Issuing Bank and the
Administrative Agent (each such letter of credit (and each Existing Letter of
Credit described in section 3.1(e)), a "LETTER OF CREDIT" and collectively, the
"LETTERS OF CREDIT"). Letters of Credit issued for purposes referred to in
clause (i) above are sometimes referred to as "DOCUMENTARY LETTERS OF CREDIT",
and Letters of Credit issued for purposes referred to in clause (ii) above are
sometimes referred to as "STANDBY LETTERS OF CREDIT".
(b) MAXIMUM LC EXPOSURE, ETC. A Letter of Credit shall be issued hereunder,
and the Stated Amount of a Letter of Credit shall be increased hereunder, only
if (and upon such issuance or increase the Borrower shall be deemed to represent
and warrant that), after giving effect to such issuance or increase, (i) the
Total LC Exposure shall not exceed $100,000,000, and (ii) the General Revolving
Credit Exposure of each Lender shall not exceed its General Revolving
Commitment.
(c) STATED AMOUNTS AND EXPIRATION. Notwithstanding the foregoing,
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(i) no individual Letter of Credit (other than any Existing Letter
of Credit) shall be issued which has an initial Stated Amount less than
$100,000 unless such lesser Stated Amount is acceptable to the Issuing
Bank;
(ii) each Standby Letter of Credit shall have an expiry date
(including any renewal periods) occurring not later than the earlier of (A)
one year from the date of issuance thereof, unless a longer period is
approved by the relevant Issuing Bank and the Required Lenders, and (B) 15
Business Days prior to the Maturity Date, in each case on terms acceptable
to the Administrative Agent and the relevant Issuing Bank; and
(iii) each Documentary Letter of Credit (including any acceptances
or time drafts created thereunder) shall have an expiry date (including any
renewal periods) occurring not later than the earlier of (A) six months
from the date of issuance thereof, unless a longer period is approved by
the relevant Issuing Bank and the Required Lenders, and (B) 15 Business
Days prior to the Maturity Date, in each case on terms acceptable to the
Administrative Agent and the relevant Issuing Bank.
(d) EFFECT OF LENDER DEFAULT. Notwithstanding the foregoing, in the event a
Lender Default exists, no Issuing Bank shall be required to issue any Letter of
Credit (or increase the Stated Amount of an outstanding Letter of Credit) unless
either (i) such Issuing Bank has entered into arrangements satisfactory to it
and the Borrower to eliminate such Issuing Bank's risk with respect to the
participation in Letters of Credit of the Defaulting Lender or Lenders,
including by cash collateralizing such Defaulting Lender's or Lenders' LC
Exposure; or (ii) the issuance of such Letter of Credit (or increase in the
Stated Amount of an outstanding Letter of Credit), taking into account the
potential failure of the Defaulting Lender or Lenders to risk participate
therein, will not cause the Issuing Bank to incur Credit Exposure in excess of
its Commitment, and the Borrower has undertaken, for the benefit of such Issuing
Bank, pursuant to an instrument satisfactory in form and substance to such
Issuing Bank, not to thereafter incur, or cause to be issued or created, Loans
or Letters of Credit hereunder which would cause the Issuing Bank to incur
Credit Exposure in excess of its Commitment.
(e) EXISTING LETTERS OF CREDIT. Annex VI hereto contains a description of
certain letters of credit outstanding on, and to continue in effect after, the
Closing Date. Each such letter of credit issued by a bank that is or becomes a
Lender under this Agreement on the Effective Date (each, an "EXISTING LETTER OF
CREDIT") shall constitute a "Letter of Credit" for all purposes of this
Agreement, issued, for purposes of section 3.4(a), on the Closing Date, and the
Borrower, the Administrative Agent and the applicable Lenders hereby agree that,
from and after such date, the terms of this Agreement shall apply to such
Letters of Credit, superseding any other agreement theretofore applicable to
them to the extent inconsistent with the terms hereof.
(f) DISBURSEMENT PROCEDURES. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; PROVIDED that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Bank and the Lenders with respect to any such LC Disbursement.
3.2. LETTER OF CREDIT REQUESTS: NOTICES OF ISSUANCE. (a) Whenever it
desires that a Letter of Credit be issued, the Borrower shall give the
Administrative Agent and the Issuing Bank written or telephonic notice (in the
case of telephonic notice, promptly confirmed in writing if so requested by the
Administrative Agent) which, if in the form of written notice shall be
substantially in the form of Exhibit B-3, or transmit by electronic
communication (if arrangements for doing so have been approved by the Issuing
Bank), prior to 11:00 A.M. (local time at its Notice Office) at least three
Business Days (or such shorter period as may be acceptable to the relevant
Issuing Bank) prior to the proposed date of issuance (which shall be a Business
Day) (each a "LETTER OF CREDIT REQUEST"), which Letter of Credit Request shall
include such supporting documents that such Issuing Bank customarily requires in
connection therewith (including, if required by the Issuing Bank, an application
for, and a reimbursement agreement with respect to, such Letter of Credit). Any
such documents executed in connection with the issuance of a Letter of Credit,
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including (without limitation) any application, reimbursement agreement,
guaranty, collateral document, the Letter of Credit itself, or any sight draft
or time draft, are herein referred to as "LETTER OF CREDIT DOCUMENTS". In the
event of any inconsistency between any of the terms or provisions of any Letter
of Credit Document and the terms and provisions of this Agreement respecting
Letters of Credit, the terms and provisions of this Agreement shall control. The
Administrative Agent shall promptly notify each Lender of each Letter of Credit
Request.
(b) Each Issuing Bank shall, on the date of each issuance of a Letter of
Credit by it, give the Administrative Agent and the Borrower written notice of
the issuance of such Letter of Credit, accompanied by a copy to the
Administrative Agent of the Letter of Credit or Letters of Credit issued by it.
Each Issuing Bank shall provide to the Administrative Agent a quarterly (or
monthly if requested by any applicable Lender in writing) summary describing the
outstanding Letters of Credit issued by such Issuing Bank and an identification
for the relevant period of the daily aggregate or average daily aggregate Total
LC Exposure represented by Letters of Credit issued by such Issuing Bank.
3.3. AGREEMENT TO REPAY LC DISBURSEMENTS. (a) If the Issuing Bank shall
make any LC Disbursement in respect of a Letter of Credit, the Borrower shall
reimburse (or cause its applicable Subsidiary which is the account party to
reimburse) such LC Disbursement by paying to the Administrative Agent, for the
account of the Issuing Bank, an amount equal to such LC Disbursement not later
than 12:00 noon (local time at the Payment Office), on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m.(local time at the Payment Office), on such
date, or, if such notice has not been received by the Borrower prior to such
time on such date, then not later than 12:00 noon (local time at the Payment
Office), on (i) the Business Day that the Borrower receives such notice, if such
notice is received prior to 10:00 a.m. (local time at the Payment Office), on
the day of receipt, or (ii) the Business Day immediately following the day that
the Borrower receives such notice, if such notice is not received prior to such
time on the day of receipt; PROVIDED that if such LC Disbursement is not less
than $1,000,000, the Borrower may, subject to the conditions to Borrowing set
forth herein, request in accordance with section 2.2 that such payment be
financed with a Prime Rate Borrowing in an equivalent amount and, to the extent
so financed, the Borrower's obligation to make such reimbursement payment shall
be discharged and replaced by the resulting Borrowing.
(b) If the Issuing Bank shall make any LC Disbursement, then, unless the
Borrower shall reimburse such LC Disbursement in full not later than 12:00 noon
(local time at the Payment Office) on the date that such LC Disbursement is
made, the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made to but excluding the date that
the Borrower reimburses such LC Disbursement, at the rate per annum then
applicable to Prime Rate Loans; PROVIDED that, if the Borrower fails to
reimburse such LC Disbursement when due pursuant to section 3.3(a), then the
last sentence of section 2.6(d) shall apply. Interest accrued pursuant to this
section 3.3(b) shall be for the account of the Issuing Bank, except that
interest accrued on and after the date of payment by any Lender pursuant to
section 3.4(c) to reimburse the Issuing Bank shall be for the account of such
Lender to the extent of such payment.
(c) The Borrower's obligation under this section 3.3 to reimburse, or cause
a Subsidiary to reimburse, each Issuing Bank with respect to LC Disbursements
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or any Subsidiary may have or have had
against such Issuing Bank, the Administrative Agent, any other Issuing Bank, any
Lender, or any of their Affiliates, including, without limitation, any defense
based upon the failure of any drawing under a Letter of Credit to conform to the
terms of the Letter of Credit or any non-application or misapplication by the
beneficiary of the proceeds of such drawing, PROVIDED, HOWEVER that the Borrower
shall not be obligated to reimburse, or cause a Subsidiary to reimburse, an
Issuing Bank for any wrongful payment made by such Issuing Bank under a Letter
of Credit as a result of acts or omissions constituting willful misconduct or
gross negligence on the part of such Issuing Bank.
3.4. PARTICIPATIONS IN LETTERS OF CREDIT. (a) Immediately upon the issuance
by an Issuing Bank of any Letter of Credit (and on the Closing Date with respect
to any Existing Letter of Credit), such Issuing Bank shall be deemed to have
sold and transferred to each Lender, and each such Lender (each a "PARTICIPANT")
shall be deemed
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irrevocably and unconditionally to have purchased and received from such Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such Lender's General Revolving Facility Percentage, in (i) such
Letter of Credit, each substitute letter of credit, and each drawing made
thereunder, (ii) the obligations of the Borrower under this Agreement with
respect thereto (although Letter of Credit Fees shall be payable directly to the
Administrative Agent for the account of the Lenders as provided in section
4.1(b) and the Participants shall have no right to receive any portion of any
fees of the nature contemplated by section 4.1(c) or 4.1(d)), (iii) the
obligations of the Borrower or any Subsidiary under any Letter of Credit
Documents pertaining thereto, and (iv) any security for, or guaranty pertaining
to, any of the foregoing. Upon any change in the Commitments of the Lenders
pursuant to section 12.4(c), it is hereby agreed that, with respect to all
outstanding Letters of Credit and LC Disbursements, there shall be an automatic
adjustment to the participations pursuant to this section 3.4 to reflect the new
General Revolving Facility Percentages of the assigning and assignee Lender.
(b) In determining whether to pay under any Letter of Credit, an Issuing
Bank shall not have any obligation relative to the Participants other than to
determine that any documents required to be delivered under such Letter of
Credit have been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by an Issuing Bank under or in connection with any Letter of Credit if taken or
omitted in the absence of gross negligence or willful misconduct, shall not
create for such Issuing Bank any resulting liability.
(c) In the event that an Issuing Bank makes any LC Disbursement and the
Borrower shall not have reimbursed (or caused any applicable Subsidiary to
reimburse) such amount in full to such Issuing Bank pursuant to section 3.3(a),
such Issuing Bank shall promptly notify the Administrative Agent, and the
Administrative Agent shall promptly notify each Participant of such failure, and
each Participant shall promptly and unconditionally pay to the Administrative
Agent for the account of such Issuing Bank, the amount of such Participant's
General Revolving Facility Percentage of such LC Disbursement in U.S. Dollars
(the Administrative Agent having determined in the case of any LC Disbursement
by an Issuing Bank made in an Alternative Currency the equivalent thereof in
Dollars) and in same day funds, PROVIDED, HOWEVER, that no Participant shall be
obligated to pay to the Administrative Agent its General Revolving Facility
Percentage of such unreimbursed LC Disbursement for any wrongful payment made by
such Issuing Bank under a Letter of Credit as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of such Issuing
Bank. If the Administrative Agent so notifies any Participant required to fund
an LC Disbursement prior to 11:00 A.M. (local time at its Notice Office) on any
Business Day, such Participant shall make available to the Administrative Agent
for the account of the relevant Issuing Bank such Participant's General
Revolving Facility Percentage of the amount of such LC Disbursement on such
Business Day in same day funds. If and to the extent such Participant shall not
have so made its General Revolving Facility Percentage of the amount of such LC
Disbursement available to the Administrative Agent for the account of the
relevant Issuing Bank, such Participant agrees to pay to the Administrative
Agent for the account of such Issuing Bank, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date such
amount is paid to the Administrative Agent for the account of such Issuing Bank
at the Federal Funds Effective Rate. The failure of any Participant to make
available to the Administrative Agent for the account of the relevant Issuing
Bank its General Revolving Facility Percentage of any unreimbursed LC
Disbursement shall not relieve any other Participant of its obligation hereunder
to make available to the Administrative Agent for the account of such Issuing
Bank its General Revolving Facility Percentage of any unreimbursed LC
Disbursement, on the date required, as specified above, but no Participant shall
be responsible for the failure of any other Participant to make available to the
Administrative Agent for the account of such Issuing Bank such other
Participant's General Revolving Facility Percentage of any such unreimbursed LC
Disbursement.
(d) Whenever an Issuing Bank receives a payment of a reimbursement
obligation for an LC Disbursement as to which the Administrative Agent has
received for the account of such Issuing Bank any payments from the Participants
pursuant to section 3.4(c) above, such Issuing Bank shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participant which has paid its General Revolving Facility Percentage thereof, in
U.S. dollars and in same day funds, an amount equal to such Participant's
General Revolving Facility Percentage of the principal amount thereof and
interest thereon accruing after the purchase of the respective participations,
as and to the extent so received.
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(e) The obligations of the Participants to make payments to the
Administrative Agent for the account of each Issuing Bank with respect to LC
Disbursements shall be irrevocable and not subject to counterclaim, set-off or
other defense or any other qualification or exception whatsoever and shall be
made in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, set-off defense or other right
which the Borrower (or any Subsidiary) may have at any time against a
beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any person for whom any such transferee may be acting), any
payee of a draft drawn on an Issuing Bank relating to a Letter of Credit,
the Administrative Agent, any Issuing Bank, any Lender, or other person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including
any underlying transaction between the Borrower (or any Subsidiary) and the
beneficiary named in any such Letter of Credit or the payee named in any
such draft relating to a Letter of Credit, other than any claim which the
Borrower (or any Subsidiary which is the account party with respect to a
Letter of Credit) may have against any applicable Issuing Bank for gross
negligence or wilful misconduct of such Issuing Bank in making payment
under any applicable Letter of Credit;
(iii) any draft, certificate or other document presented under the
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) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents: or
(v) the occurrence of any Default or Event of Default.
(f) To the extent the Issuing Bank is not indemnified by the Borrower, the
Participants will reimburse and indemnify the Issuing Bank, in proportion to
their respective General Revolving Facility Percentages, for and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by the Issuing Bank in
performing its respective duties in any way related to or arising out of its
issuance of Letters of Credit, PROVIDED that no Participants shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, costs, expenses or disbursements resulting from the
Issuing Bank's gross negligence or willful misconduct.
3.5. INCREASED COSTS. If after the Effective Date, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Issuing Bank or any Lender with any request or
directive (whether or not having the force of law) by any such authority,
central bank or comparable agency (in each case made subsequent to the Effective
Date) shall either (i) impose, modify or make applicable any reserve, deposit,
capital adequacy or similar requirement against Letters of Credit issued by such
Issuing Bank, or such Lender's participation therein, or (ii) shall impose on
such Issuing Bank or any Lender any other conditions affecting this Agreement,
any Letter of Credit, or such Lender's participation therein; and the result of
any of the foregoing is to increase the cost to such Issuing Bank or such Lender
of issuing, creating, maintaining or participating in any Letter of Credit, or
to reduce the amount of any sum received or receivable by such Issuing Bank or
such Lender hereunder (other than any increased cost or reduction in the amount
received or receivable resulting from the imposition of or a change in the rate
of taxes or similar charges), THEN, upon demand to the Borrower by such Issuing
Bank or such Lender (a copy of which notice shall be sent by such Issuing Bank
or such Lender to the Administrative Agent), the Borrower shall pay to such
Issuing Bank or such Lender such
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additional amount or amounts as will compensate any such Issuing Bank or such
Lender for such increased cost or reduction. A certificate submitted to the
Borrower by any Issuing Bank or any Lender, as the case may be (a copy of which
certificate shall be sent by such Issuing Bank or such Lender to the
Administrative Agent), setting forth, in reasonable detail, the basis for the
determination of such additional amount or amounts necessary to compensate any
Issuing Bank or such Lender as aforesaid shall be conclusive and binding on the
Borrower absent manifest error, although the failure to deliver any such
certificate shall not release or diminish any of the Borrower's obligations to
pay additional amounts pursuant to this section 3.4. Reference is hereby made to
the provisions of section 2.10(d) for certain limitations upon the rights of an
Issuing Bank or Lender under this section.
3.6. GUARANTY OF SUBSIDIARY LETTER OF CREDIT OBLIGATIONS. (a) The Borrower
hereby unconditionally guarantees, for the benefit of the Administrative Agent
and the Lenders, the full and punctual payment of the Obligations of each
Subsidiary under each Letter of Credit Document to which such Subsidiary is now
or hereafter becomes a party. Upon failure by any such Subsidiary to pay
punctually any such amount, the Borrower shall forthwith on demand by the
Administrative Agent pay the amount not so paid at the place and in the currency
and otherwise in the manner specified in this Agreement or any applicable Letter
of Credit Document.
(b) As a separate, additional and continuing obligation, the Borrower
unconditionally and irrevocably undertakes and agrees, for the benefit of the
Administrative Agent and the Lenders, that, should any amounts not be
recoverable from the Borrower under section 3.6(a) for any reason whatsoever
(including, without limitation, by reason of any provision of any Credit
Document or any other agreement or instrument executed in connection therewith
being or becoming void, unenforceable, or otherwise invalid under any applicable
law) then, notwithstanding any notice or knowledge thereof by any Lender, the
Administrative Agent, any of their respective Affiliates, or any other person,
at any time, the Borrower as sole, original and independent obligor, upon demand
by the Administrative Agent, will make payment to the Administrative Agent, for
the account of the Lenders and the Administrative Agent, of all such obligations
not so recoverable by way of full indemnity, in such currency and otherwise in
such manner as is provided in the Credit Documents.
(c) The obligations of the Borrower under this section shall be
unconditional and absolute and, without limiting the generality of the foregoing
shall not be released, discharged or otherwise affected by the occurrence, one
or more times, of any of the following:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect to any obligation of any Subsidiary under any Letter of
Credit Document, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement, any Note or any other Credit Document;
(iii) any release, non-perfection or invalidity of any direct or
indirect security for any obligation of the Borrower under this Agreement,
any Note or any other Credit Document or of any Subsidiary under any Letter
of Credit Document;
(iv) any change in the corporate existence, structure or ownership
of any Subsidiary or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting any Subsidiary or its assets or any resulting
release or discharge of any obligation of any Subsidiary contained in any
Letter of Credit Document;
(v) the existence of any claim, set-off or other rights which the
Borrower may have at any time against any Subsidiary, the Administrative
Agent, any Lender or any other person, whether in connection herewith or
any unrelated transactions;
(vi) any invalidity or unenforceability relating to or against any
Subsidiary for any reason of any Letter of Credit Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Subsidiary of any Obligations in respect of any Letter of
Credit; or
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(vii) any other act or omission to act or delay of any kind by any
Subsidiary, the Administrative Agent, any Lender or any other person or any
other circumstance whatsoever which might, but for the provisions of this
section, constitute a legal or equitable discharge of the Borrower's
obligations under this section.
(d) The Borrower's obligations under this section shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Borrower under
the Credit Documents and by any Subsidiary under the Letter of Credit Documents
shall have been paid in full. If at any time any payment of any of the
Obligations of any Subsidiary in respect of any Letter of Credit Documents is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of such Subsidiary, the Borrower's obligations
under this section with respect to such payment shall be reinstated at such time
as though such payment had been due but not made at such time.
(e) The Borrower irrevocably waives acceptance hereof, presentment, demand,
protest and any notice not provided for herein, as well as any requirement that
at any time any action be taken by any person against any Subsidiary or any
other person, or against any collateral or guaranty of any other person.
(f) The Borrower hereby subordinates all rights, whether arising by
operation of law or otherwise, which it may have upon making any payment under
this section to be subrogated to the rights of the payee against any Subsidiary
with respect to such payment or otherwise to be reimbursed, indemnified or
exonerated by any Subsidiary in respect thereof, to the indefeasible payment in
full of all of the Obligations.
(g) In the event that acceleration of the time for payment of any amount
payable by any Subsidiary under any Letter of Credit Document is stayed upon
insolvency, bankruptcy or reorganization of such Subsidiary, all such amounts
otherwise subject to acceleration under the terms of any applicable Letter of
Credit Document shall nonetheless be payable by the Borrower under this section
forthwith on demand by the Administrative Agent.
SECTION 4. FEES AND COMMISSIONS; TERMINATION
AND REDUCTION OF COMMITMENTS.
4.1. FEES AND COMMISSIONS. (a) FACILITY FEE. (i) The Borrower agrees to pay
to the Administrative Agent a Facility Fee ("FACILITY FEE") for the account of
each Non-Defaulting Lender which has a General Revolving Commitment for the
period from and including the Effective Date to but not including the date the
Total General Revolving Commitment has been terminated and no Loans or Letters
of Credit are outstanding, which, for any such Lender, shall be computed on the
daily amount of the General Revolving Commitment of such Lender, whether used or
unused, at the Applicable Facility Fee Rate, payable quarterly in arrears on the
last Business Day of each April, July, October and January and on the date when
the Total General Revolving Commitment has been terminated and no Loans or
Letters of Credit are outstanding, commencing with the last Business Day of the
first such date occurring after the Effective Date for the period from the
Effective Date to such date.
(ii) As used herein, the term "APPLICABLE FACILITY FEE RATE" means the
particular rate per annum determined by the Administrative Agent in accordance
with the Pricing Grid Table which appears in section 2.6(g), based on the
Borrower's Fixed Charge Coverage Ratio and such Pricing Grid Table, and the
following provisions:
(A) Initially, until changed hereunder in accordance with the
following provisions, the Applicable Facility Fee Rate will be 40 basis
points per annum.
(B) Commencing with the fiscal quarter of the Borrower ended on
or nearest to January 31, 2000, and continuing with each fiscal quarter
thereafter, the Administrative Agent will determine the Applicable
Facility Fee Rate in accordance with the Pricing Grid Table, based on
the Borrower's Fixed Charge Coverage Ratio for the Testing Period ended
on the last day of the fiscal quarter, and identified in such Table.
Changes in the Applicable Facility Fee Rate based upon changes in such
Fixed Charge Coverage
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Ratio shall become effective on the first day of the month following the
receipt by the Administrative Agent pursuant to section 8.1(a) or (b) of
the financial statements of the Borrower, accompanied by the certificate
and calculations referred to in section 8.1(c), demonstrating the
computation of such Fixed Charge Coverage Ratio, based upon the Fixed
Charge Coverage Ratio in effect at the end of the applicable period
covered (in whole or in part) by such financial statements.
(C) Notwithstanding the above provisions, during any period when (1)
the Borrower has failed to timely deliver its consolidated financial
statements referred to in section 8.1(a) or (b), accompanied by the
certificate and calculations referred to in section 8.1(c), (2) a Default
under section 10.1(a) has occurred and is continuing, or (3) an Event of
Default has occurred and is continuing, the Applicable Facility Fee Rate
shall be the highest rate per annum indicated therefor in the Pricing Grid
Table, regardless of the Borrower's Fixed Charge Coverage Ratio at such
time.
(D) Any changes in the Applicable Facility Fee Rate shall be
determined by the Administrative Agent in accordance with the above
provisions and the Administrative Agent will promptly provide notice of
such determinations to the Borrower and the Lenders. Any such determination
by the Administrative Agent pursuant to this section 4.1(a) shall be
conclusive and binding absent manifest error.
(b) LETTER OF CREDIT FEE. The Borrower agrees to pay to the Administrative
Agent, for the account of each Non-Defaulting Lender, PRO RATA on the basis of
its General Revolving Facility Percentage, a fee in respect of each Letter of
Credit (the "LETTER OF CREDIT FEE"), computed for each day at the rate per annum
equal to
(i) in the case of any Standby Letter of Credit, 100% of the
Applicable Eurodollar Margin then in effect on the Stated Amount thereof
which is outstanding on such day; or
(ii) in the case of any Documentary Letter of Credit, 50% of the
Applicable Eurodollar Margin then in effect on the Stated Amount thereof
outstanding on such day, EXCEPT that if any banker's acceptance or time
draft is created or issued under any Documentary Letter of Credit, such
rate as applied to the Stated Amount of such banker's acceptance or time
draft which is outstanding on such day shall be 100% of the Applicable
Eurodollar Margin then in effect.
Accrued Letter of Credit Fees shall be payable on the last Business Day of each
April, July, October and January and on the date on which the Total Commitment
has been terminated and no Letters of Credit are outstanding. Notwithstanding
the above provisions, if a Default under section 10.1(a) or Event of Default is
in existence, the Borrower will pay to the Administrative Agent, on demand, for
the account of each Non-Defaulting Lender, PRO RATA on the basis of its General
Revolving Facility Percentage, an additional Letter of Credit Fee for each
outstanding Letter of Credit, computed at 2% per annum above the then prevailing
rate for the Letter of Credit Fee on the Stated Amount of such outstanding
Letter of Credit for the period such Default or Event of Default is in
existence.
(c) FRONTING FEES. The Borrower agrees to pay directly to each Issuing
Bank, for its own account, a fee in respect of each Letter of Credit issued by
it (a "FRONTING FEE"), payable at such time or time and at such rate or rates as
may from time to time be agreed between the Borrower and such Issuing Bank.
(d) ADDITIONAL CHARGES OF ISSUING BANK FOR LETTERS OF CREDIT. The Borrower
agrees to pay directly to each Issuing Bank, upon each issuance of, drawing
under, creation or issuance of a banker's acceptance or time draft under, and/or
amendment, extension, renewal or transfer of, a Letter of Credit issued by it,
(i) such amount (and payable at such time or times) as may from time to time be
agreed between the Borrower and such Issuing Bank, or (ii) in the absence of any
such agreement, such amounts as shall at the time be the administrative or
processing charge which such Issuing Bank is customarily charging for issuances
of, drawings under, creation or issuance of a banker's acceptance or time draft
under, or amendments, extensions, renewals or transfers of, letters of credit
issued by it.
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(e) OTHER FEES. The Borrower shall pay to the Administrative Agent on the
Effective Date and thereafter for its own account and/or for distribution to the
Lenders such fees as heretofore agreed by the Borrower and the Administrative
Agent.
(f) COMPUTATIONS OF FEES. All computations of Fees shall be made in
accordance with section 12.7(b).
4.2. VOLUNTARY TERMINATION/REDUCTION OF COMMITMENTS. Upon at least three
Business Days' prior written notice (or telephonic notice confirmed in writing)
to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the affected Lenders),
the Borrower shall have the right, without premium or penalty, to:
(a) terminate the Total Commitment, PROVIDED that (i) all
outstanding Loans are contemporaneously prepaid in accordance with section
5.1, and (ii) there is no LC Exposure for any Lender at such time;
(b) terminate the Swing Line Commitment, PROVIDED that all
outstanding Swing Line Loans are contemporaneously prepaid in accordance
with section 5.1;
(c) partially and permanently reduce the Unutilized Total General
Revolving Commitment, PROVIDED that (i) any such reduction shall apply to
proportionately and permanently reduce the General Revolving Commitment of
each of the Lenders; and (ii) any partial reduction of the Unutilized Total
General Revolving Commitment pursuant to this section 4.2(b) shall be in
the amount of at least $5,000,000 (or, if greater, in integral multiples of
$1,000,000); and (iii) after giving effect to any such partial reduction of
the Unutilized Total General Revolving Commitment, the Total General
Revolving Commitment then in effect shall exceed the Swing Line Commitment
then in effect by at least $10,000,000; and/or
(d) partially and permanently reduce the Unutilized Swing Line
Commitment, PROVIDED that any partial reduction of the Unutilized Swing
Line Commitment pursuant to this section 4.2(d) shall be in the amount of
at least $1,000,000 (or, if greater, in integral multiples of $1,000,000).
4.3. MANDATORY TERMINATION/ADJUSTMENTS OF COMMITMENTS, ETC. (a) The Total
Commitment (and the Commitment of each Lender) shall terminate on June 15, 1999,
unless the Closing Date has occurred on or prior to such date.
(b) The Total Commitment shall terminate (and the Commitment of each Lender
shall terminate) on the date on which a Change of Control occurs.
4.4. EXTENSION OF MATURITY DATE. At any time after February 15, 2000, and
during the 30 day period following delivery by the Borrower pursuant to section
8.1(a) of its consolidated financial statements for its fiscal year most
recently ended, and annually thereafter during the 30 day period following
delivery by the Borrower of its consolidated financial statements pursuant to
section 8.1(a), the Borrower may request the Administrative Agent to determine
if all of the Lenders are then willing to extend the Maturity Date for a single
additional year. If the Borrower so requests, the Administrative Agent will so
advise such Lenders. If all of such Lenders in their sole discretion are all
willing to so extend the Maturity Date, after taking into account such
considerations as any such Lender may deem relevant, the Borrower, the
Administrative Agent and all of such Lenders shall execute and deliver a
definitive written instrument so extending the Maturity Date. No such extension
of the Maturity Date shall be valid or effective for any purpose unless such
definitive written instrument is so signed and delivered within 60 days
following the giving by the Administrative Agent of notice to the Lenders that
the Borrower has requested such an extension.
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SECTION 5. PAYMENTS.
5.1. VOLUNTARY PREPAYMENTS. The Borrower shall have the right to prepay any
of its Loans, in whole or in part, without premium or penalty, from time to time
on the following terms and conditions:
(a) the Borrower shall give the Administrative Agent at the Notice
Office written or telephonic notice (in the case of telephonic notice,
promptly confirmed in writing if so requested by the Administrative Agent)
of its intent to prepay the Loans, the amount of such prepayment and (in
the case of Eurodollar Loans or Swing Line Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be received by the
Administrative Agent by
(x) 11:00 A.M. (local time at the Notice Office) three
Business Days prior to the date of such prepayment, in the case of
any prepayment of Eurodollar Loans, or
(y) 12:00 noon (local time at the Notice Office) on the date
of such prepayment, in the case of any prepayment of Prime Rate
Loans or Money Market Rate Loans,
and which notice shall promptly be transmitted by the Administrative Agent
to each of the affected Lenders;
(b) in the case of any partial prepayment of any Borrowing under the
General Revolving Facility, such partial prepayment shall be in an
aggregate principal of at least:
(i) $1,000,000 or an integral multiple of $100,000 in
excess thereof, in the case of a Prime Rate Borrowing, or
(ii) $5,000,000 or an integral multiple of $500,000 in
excess thereof, in the case of a Eurodollar Borrowing;
(c) in the case of any partial prepayment of any Borrowing under the
Swing Line Facility, such partial prepayment shall be in an aggregate
principal of at least $100,000 or an integral multiple of $50,000 in excess
thereof;
(d) no partial prepayment of any Loans made pursuant to a Borrowing
shall reduce the aggregate principal amount of such Loans outstanding
pursuant to such Borrowing to an amount less than the Minimum Borrowing
Amount applicable thereto;
(e) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied PRO RATA among such Loans; and
(f) each prepayment of Eurodollar Loans or Money Market Rate Loans
pursuant to this section 5.1 on any date other than the last day of the
Interest Period applicable thereto, in the case of Eurodollar Loans, or the
maturity date thereof, in the case of Money Market Rate Loans, shall be
accompanied by any amounts payable in respect thereof under section 2.9.
5.2. MANDATORY PREPAYMENTS. The Loans shall be subject to mandatory
prepayment in accordance with the following provisions:
(a) IF TOTAL GENERAL REVOLVING CREDIT EXPOSURE EXCEEDS TOTAL GENERAL
REVOLVING COMMITMENT. If on any date (after giving effect to any other
payments on such date) the Total General Revolving Credit Exposure on such
date exceeds the Total General Revolving Commitment as then in effect, the
Borrower shall prepay on such date that principal amount of Swing Line
Loans and after Swing Line Loans have been paid in full, General Revolving
Loans and, after General Revolving Loans have been paid in full, LC
Disbursements which remain unpaid, in an aggregate amount at least equal to
such excess and
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conforming in the case of partial prepayments of Loans to the requirements
as to the amounts of partial prepayments of Loans which are contained in
section 5.1. If, after giving effect to the prepayment of Swing line Loans,
General Revolving Loans and LC Disbursements which remain unpaid, the Total
LC Exposure exceeds the Total General Revolving Commitment as then in
effect, the Borrower shall pay to the Administrative Agent an amount in
cash and/or Cash Equivalents equal to such excess and the Administrative
Agent shall hold such payment as security for the reimbursement obligations
of the Borrower hereunder in respect of Letters of Credit pursuant to a
cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Administrative Agent and the Borrower (which
shall permit certain investments in Cash Equivalents satisfactory to the
Administrative Agent and the Borrower until the proceeds are applied to the
secured obligations).
(b) IF OUTSTANDING SWING LINE LOANS EXCEED UNUTILIZED TOTAL GENERAL
REVOLVING COMMITMENT. If on any date (after giving effect to any other
payments on such date) the aggregate outstanding principal amount of Swing
Line Loans exceeds the Unutilized Total General Revolving Commitment as
then in effect, the Borrower shall prepay on such date Swing Line Loans in
an aggregate amount at least equal to such excess and conforming in the
case of partial prepayments of Swing Line Loans to the requirements as to
the amounts of partial prepayments of Swing Line Loans which are contained
in section 5.1.
(c) IF OUTSTANDING SWING LINE LOANS EXCEED SWING LINE COMMITMENT. If
on any date (after giving effect to any other payments on such date) the
aggregate outstanding principal amount of Swing Line Loans exceeds the
Swing Line Commitment at such time, the Borrower shall prepay on such date
Swing Line Loans in an aggregate amount at least equal to such excess and
conforming in the case of partial prepayments of Swing Line Loans to the
requirements as to the amounts of partial prepayments of Swing Line Loans
which are contained in section 5.1.
(d) CHANGE OF CONTROL. On the date of which a Change of Control
occurs, notwithstanding anything to the contrary contained in this
Agreement, no further Borrowings shall be made, no Issuing Bank shall
issue, renew, or increase the Stated Amount of, any Letter of Credit, and
the then outstanding principal amount of all Loans, if any, then
outstanding shall become due and payable and shall be prepaid in full, and
the Borrower shall contemporaneously either (i) cause all outstanding
Letters of Credit to be surrendered for cancellation (any such Letters of
Credit to be replaced by letters of credit issued by other financial
institutions acceptable to the Required Lenders), or (ii) the Borrower
shall pay to the Administrative Agent an amount in cash and/or Cash
Equivalents equal to 100% of the Total LC Exposure and the Administrative
Agent shall hold such payment as security for the reimbursement obligations
of the Borrower hereunder in respect of the Total LC Exposure pursuant to a
cash collateral agreement to be entered into in form and substance
reasonably satisfactory to the Administrative Agent and the Borrower (which
shall permit certain investments in Cash Equivalents satisfactory to the
Administrative Agent and the Borrower until the proceeds are applied to the
secured obligations).
(e) PARTICULAR LOANS TO BE PREPAID. With respect to each repayment
or prepayment of Loans required by this section 5.2, the Borrower shall
designate the Types of Loans which are to be prepaid and the specific
Borrowing(s) pursuant to which such repayment or prepayment is to be made,
PROVIDED that (i) the Borrower shall first so designate all Loans that are
Prime Rate Loans and Eurodollar Loans with Interest Periods ending on the
date of repayment or prepayment prior to designating any other Eurodollar
Loans for repayment or prepayment, (ii) if the outstanding principal amount
of Eurodollar Loans made pursuant to a Borrowing is reduced below the
applicable Minimum Borrowing Amount as a result of any such repayment or
prepayment, then all the Loans outstanding pursuant to such Borrowing shall
be Converted into Prime Rate Loans, and (iii) each repayment and prepayment
of any Loans made pursuant to a Borrowing shall be applied PRO RATA among
such Loans. In the absence of a designation by the Borrower as described in
the preceding sentence, the Administrative Agent shall, subject to the
above, make such designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under section 2.9. Any
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repayment or prepayment of Eurodollar Loans or Money Market Rate Loans
pursuant to this section 5.2 shall in all events be accompanied by such
compensation as is required by section 2.9.
5.3. METHOD AND PLACE OF PAYMENT. Except as otherwise specifically provided
herein, all payments under this Agreement shall be made to the Administrative
Agent for the ratable (based on its PRO RATA share) account of the Lenders
entitled thereto, not later than 11:00 A.M. (local time at the Payment Office)
on the date when due and shall be made in immediately available funds and in
lawful money of the United States of America at the Payment Office, it being
understood that written notice by the Borrower to the Administrative Agent to
make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any payments under this Agreement which are made later than 11:00
A.M. (local time at the Payment Office) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.
5.4. NET PAYMENTS. (a) All payments made by the Borrower hereunder, under
any Note or any other Credit Document, will be made without setoff, counterclaim
or other defense. Except as provided for in section 5.4(b), all such payments
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by
any political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, except as provided in the second succeeding
sentence, any tax, imposed on or measured by the net income or net profits of a
Lender pursuant to the laws of the jurisdiction under which such Lender is
organized or the jurisdiction in which the principal office or Applicable
Lending Office of such Lender is located, or any subdivision thereof or therein)
and all interest, penalties or similar liabilities with respect to such non
excluded taxes, levies imposts, duties, fees, assessments or other charges (all
such nonexcluded taxes levies, imposts, duties, fees assessments or other
charges being referred to collectively as "TAXES"). If any Taxes are so levied
or imposed, the Borrower agrees to pay the full amount of such Taxes and such
additional amounts as may be necessary so that every payment by it of all
amounts due hereunder, under any Note or under any other Credit Document, after
withholding or deduction for or on account of any Taxes will not be less than
the amount provided for herein or in such Note or in such other Credit Document.
If any amounts are payable in respect of Taxes pursuant to the preceding
sentence, the Borrower agrees to reimburse each Lender, upon the written request
of such Lender for taxes imposed on or measured by the net income or profits of
such Lender pursuant to the laws of the jurisdiction in which such Lender is
organized or in which the principal office or Applicable Lending Office of such
Lender is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or Applicable
Lending Office of such Lender is located and for any withholding of income or
similar taxes imposed by the United States of America as such Lender shall
determine are payable by, or withheld from, such Lender in respect of such
amounts so paid to or on behalf of such Lender pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Lender
pursuant to this sentence, which request shall be accompanied by a statement
from such Lender setting forth, in reasonable detail, the computations used in
determining such amounts. The Borrower will furnish to the Administrative Agent
within 45 days after the date the payment of any Taxes, or any withholding or
deduction on account thereof, is due pursuant to applicable law certified copies
of tax receipts, or other evidence satisfactory to the Lender, evidencing such
payment by the Borrower. The Borrower will indemnify and hold harmless the
Administrative Agent and each Lender, and reimburse the Administrative Agent or
such Lender upon its written request, for the amount of any Taxes so levied r
imposed and paid or withheld by such Lender.
(b) Each Lender that is not a United States person (as such term is defined
in section 7701(a)(30) of the Code) for Federal income tax purposes agrees to
provide to the Borrower and the Administrative Agent on or prior to the
Effective Date, or in the cases of a Lender that is an assignee or transferee of
an interest under this Agreement pursuant to section 12.4 (unless the respective
Lender was already a Lender hereunder immediately prior to such assignment or
transfer and such Lender is in compliance with the provisions of this section
5.4(b)), on the date of such assignment or transfer to such Lender, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Lender's entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Agreement, any Note or any other
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Credit Document, or (ii) if the Lender is not a "bank" within the meaning of
section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit F (any such certificate, a "SECTION
5.4(b)(ii) CERTIFICATE") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Lender's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement, any
Note or any other Credit Document. In addition, each Lender agrees that from
time to time after the Effective Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to the Borrower and the Administrative Agent
two new accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001, or Form W-8 and a Section 5.4(b)(ii) Certificate, as the case
may be, and such other forms as may be required in order to confirm or establish
the entitlement of such Lender to a continued exemption from or reduction in
United States withholding tax with respect to payments under this Agreement, any
Note or any other Credit Document, or it shall immediately notify the Borrower
and the Administrative Agent of its inability to deliver any such Form or
Certificate, in which case such Lender shall not be required to deliver any such
Form or Certificate pursuant to this section 5.4(b). Notwithstanding anything to
the contrary contained in section 5.4(a), but subject to section 12.4(b) and the
immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or other
similar taxes imposed by the United States (or any political subdivision or
taxing authority thereof or therein) from interest, fees or other amounts
payable hereunder for the account of any Lender which is not a United States
person (as such term is defined in section 7701(a)(30) of the Code) for United
States federal income tax purposes and which has not provided to the Borrower
such forms that establish a complete exemption from such deduction or
withholding and (y) the Borrower shall not be obligated pursuant to section
5.4(a) hereof to gross-up payments to be made to a Lender in respect of income
or similar taxes imposed by the United States or any additional amounts with
respect thereto (I) if such Lender has not provided to the Borrower the Internal
Revenue Service forms required to be provided to the Borrower pursuant to this
section 5.4(b) or (II) in the case of a payment other than interest, to a Lender
described in clause (ii) above, to the extent that such forms do not establish a
complete exemption from withholding of such taxes. Notwithstanding anything to
the contrary contained in the preceding sentence or elsewhere in this section
5.4 and except as specifically provided for in section 12.4(b), the Borrower
agrees to pay additional amounts and indemnify each Lender in the manner set
forth in section 5.4(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any Taxes deducted or
withheld by it as described in the previous sentence as a result of any changes
after the Effective Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Taxes.
(c) If any Lender, in its sole opinion, determines that it has finally and
irrevocably received or been granted a refund in respect of any Taxes paid as to
which indemnification has been paid by the Borrower pursuant to this section, it
shall promptly remit such refund (including any interest received in respect
thereof), net of all out-of-pocket costs and expenses; PROVIDED, that the
Borrower agrees to promptly return any such refund (plus interest, if previously
paid to the Borrower with the refund) to such Lender in the event such Lender is
required to repay such refund to the relevant taxing authority. Any such Lender
shall provide the Borrower with a copy of any notice of assessment from the
relevant taxing authority (redacting any unrelated confidential information
contained therein) requiring repayment of such refund. Nothing contained herein
shall impose an obligation on any Lender to apply for any such refund.
(d) Reference is hereby made to the provisions of section 2.8(d) for
certain limitations upon the rights of a Lender under this section.
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SECTION 6. CONDITIONS PRECEDENT.
6.1. CONDITIONS PRECEDENT AT CLOSING DATE. The obligation of the Lenders to
make Loans, and of any Issuing Bank to issue Letters of Credit, is subject to
the satisfaction of each of the following conditions on the Closing Date:
(a) EFFECTIVENESS; NOTES. On or prior to the Closing Date, (i) the
Effective Date shall have occurred and (ii) there shall have been delivered
to the Administrative Agent for the account of each Lender the appropriate
Note or Notes executed by the Borrower, in each case, in the amount,
maturity and as otherwise provided herein.
(b) FEES, ETC. The Borrower shall have paid or caused to be paid all
fees required to be paid by it on or prior to such date pursuant to section
4.1 hereof and all reasonable fees and expenses of the Administrative Agent
and of special counsel to the Administrative Agent which have been invoiced
on or prior to such date in connection with the preparation, execution and
delivery of this Agreement and the other Credit Documents and the
consummation of the transactions contemplated hereby and thereby.
(c) OTHER CREDIT DOCUMENTS. The Credit Parties named therein shall
have duly executed and delivered and there shall be in full force and
effect, and original counterparts shall have been delivered to the
Administrative Agent, in sufficient quantities for the Administrative Agent
and the Lenders, of, the Subsidiary Guaranty (as modified, amended or
supplemented from time to time in accordance with the terms thereof and
hereof, the "SUBSIDIARY GUARANTY"), substantially in the form attached
hereto as Exhibit C.
(d) CORPORATE RESOLUTIONS AND APPROVALS. The Administrative Agent
shall have received, in sufficient quantity for the Administrative Agent
and the Lenders, certified copies of the resolutions of the Board of
Directors of the Borrower and each other Credit Party, approving the Credit
Documents to which the Borrower or any such other Credit Party, as the case
may be, is or may become a party, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect
to the execution, delivery and performance by the Borrower or any such
other Credit Party of the Credit Documents to which it is or may become a
party.
(e) INCUMBENCY CERTIFICATES. The Administrative Agent shall have
received, in sufficient quantity for the Administrative Agent and the
Lenders, a certificate of the Secretary or an Assistant Secretary of the
Borrower and of each other Credit Party, certifying the names and true
signatures of the officers of the Borrower or such other Credit Party, as
the case may be, authorized to sign the Credit Documents to which the
Borrower or such other Credit Party is a party and any other documents to
which the Borrower or any such other Credit Party is a party which may be
executed and delivered in connection herewith.
(f) OPINION OF COUNSEL. On the Closing Date, the Administrative
Agent shall have received an opinion, addressed to the Administrative Agent
and each of the Lenders and dated the Closing Date, from Thompson, Hine &
Flory LLP, special counsel to the Borrower, substantially in the form of
Exhibit D hereto and covering such other matters incident to the
transactions contemplated hereby as the Administrative Agent may reasonably
request, such opinion to be in form and substance satisfactory to the
Administrative Agent.
(g) EXISTING CREDIT FACILITY. Contemporaneously with the Closing
Date, the Borrower shall have terminated its existing credit agreement,
dated as of September 30, 1994, as amended, and prepaid any borrowings
thereunder.
(h) SUBORDINATED NOTE OFFERING COMPLETED. On or prior to the Closing
Date, the Borrower shall have completed the offering of at least
$125,000,000 aggregate principal amount of its subordinated notes (the
"SUBORDINATED NOTES"), with subordination provisions, financial and other
covenants, redemption provisions, a maturity of not less than 7 years, and
guarantees (on a senior subordinated basis) by Subsidiaries of the
Borrower, consistent with the description of the terms of such subordinated
notes which
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is included in the Offering Memorandum dated April 14, 1999 (Subject to
Completion), previously delivered to the Lenders (with such modifications
as shall be reasonably acceptable to the Administrative Agent, exclusive of
matters related to interest rate, offering price and redemption prices).
The indenture relating to the Subordinated Notes, including any indenture
relating to a registered Exchange Offer (as described in such Offering
Memorandum) for the Subordinated Notes, is herein referred to as the
"SUBORDINATED NOTE INDENTURE".
(i) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
and all documents incidental to the transactions contemplated hereby shall
be satisfactory in substance and form to the Administrative Agent and the
Lenders and the Administrative Agent and its special counsel and the
Lenders shall have received all such counterpart originals or certified or
other copies of such documents as the Administrative Agent or its special
counsel or any Lender may reasonably request.
6.2. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The obligations of the
Lenders to make each Loan and/or of an Issuing Bank to issue each Letter of
Credit is subject, at the time thereof, to the satisfaction of the following
conditions:
(a) NOTICE OF BORROWING, ETC. The Administrative Agent shall have
received a Notice of Borrowing meeting the requirements of section 2.2 with
respect to the incurrence of Loans, or a Letter of Credit Request meeting
the requirement of section 3.2 with respect to the issuance of a Letter of
Credit, as applicable.
(b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of each
Credit Event and also after giving effect thereto, (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties of
the Credit Parties contained herein or in the other Credit Documents shall
be true and correct in all material respects with the same effect as though
such representations and warranties had been made on and as of the date of
such Credit Event, except to the extent that such representations and
warranties expressly relate to an earlier specified date, in which case
such representations and warranties shall have been true and correct in all
material respects as of the date when made.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to each of the Lenders that all of
the applicable conditions specified in section 6.1 and/or 6.2, as the case may
be, exist as of that time. All of the certificates, legal opinions and other
documents and papers referred to in this section 6, unless otherwise specified,
shall be delivered to the Administrative Agent for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts for each of the
Lenders, and the Administrative Agent will promptly distribute to the Lenders
their respective Notes and the copies of such other certificates, legal opinions
and documents.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Agreement and to make the
Loans, and/or to issue and/or to participate in the Letters of Credit provided
for herein, the Borrower makes the following representations and warranties to,
and agreements with, the Lenders, all of which shall survive the execution and
delivery of this Agreement and each Credit Event:
7.1. CORPORATE STATUS, ETC. Each of the Borrower and its Subsidiaries (i)
is a duly organized or formed and validly existing corporation, partnership or
limited liability company, as the case may be, in good standing under the laws
of the jurisdiction of its formation and has the corporate, partnership or
limited liability company power and authority, as applicable, to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage, and (ii) has duly qualified and is authorized to
do business in all jurisdictions where it is required to be so qualified except
where the failure to be so qualified would not have a Material Adverse Effect.
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7.2. SUBSIDIARIES. Annex II hereto lists, as of the date hereof, each
Subsidiary of the Borrower (and the direct and indirect ownership interest of
the Borrower therein).
7.3. CORPORATE POWER AND AUTHORITY, ETC. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is party and has taken all
necessary corporate or other organizational action to authorize the execution,
delivery and performance of the Credit Documents to which it is party. Each
Credit Party has duly executed and delivered each Credit Document to which it is
party and each Credit Document to which it is party constitutes the legal, valid
and binding agreement or obligation of such Credit Party enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).
7.4. NO VIOLATION. Neither the execution, delivery and performance by any
Credit Party of the Credit Documents to which it is party nor compliance with
the terms and provisions thereof (i) will contravene any provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality applicable to such Credit Party or its properties
and assets, (ii) will conflict with or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any Lien upon any of the property or assets of such Credit Party pursuant to the
terms of any promissory note, bond, debenture, indenture, mortgage, deed of
trust, credit or loan agreement, or any other material agreement or other
instrument, to which such Credit Party is a party or by which it or any of its
property or assets are bound or affected, or (iii) will violate any provision of
the certificate or articles of incorporation, code of regulations or by-laws, or
other charter documents of such Credit Party.
7.5. GOVERNMENTAL APPROVALS. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any Governmental Authority, is required to authorize or is
required as a condition to (i) the execution, delivery and performance by any
Credit Party of any Credit Document to which it is a party, or (ii) the
legality, validity, binding effect or enforceability of any Credit Document to
which any Credit Party is a party.
7.6. LITIGATION. There are no actions, suits or proceedings pending or, to,
the knowledge of the Borrower, threatened with respect to the Borrower or any of
its Subsidiaries (i) that have, or could reasonably be expected to have, a
Material Adverse Effect, or (ii) which question the validity or enforceability
of any of the Credit Documents, or of any action to be taken by any Credit Party
pursuant to any of the Credit Documents to which it is a party.
7.7. USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of all Loans
shall be utilized (i) to retire the Indebtedness referred to in sections 6.1(g),
(ii) to finance Acquisitions permitted hereunder, and (iii) for other lawful
purposes not inconsistent with the requirements of this Agreement.
(b) No part of the proceeds of any Credit Event will be used directly or
indirectly to purchase or carry Margin Stock, or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock. Neither any Credit
Event, nor the use of the proceeds thereof, will violate or be inconsistent with
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System. The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying any Margin Stock. At no time would
more than 25% of the value of the assets of the Borrower or of the Borrower and
its consolidated Subsidiaries that are subject to any "arrangement" (as such
term is used in section 221.2(g) of such Regulation U) hereunder be represented
by Margin Stock.
7.8. FINANCIAL STATEMENTS, ETC. (a) The Borrower has furnished to the
Lenders and the Administrative Agent complete and correct copies of the audited
consolidated balance sheets of the Borrower and its consolidated subsidiaries as
of the end of its fiscal years ended on or nearest to January 31, 1999 and
January 31, 1998, and the related audited consolidated statements of income,
stockholders' equity, and cash flows for the fiscal years then ended,
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accompanied by the unqualified report thereon of the Borrower's independent
accountants. All such financial statements have been prepared in accordance with
GAAP, consistently applied (except as stated therein), and fairly present the
financial position of the Borrower and its consolidated subsidiaries as of the
respective dates indicated and the consolidated results of their operations and
cash flows for the respective periods indicated.
(b) The Borrower has received consideration which is the reasonable
equivalent value of the obligations and liabilities that the Borrower has
incurred to the Administrative Agent and the Lenders. The Borrower now has
capital sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage and is now solvent and able to
pay its debts as they mature and the Borrower, as of the Closing Date, owns
property having a value, both at fair valuation and at present fair salable
value, greater than the amount required to pay the Borrower's debts; and the
Borrower is not entering into the Credit Documents with the intent to hinder,
delay or defraud its creditors.
(c) The Borrower has delivered or caused to be delivered to the Lenders
prior to the execution and delivery of this Agreement (i) a copy of the
Borrower's Report on Form 10-K as filed (without Exhibits) with the SEC for its
fiscal year ended on or nearest to January 31, 1998, and any Amendment thereto
filed with the SEC prior to such execution and delivery (as so amended, the
"1998 FORM 10-K"), which Form 10-K contains a general description of the
business and affairs of the Borrower and its Subsidiaries, and (ii) financial
projections prepared by management of the Borrower for the Borrower and its
Subsidiaries for the fiscal years 2000-2004 (the "FINANCIAL PROJECTIONS"). The
Financial Projections were prepared on behalf of the Borrower in good faith
after taking into account the existing and historical levels of business
activity of the Borrower and its Subsidiaries, known trends, including general
economic trends, and all other information, assumptions and estimates considered
by management of the Borrower and its Subsidiaries to be pertinent thereto. The
Financial Projections were considered by management of the Borrower, as of such
date of preparation, to be realistically achievable; PROVIDED, that no
representation or warranty, express or implied, is made as to the impact of
future general economic conditions or as to whether the Borrower's projected
consolidated results as set forth in the Financial Projections will actually be
realized. No facts are known to the Borrower at the date hereof which, if
reflected in the Financial Projections, would result in a material adverse
change in the assets, liabilities, results of operations or cash flows reflected
therein.
7.9. NO MATERIAL ADVERSE CHANGE. Since January 31, 1998, there has been no
change in the condition, business or affairs of the Borrower and its
Subsidiaries taken as a whole, or their properties and assets considered as an
entirety, except for changes, none of which, individually or in the aggregate,
has had or could reasonably be expected to have, a Material Adverse Effect.
7.10. TAX RETURNS AND PAYMENTS. Each of the Borrower and each of its
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, other than
those not yet delinquent and except for those contested in good faith. The
Borrower and each of its Subsidiaries has established on its books such charges,
accruals and reserves in respect of taxes, assessments, fees and other
governmental charges for all fiscal periods as are required by GAAP. The
Borrower knows of no proposed assessment for additional federal, foreign or
state taxes for any period, or of any basis therefor, which, individually or in
the aggregate, taking into account such charges, accruals and reserves in
respect thereof as the Borrower and its Subsidiaries have made, could reasonably
be expected to have a Material Adverse Effect.
7.11. TITLE TO PROPERTIES, ETC. The Borrower and each of its Subsidiaries
has good and marketable title, in the case of real property, and good title (or
valid Leaseholds, in the case of any leased property), in the case of all other
property, to all of its properties and assets free and clear of Liens other than
Liens permitted by section 9.3. The interests of the Borrower and each of its
Subsidiaries in the properties reflected in the most recent balance sheet
referred to in section 7.8, taken as a whole, were sufficient, in the judgment
of the Borrower, as of the date of such balance sheet for purposes of the
ownership and operation of the businesses conducted by the Borrower and such
Subsidiaries.
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7.12. LAWFUL OPERATIONS, ETC. The Borrower and each of its Subsidiaries (i)
holds all necessary federal, state and local governmental licenses,
registrations, certifications, permits and authorizations necessary to conduct
its business, including, without limitation, those required under Environmental
Laws, and (ii) is in full compliance with all material requirements imposed by
law, regulation or rule, whether federal, state or local, which are applicable
to it, its operations, or its properties and assets, including without
limitation, applicable requirements of Environmental Laws, EXCEPT in any case
referred to in the foregoing clause (i) or (ii) for any failure to obtain and
maintain in effect, or noncompliance, which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
7.13. ENVIRONMENTAL MATTERS. Except with respect to any matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i)
has become subject to any Environmental Liability, (ii) has received any written
notice or claim with respect to any Environmental Liability, or (iii) knows of
any basis for any Environmental Liability.
7.14. COMPLIANCE WITH ERISA. Compliance by the Borrower with the provisions
hereof and Credit Events contemplated hereby will not involve any prohibited
transaction within the meaning of ERISA or section 4975 of the Code. The
Borrower and each of its Subsidiaries, (i) has fulfilled all obligations under
minimum funding standards of ERISA and the Code with respect to each Plan that
is not a Multiemployer Plan or a Multiple Employer Plan, (ii) has satisfied all
respective contribution obligations in respect of each Multiemployer Plan and
each Multiple Employer Plan, (iii) is in compliance in all material respects
with all other applicable provisions of ERISA and the Code with respect to each
Plan, each Multiemployer Plan and each Multiple Employer Plan, and (iv) has not
incurred any liability under the Title IV of ERISA to the PBGC with respect to
any Plan, any Multiemployer Plan, any Multiple Employer Plan, or any trust
established thereunder. No Plan or trust created thereunder has been terminated,
and there have been no Reportable Events, with respect to any Plan or trust
created thereunder or with respect to any Multiemployer Plan or Multiple
Employer Plan, which termination or Reportable Event will or could result in the
termination of such Plan, Multiemployer Plan or Multiple Employer Plan and give
rise to a material liability of the Borrower or any ERISA Affiliate in respect
thereof. Neither the Borrower nor any ERISA Affiliate is at the date hereof, or
has been at any time within the two years preceding the date hereof, an employer
required to contribute to any Multiemployer Plan or Multiple Employer Plan, or a
"contributing sponsor" (as such term is defined in section 4001 of ERISA) in any
Multiemployer Plan or Multiple Employer Plan. Neither the Borrower nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA) except as has been
disclosed to the Lenders in writing.
7.15. INTELLECTUAL PROPERTY, ETC. The Borrower and each of its Subsidiaries
has obtained or has the right to use all material patents, trademarks,
servicemarks, trade names, copyrights, licenses and other rights with respect to
the foregoing necessary for the present and planned future conduct of its
business, without any known conflict with the rights of others, EXCEPT for such
patents, trademarks, servicemarks, trade names, copyrights, licenses and rights,
the loss of which, and such conflicts, which in any such case individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
7.16. INVESTMENT COMPANY ACT, ETC. Neither the Borrower nor any of its
Subsidiaries is subject to regulation with respect to the creation or incurrence
of Indebtedness under the Investment Company Act of 1940, as amended, the
Interstate Commerce Act, as amended, the Federal Power Act, as amended, the
Public Utility Holding Company Act of 1935, as amended, or any applicable state
public utility law.
7.17. LABOR RELATIONS. Neither the Borrower nor any of its Subsidiaries (i)
is a party to any labor dispute affecting any bargaining unit or other group of
employees generally, (ii) is subject to any material strike, slow down, workout
or other concerted interruptions of operations by employees of the Borrower or
any Subsidiary, whether or not relating to any labor contracts, (iii) is subject
to any significant pending or, to the knowledge of the Borrower, threatened,
unfair labor practice complaint, before the National Labor Relations Board, and
(iv) is subject to any significant pending or, to the knowledge of the Borrower,
threatened, grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement, (v) is subject to any significant
pending or, to the knowledge of the Borrower, threatened, significant strike,
labor dispute, slowdown or stoppage, or (vi) is, to the
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knowledge of the Borrower, involved or subject to any union representation
organizing or certification matter with respect to the employees of the Borrower
or any of its Subsidiaries, EXCEPT (with respect to any matter specified in any
of the above clauses), for such matters as, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
7.18. EXISTING INDEBTEDNESS. Annex III sets forth a true and complete list,
as of the date or dates set forth therein, of all Indebtedness of the Borrower
and each of its Subsidiaries, on a consolidated basis, which (i) has an
outstanding principal amount of at least $2,000,000, or may be incurred pursuant
to existing commitments or lines of credit, or (ii) which has an outstanding
principal amount of at least $100,000 and is secured by any Lien on any property
of the Borrower or any Subsidiary, and which will be outstanding on the Closing
Date after giving effect to the initial Borrowing hereunder, other than the
Indebtedness created under the Credit Documents (all such Indebtedness, whether
or not in a principal amount meeting such threshold and required to be so listed
on Annex III, herein the "EXISTING INDEBTEDNESS"). The Borrower has provided to
the Administrative Agent prior to the date of execution hereof true and complete
copies (or summary descriptions) of all agreements and instruments governing the
Indebtedness listed on Annex III (the "EXISTING INDEBTEDNESS AGREEMENTS").
7.19. YEAR 2000 COMPUTER MATTERS. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrower's and
its Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
Borrower's or any of its Subsidiary's systems interface) and the testing of all
such systems and equipment, as so reprogrammed, will be completed by December 1,
1999. The cost to the Borrower and its Subsidiaries of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower and its Subsidiaries (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in an
Event of Default or a Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Borrower and its Subsidiaries
are and, with ordinary course upgrading and maintenance, will continue to be,
sufficient to permit the Borrower and its Subsidiaries to conduct theirs
business without Material Adverse Effect.
7.20. TRUE AND COMPLETE DISCLOSURE. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Borrower
or any of its Subsidiaries in writing to the Administrative Agent or any Lender
for purposes of or in connection with this Agreement or any transaction
contemplated herein, other than the Financial Projections (as to which
representations are made only as provided in section 7.8), is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of such person in writing to any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided, except that any such
future information consisting of financial projections prepared by management of
the Borrower is only represented herein as being based on good faith estimates
and assumptions believed by such persons to be reasonable at the time made. The
Lenders recognize 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 materially from the projected results. As of the
Effective Date, there is no fact known to the Borrower or any of its
Subsidiaries which has, or could reasonably be expected to have, a Material
Adverse Effect which has not theretofore been disclosed in writing to the
Lenders.
SECTION 8. AFFIRMATIVE COVENANTS.
The Borrower hereby covenants and agrees that on the Effective Date and
thereafter for so long as this Agreement is in effect and until such time as the
Total Commitment has been terminated, no Loans or Letters of Credit remain
outstanding and all interest, Fees and all other Obligations incurred hereunder
are paid in full:
8.1. REPORTING REQUIREMENTS. The Borrower will furnish to each Lender and
the Administrative Agent:
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(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within 90 days after the close of each fiscal year of the Borrower,
the consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such fiscal year and the related consolidated
statements of income, of stockholder's equity and of cash flows for such
fiscal year, in each case setting forth comparative figures for the
preceding fiscal year, all in reasonable detail and accompanied by the
opinion with respect to such consolidated financial statements of
independent public accountants of recognized national standing selected by
the Borrower, which opinion shall be unqualified and shall (i) state that
such accountants audited such consolidated financial statements in
accordance with generally accepted auditing standards, that such
accountants believe that such audit provides a reasonable basis for their
opinion, and that in their opinion such consolidated financial statements
present fairly, in all material respects, the consolidated financial
position of the Borrower and its consolidated subsidiaries as at the end of
such fiscal year and the consolidated results of their operations and cash
flows for such fiscal year in conformity with generally accepted accounting
principles, or (ii) contain such statements as are customarily included in
unqualified reports of independent accountants in conformity with the
recommendations and requirements of the American Institute of Certified
Public Accountants (or any successor organization).
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
event within 45 days after the close of each of the quarterly accounting
periods in each fiscal year of the Borrower, the unaudited condensed
consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such quarterly period and the related
unaudited condensed consolidated statements of income and of cash flows for
such quarterly period, and setting forth, in the case of such unaudited
consolidated statements of income and of cash flows, comparative figures
for the related periods in the prior fiscal year, and which consolidated
financial statements shall be certified on behalf of the Borrower by the
Chief Financial Officer or other Authorized Officer of the Borrower,
subject to changes resulting from normal year-end audit adjustments.
(c) OFFICER'S COMPLIANCE CERTIFICATES. At the time of the delivery
of the financial statements provided for in sections 8.1(a) and (b), a
certificate on behalf of the Borrower of the Chief Financial Officer or
other Authorized Officer of the Borrower to the effect that, to the best
knowledge of the Borrower, no Default or Event of Default exists or, if any
Default or Event of Default does exist, specifying the nature and extent
thereof, which certificate shall set forth the calculations required to
establish compliance with the provisions of sections 9.6 through 9.10,
inclusive of this Agreement, including an identification of the amounts of
any financial items of persons or business units acquired by the Borrower
for any periods prior to the date of acquisition which are used in making
such calculations.
(d) ANNUAL BUDGETS AND FORECASTS. Not later than 30 days prior to
the commencement of any fiscal year of the Borrower and its Subsidiaries, a
consolidated budget in reasonable detail for each of fiscal quarter in such
fiscal year, and (if and to the extent prepared by management of the
Borrower) for any subsequent fiscal years, as customarily prepared by
management for its internal use, setting forth, with appropriate
discussion, the forecasted balance sheet, income statement, operating cash
flows and Consolidated Capital Expenditures of the Borrower and its
Subsidiaries for the period covered thereby, and the principal assumptions
upon which forecasts and budget are based.
(e) NOTICE OF DEFAULT, LITIGATION OR ADVERSE CHANGE IN RELATIONSHIP
WITH SUPPLIERS. Promptly, and in any event within three Business Days, in
the case of clause (i) below, or five Business Days, in the case of clause
(ii) or (iii) below, after the Borrower or any of its Subsidiaries obtains
knowledge thereof, notice of
(i) the occurrence of any event which constitutes a Default
or Event of Default, which notice shall specify the nature thereof,
the period of existence thereof and what action the Borrower
proposes to take with respect thereto,
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(ii) any litigation or governmental or regulatory
investigation or proceeding pending against or involving the
Borrower or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect, and
(iii) any significant adverse change (in the Borrower's
reasonable judgment) in the Borrower's or any Subsidiary's
relationship with, or any significant event or circumstance which is
in the Borrower's reasonable judgment likely to adversely affect the
Borrower's or any Subsidiary's relationship with, any supplier which
is material to the operations of the Borrower and its Subsidiaries
considered as an entirety.
(f) ERISA. Promptly, and in any event within 10 days after the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows of
the occurrence of any of the following, the Borrower will deliver to each
of the Lenders a certificate on behalf of the Borrower of an Authorized
Officer of the Borrower setting forth the full details as to such
occurrence and the action, if any, that the Borrower, such Subsidiary or
such ERISA Affiliate is required or proposes to take, together with any
notices required or proposed to be given to or filed with or by the
Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant
or the Plan administrator with respect thereto:
(i) that a Reportable Event has occurred with respect to
any Plan;
(ii) the institution of any steps by the Borrower, any ERISA
Affiliate, the PBGC or any other person to terminate any Plan;
(iii) the institution of any steps by the Borrower or any
Subsidiary to withdraw from any Multiemployer Plan or Multiple
Employer Plan, if such withdrawal could result in withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of
ERISA) in excess of $1,000,000;
(iv) the institution of any steps by the Borrower or any
ERISA Affiliate to withdraw from any Plan, if such withdrawal could
result in withdrawal liability in excess of $1,000,000;
(v) a non-exempt "prohibited transaction" within the
meaning of section 406 of ERISA in connection with any Plan;
(vi) that a Plan has an Unfunded Current Liability exceeding
$3,000,000;
(vii) any material increase in the contingent liability of
the Borrower or any Subsidiary with respect to any post-retirement
welfare liability; or
(viii) the taking of any action by, or the threatening of
the taking of any action by, the Internal Revenue Service, the
Department of Labor or the PBGC with respect to any of the
foregoing.
(g) ENVIRONMENTAL MATTERS. Promptly upon, and in any event within 10
Business Days after, an officer of the Borrower obtains actual knowledge
thereof, notice of any of the following environmental matters which
involves any reasonable likelihood (in the Borrower's reasonable judgment)
of resulting in a Material Adverse Effect: (i) any pending or threatened
(in writing) claim that the Borrower or any of its Subsidiaries or any Real
Property owned or operated by the Borrower or any of its Subsidiaries has
any Environmental Liability; (ii) any condition or occurrence on or arising
from any Real Property owned or operated by the Borrower or any of its
Subsidiaries that (A) results in noncompliance by the Borrower or any of
its Subsidiaries with any applicable Environmental Law or (B) would
reasonably be expected to form the basis of a claim that the Borrower or
any of its Subsidiaries or any such Real Property has any Environmental
Liability; (iii) any condition or occurrence on any Real Property owned,
leased or operated by the Borrower or any of its Subsidiaries that could
reasonably be expected to cause such Real Property to be subject to any
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restrictions on the ownership, occupancy, use or transferability by the
Borrower or any of its Subsidiaries of such Real Property under any
Environmental Law; and (iv) the taking of any removal or remedial action in
response to the actual or alleged presence of any Hazardous Material on any
Real Property owned, leased or operated by the Borrower or any of its
Subsidiaries as required by any Environmental Law or any governmental or
other administrative agency. All such notices shall describe in reasonable
detail the nature of the Environmental Claim and the Borrower's or such
Subsidiary's response thereto.
(h) SEC REPORTS AND REGISTRATION STATEMENTS. Promptly upon
transmission thereof or other filing with the SEC, copies of all
registration statements (other than the exhibits thereto and any
registration statement on Form S-8 or its equivalent) and annual, quarterly
or current reports that the Borrower or any of its Subsidiaries files with
the SEC on Forms 10-K, 10-Q or 8-K (or any successor forms).
(i) ANNUAL AND QUARTERLY REPORTS, PROXY STATEMENTS AND OTHER REPORTS
DELIVERED TO STOCKHOLDERS GENERALLY. Promptly after transmission thereof to
its stockholders, copies of all annual, quarterly and other reports and all
proxy statements that the Borrower furnishes to its stockholders generally.
(j) AUDITORS' INTERNAL CONTROL COMMENT LETTERS, ETC. Promptly upon
receipt thereof, a copy of each letter or memorandum commenting on internal
accounting controls and/or accounting or financial reporting policies
followed by the Borrower and/or any of its Subsidiaries, which is submitted
to the Borrower by its independent accountants in connection with any
annual or interim audit made by them of the books of the Borrower or any of
its Subsidiaries.
(k) PRESS RELEASES. Promptly after the release thereof to any news
organization or news distribution organization, copies of any press
releases and other similar statements intended to be made available
generally by the Borrower or any of its Subsidiaries to the public
concerning material developments relating to the Borrower or any of its
Subsidiaries.
(l) OTHER INFORMATION. With reasonable promptness, such other
information or documents (financial or otherwise) relating to the Borrower
or any of its Subsidiaries as any Lender may reasonably request from time
to time.
8.2. BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and will cause each
of its Subsidiaries to, (i) keep proper books of record and account, in which
full and correct entries shall be made of all financial transactions and the
assets and business of the Borrower or such Subsidiaries, as the case may be, in
accordance with GAAP, in the case of the Borrower, or which are reconcilable to
a GAAP presentation, in the case of any Subsidiary; and (ii) permit, upon at
least two Business Days' notice to the Chief Financial Officer or any other
Authorized Officer of the Borrower, officers and designated representatives of
the Administrative Agent or any of the Lenders to visit and inspect any of the
properties or assets of the Borrower and any of its Subsidiaries in whomsoever's
possession (but only to the extent the Borrower or such Subsidiary has the right
to do so to the extent in the possession of another person), and to examine (and
make copies of or take extracts from) the books of account of the Borrower and
any of its Subsidiaries and discuss the affairs, finances and accounts of the
Borrower and of any of its Subsidiaries with, and be advised as to the same by,
its and their officers and independent accountants and independent actuaries, if
any, all at such reasonable times and intervals and to such reasonable extent as
the Administrative Agent or any of the Lenders may request.
8.3. INSURANCE. The Borrower will, and will cause each of its Subsidiaries
to, (i) maintain insurance coverage by such insurers and in such forms and
amounts and against such risks as are generally consistent with the insurance
coverage maintained by the Borrower and its Subsidiaries at the date hereof, and
(ii) forthwith upon any Lender's written request, furnish to such Lender such
information about such insurance as such Lender may from time to time reasonably
request, which information shall be prepared in form and detail satisfactory to
such Lender and certified by an Authorized Officer of the Borrower.
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8.4. PAYMENT OF TAXES AND CLAIMS. The Borrower will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien or charge upon any properties of the Borrower or any of its Subsidiaries;
PROVIDED that neither the Borrower nor any of its Subsidiaries shall be required
to pay any such tax, assessment, charge, levy or claim which is being contested
in good faith and by proper proceedings if it has maintained adequate reserves
with respect thereto in accordance with GAAP; and PROVIDED, FURTHER, that the
Borrower will not be considered to be in default of any of the provisions of
this sentence if the Borrower or any Subsidiary fails to pay any such amount
which, individually or in the aggregate, is immaterial to the Borrower and its
Subsidiaries considered as an entirety.
8.5. CORPORATE FRANCHISES. The Borrower will do, and will cause each of its
Subsidiaries to do, or cause to be done, all things necessary to preserve and
keep in full force and effect its corporate or other organizational existence,
rights, authority and franchises, PROVIDED that nothing in this section 8.5
shall be deemed to prohibit (i) any transaction permitted by section 9.2; (ii)
the termination of existence of any Subsidiary if (A) the Borrower determines
that such termination is in its best interest and (B) such termination is not
adverse in any material respect to the Lenders; or (iii) the loss of any rights,
authorities or franchises if the loss thereof, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
8.6. GOOD REPAIR. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept in good
repair, working order and condition, normal wear and tear excepted, and that
from time to time there are made in such properties and equipment all needful
and proper repairs, renewals, replacements, extensions, additions, betterments
and improvements, thereto, to the extent and in the manner customary for
companies in similar businesses.
8.7. COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will cause each
of its Subsidiaries to, comply, in all material respects, with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, other than those (i) being contested
in good faith by appropriate proceedings, as to which adequate reserves are
established to the extent required under GAAP, and (ii) the noncompliance with
which would not have, and which would not be reasonably expected to have, a
Material Adverse Effect.
8.8. COMPLIANCE WITH ENVIRONMENTAL LAWS. Without limitation of the
covenants contained in section 8.7 hereof:
(a) The Borrower will, and will cause each of its Subsidiaries to,
(i) comply, in all material respects, with all Environmental Laws
applicable to the ownership, lease or use of all Real Property now or
hereafter owned, leased or operated by the Borrower or any of its
Subsidiaries, and promptly pay or cause to be paid all costs and expenses
incurred in connection with such compliance, except for such noncompliance
as would not have, and which would not be reasonably expected to have, a
Material Adverse Effect; and (ii) keep or cause to be kept all such Real
Property free and clear of any Liens imposed pursuant to such Environmental
Laws which are not permitted under section 9.3.
(b) Without limitation of the foregoing, if the Borrower or any of
its Subsidiaries shall generate, use, treat, store, release or dispose of,
or permit the generation, use, treatment, storage, release or disposal of,
Hazardous Materials on any Real Property now or hereafter owned, leased or
operated by the Borrower or any of its Subsidiaries, or transport or permit
the transportation of Hazardous Materials to or from any such Real
Property, any such action shall be effected only in the ordinary course of
business and in any event in compliance, in all material respects, with all
Environmental Laws applicable thereto, except for such noncompliance as
would not have, and which would not be reasonably expected to have, a
Material Adverse Effect.
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(c) If required to do so under any applicable order of any
governmental agency, the Borrower will undertake, and cause each of its
Subsidiaries to undertake, any clean up, removal, remedial or other action
necessary to remove and clean up any Hazardous Materials from any Real
Property owned, leased or operated by the Borrower or any of its
Subsidiaries in accordance with, in all material respects, the requirements
of all applicable Environmental Laws and in accordance with, in all
material respects, such orders of all governmental authorities, except (i)
to the extent that the Borrower or such Subsidiary is contesting such order
in good faith and by appropriate proceedings and for which adequate
reserves have been established to the extent required by GAAP, or (ii) for
such noncompliance as would not have, and which would not be reasonably
expected to have, a Material Adverse Effect.
8.9. FISCAL YEARS, FISCAL QUARTERS. The Borrower will, for consolidated
financial reporting purposes, continue to use its current methodology for
determining its fiscal year and fiscal quarters. If the Borrower shall change
any of its Subsidiaries' fiscal years or fiscal quarters (other than the fiscal
year or fiscal quarters of a person which becomes a Subsidiary, made at the time
such person becomes a Subsidiary, to conform to the Borrower's fiscal year and
fiscal quarters or to conform to the fiscal year or fiscal quarters which the
Borrower generally utilizes for its Subsidiaries), the Borrower will promptly,
and in any event within 30 days following any such change, deliver a notice to
the Administrative Agent and the Lenders describing such change and any material
accounting entries made in connection therewith and stating whether such change
will have any impact upon any financial computations to be made hereunder, and
if any such impact is foreseen, describing in reasonable detail the nature and
extent of such impact. If the Required Lenders determine that any such change
will have any impact upon any financial computations to be made hereunder which
is adverse to the Lenders, the Borrower will, if so requested by the
Administrative Agent, enter into an amendment to this Agreement, in form and
substance satisfactory to the Administrative Agent and the Required Lenders,
modifying any of the financial covenants or related provisions hereof in such
manner as the Required Lenders determine is necessary to eliminate such adverse
effect.
8.10. CERTAIN SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY. (a) In the
event that at any time after the Effective Date
(x) the Borrower has any Subsidiary (other than a Foreign Subsidiary
as to which section 8.10(b) applies) which is not a party to the Subsidiary
Guaranty, or
(y) an Event of Default shall have occurred and be continuing and
the Borrower has any Subsidiary which is not a party to the Subsidiary
Guaranty,
the Borrower will notify the Administrative Agent in writing of such event,
identifying the Subsidiary in question and referring specifically to the rights
of the Administrative Agent and the Lenders under this section. The Borrower
will, within 15 days following request therefor from the Administrative Agent
(who may give such request on its own initiative or upon request by the Required
Lenders), cause such Subsidiary to deliver to the Administrative Agent, in
sufficient quantities for the Lenders, (i) a joinder supplement, satisfactory in
form and substance to the Administrative Agent and the Required Lenders, duly
executed by such Subsidiary, pursuant to which such Subsidiary joins in the
Subsidiary Guaranty as a guarantor thereunder, and (ii) if such Subsidiary is a
corporation, resolutions of the Board of Directors of such Subsidiary, certified
by the Secretary or an Assistant Secretary of such Subsidiary as duly adopted
and in full force and effect, authorizing the execution and delivery of such
joinder supplement, or if such Subsidiary is not a corporation, such other
evidence of the authority of such Subsidiary to execute such joinder supplement
as the Administrative Agent may reasonably request.
(b) Notwithstanding the foregoing provisions of this section 8.10, the
Borrower shall not, unless an Event of Default shall have occurred and be
continuing, be required to cause a Foreign Subsidiary to join in the Subsidiary
Guaranty if (i) to do so would subject the Borrower to liability for additional
United States income taxes by virtue of section 956 of the Code in an amount the
Borrower considers material, and (ii) the Borrower provides the Administrative
Agent, within the 30-day period referred to in section 8.10(a), with
documentation, including computations prepared by the Borrower's internal tax
officer, its independent accountants or tax counsel, acceptable to the Required
Lenders, in support thereof.
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8.11. HEDGE AGREEMENTS, ETC. In the event the Borrower or any of its
Subsidiaries determines to enter into a Hedge Agreement it may do so, PROVIDED
that the purpose of such Hedge Agreement is to provide protection to the
Borrower or any such Subsidiary from fluctuations and other changes in interest
rates and currency exchange rates, as and to the extent considered reasonably
necessary by the Borrower, but without exposing the Borrower or its Subsidiaries
to predominantly speculative risks unrelated to the amount of assets,
Indebtedness or other liabilities intended to be subject to coverage on a
notional basis under all such Hedge Agreements.
8.12. MOST FAVORED COVENANT STATUS. Should the Borrower at any time after
the Effective Date, issue or guarantee any unsecured Indebtedness denominated in
U.S. dollars for money borrowed or represented by bonds, notes, debentures or
similar securities in an aggregate amount exceeding $10,000,000, to any lender
or group of lenders acting in concert with one another, or one or more
institutional investors, pursuant to a loan agreement, credit agreement, note
purchase agreement, indenture, guaranty or other similar instrument, which
agreement, indenture, guaranty or instrument, includes affirmative or negative
business or financial covenants (or any events of default or other type of
restriction which would have the practical effect of any affirmative or negative
business or financial covenant, including, without limitation, any "put" or
mandatory prepayment of such Indebtedness upon the occurrence of a "change of
control") which are applicable to the Borrower, other than those set forth
herein or in any of the other Credit Documents, the Borrower shall promptly so
notify the Administrative Agent and the Lenders and, if the Administrative Agent
shall so request by written notice to the Borrower (after a determination has
been made by the Required Lenders that any of the above-referenced documents or
instruments contain any such provisions, which either individually or in the
aggregate, are more favorable to the holders of such unsecured Indebtedness than
any of the provisions set forth herein), the Borrower, the Administrative Agent
and the Lenders shall promptly amend this Agreement to incorporate some or all
of such provisions, in the discretion of the Administrative Agent and the
Required Lenders, into this Agreement and, to the extent necessary and
reasonably desirable to the Administrative Agent and the Required Lenders, into
any of the other Credit Documents, all at the election of the Administrative
Agent and the Required Lenders.
8.13. SENIOR DEBT. The Borrower will at all times ensure that (a) the
claims of the Lenders in respect of the Obligations of the Borrower will not be
subordinate to, and will in all respects at least rank PARI PASSU with, the
claims of every other senior unsecured creditor of the Borrower, and (b) any
Indebtedness subordinated in any manner to the claims of any other senior
unsecured creditor of the Borrower will be subordinated in like manner to such
claims of the Lenders.
SECTION 9. NEGATIVE COVENANTS.
The Borrower hereby covenants and agrees that on the Effective Date and
thereafter for so long as this Agreement is in effect and until such time as the
Total Commitment has been terminated, no Loans or Letters of Credit remain
outstanding and all interest, Fees and all other Obligations incurred hereunder
are paid in full:
9.1. CHANGES IN BUSINESS. Neither the Borrower nor any of its Subsidiaries
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Borrower
and its Subsidiaries, would be substantially changed from the business engaged
in by the Borrower and its Subsidiaries on the date hereof.
9.2. CONSOLIDATION, MERGER, ACQUISITIONS, ASSET SALES, ETC. The Borrower
will not, and will not permit any Subsidiary to, (1) wind up, liquidate or
dissolve its affairs, (2) enter into any transaction of merger or consolidation,
(3) make or otherwise effect any Acquisition, (4) sell or otherwise dispose of
any of its property or assets outside the ordinary course of business, or
otherwise make or otherwise effect any Asset Sale, or (5) agree to do any of the
foregoing at any future time, EXCEPT that the following shall be permitted:
(a) CERTAIN INTERCOMPANY MERGERS, ETC. If no Default or Event of
Default shall have occurred and be continuing or would result therefrom,
(i) the merger, consolidation or amalgamation of any Wholly-Owned
Subsidiary with or into the Borrower or another Wholly-Owned Subsidiary, so
long as in
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any merger, consolidation or amalgamation involving the Borrower, the
Borrower is the surviving or continuing or resulting corporation, (ii) the
liquidation or dissolution of any Wholly-Owned Subsidiary of the Borrower,
and (iii) the transfer or other disposition of any property by the Borrower
to any Wholly-Owned Subsidiary or by any Wholly-Owned Subsidiary to the
Borrower or any other Wholly-Owned Subsidiary of the Borrower, shall each
be permitted.
(b) PERMITTED ACQUISITIONS. If no Default or Event of Default shall
have occurred and be continuing or would result therefrom, the Borrower or
any Subsidiary may make any Acquisition which is a Permitted Acquisition,
PROVIDED that all of the conditions contained in the definition of the term
Permitted Acquisition are satisfied.
(c) WEST COAST DISTRIBUTION FACILITY. If no Default or Event of
Default shall have occurred and be continuing or would result therefrom,
the Borrower or any of its Subsidiaries may
(i) acquire undeveloped land intended to be improved for, or
developed land intended to be used or improved for, a West Coast
distribution center, and
(ii) if so desired by the Borrower, sell such unimproved or
improved property to a person that is not a Subsidiary of the
Borrower and lease it back from such person pursuant to a Capital
Lease or an Operating Lease; PROVIDED that: (A) the consideration
for sale represents fair value (as determined by management of the
Borrower), and at least 90% of such consideration consists of cash,
and (B) in the case of any such Capital Lease, or any such Operating
Lease which is also a Synthetic Lease, any Indebtedness resulting
from any such sale and leaseback transaction is permitted by section
9.4(d).
(d) PERMITTED DISPOSITIONS. If no Default or Event of Default shall
have occurred and be continuing or would result therefrom, the Borrower or
any of its Subsidiaries may (i) sell any property, land or building
(including any related receivables or other intangible assets) to any
person which is not a Subsidiary of the Borrower, or (ii) sell the entire
capital stock (or other equity interests) and Indebtedness of any
Subsidiary owned by the Borrower or any other Subsidiary to any person
which is not a Subsidiary of the Borrower, or (iii) permit any Subsidiary
to be merged or consolidated with a person which is not an Affiliate of the
Borrower, or (iv) consummate any other Asset Sale with a person who is not
a Subsidiary of the Borrower; PROVIDED that:
(A) the consideration for such transaction represents fair
value (as determined by management of the Borrower), and at least
90% of such consideration consists of cash,
(B) the aggregate consideration for all such transactions
completed during any fiscal year does not exceed 10% of the
Consolidated Total Assets of the Borrower as of the beginning of
such fiscal year;
(C) after giving effect to such transaction, the cumulative
aggregate consideration for all such transactions completed after
the end of the Borrower's fiscal quarter ended on or nearest to
October 31, 1998 does not exceed 25% of the Borrower's Consolidated
Total Assets as of the end of the most recent period for which
financial statements have been delivered to the Lenders hereunder;
and
(D) in the case of any such transaction involving
consideration in excess of $10,000,000, at least five Business Days
prior to the date of completion of such transaction the Borrower
shall have delivered to the Administrative Agent and the Lenders an
officer's certificate executed on behalf of the Borrower by an
Authorized Officer of the Borrower, which certificate shall contain
a description of the proposed transaction, the date such transaction
is scheduled to be consummated, the estimated purchase price or
other consideration for such transaction, financial
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information pertaining to compliance with the preceding clauses (A)
and (B), and which shall (if requested by the Administrative Agent)
include a certified copy of the draft or definitive documentation
pertaining thereto.
(e) LEASES. The Borrower or any of its Subsidiaries may enter into
leases of property or assets not constituting Acquisitions, PROVIDED such
leases are not otherwise in violation of this Agreement.
(f) CAPITAL EXPENDITURES: The Borrower and it Subsidiaries shall be
permitted to make any Consolidated Capital Expenditures.
(g) PERMITTED INVESTMENTS. The Borrower and it Subsidiaries
shall be permitted to make the investments permitted pursuant to section
9.5.
9.3. LIENS. The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with or without
recourse to the Borrower or any of its Subsidiaries, other than for purposes of
collection of delinquent accounts in the ordinary course of business) or assign
any right to receive income, or file or permit the filing of any financing
statement under the UCC or any other similar notice of Lien under any similar
recording or notice statute, EXCEPT that the foregoing restrictions shall not
apply to:
(a) STANDARD PERMITTED LIENS: the Standard Permitted Liens;
(b) EXISTING LIENS, ETC.: Liens (i) in existence on the Effective
Date which are listed, and the Indebtedness secured thereby and the
property subject thereto on the Effective Date described, in Annex IV, or
(ii) arising out of the refinancing, extension, renewal or refunding of any
Indebtedness secured by any such Liens, PROVIDED that the principal amount
of such Indebtedness is not increased and such Indebtedness is not secured
by any additional assets;
(c) PURCHASE MONEY LIENS: Liens (i) which are placed upon fixed or
capital assets, acquired, constructed or improved by the Borrower or any
Subsidiary, PROVIDED that (A) such Liens secure Indebtedness permitted by
section 9.4(e), (B) such Liens and the Indebtedness secured thereby are
incurred prior to or within 180 days after such acquisition or the
completion of such construction or improvement, (C) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring, constructing
or improving such fixed or capital assets; and (D) such Liens shall not
apply to any other property or assets of the Borrower or any Subsidiary; or
(ii) arising out of the refinancing, extension, renewal or refunding of any
Indebtedness secured by any such Liens, PROVIDED that the principal amount
of such Indebtedness is not increased and such Indebtedness is not secured
by any additional assets; and
(d) LIENS ON ACQUIRED PROPERTIES: any Lien (i) existing on any
property or asset prior to the acquisition thereof by the Borrower or any
Subsidiary, or existing on any property or asset of any person that becomes
a Subsidiary after the date hereof prior to the time such person becomes a
Subsidiary; PROVIDED that (A) such Lien secures Indebtedness permitted by
section 9.4(e), (B) such Lien is not created in contemplation of or in
connection with such acquisition or such person becoming a Subsidiary, as
the case may be, (C) such Lien shall not attach or apply to any other
property or assets of the Borrower or any Subsidiary, (D) such Lien shall
secure only those obligations which it secures on the date of such
acquisition or the date such person becomes a Subsidiary, as the case may
be; or (ii) arising out of the refinancing, extension, renewal or refunding
of any Indebtedness secured by any such Liens, PROVIDED that the principal
amount of such Indebtedness is not increased and such Indebtedness is not
secured by any additional assets.
9.4. INDEBTEDNESS. The Borrower will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness of the Borrower or any of its Subsidiaries, EXCEPT:
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(a) CREDIT DOCUMENTS: Indebtedness incurred under this Agreement
and the other Credit Documents;
(b) EXISTING INDEBTEDNESS: Existing Indebtedness; and any
refinancing, extension, renewal or refunding of any such Existing
Indebtedness not involving an increase in the principal amount thereof or a
reduction of more than 10% in the remaining weighted average life to
maturity thereof (computed in accordance with standard financial practice);
PROVIDED that any Existing Indebtedness identified in Annex III or referred
to in section 6.1 as being intended to be refinanced by Loans incurred
hereunder or otherwise retired, may not be otherwise refinanced;
(c) SUBORDINATED NOTES: (i) up to $150,000,000 aggregate principal
amount of Subordinated Notes issued as contemplated by section 6.1(h)
hereof, including any Guaranty Obligations, on a senior subordinated basis,
of Subsidiaries of the Borrower with respect thereto; and (ii) any
subordinated notes and subordinated Guaranty Obligations issued in exchange
therefor pursuant to the Registration Rights Agreement referred to in the
Offering Memorandum identified in section 6.1(h) hereof;
(d) WEST COAST DISTRIBUTION FACILITY: up to $30,000,000 of (i)
Capitalized Lease Obligations, or (ii) present value, determined on the
basis of the implicit interest rate, of all basic rental obligations under
one or more Synthetic Leases, for a new West Coast Distribution Facility
for the Borrower and its Subsidiaries; PROVIDED that at the time of any
incurrence thereof after the date hereof, and after giving effect thereto,
the Borrower would be in compliance with section 9.7, 9.8 and 9.9, and no
Event of Default shall have occurred and be continuing or would result
therefrom;
(e) CERTAIN PRIORITY DEBT: to the extent not permitted by the
foregoing clauses,
(i) Indebtedness consisting of Capital Lease Obligations
of the Borrower and its Subsidiaries,
(ii) Indebtedness consisting of obligations under Synthetic
Leases of the Borrower and its Subsidiaries,
(iii) Indebtedness secured by a Lien referred to in section
9.3(c) or (d), and
(iv) any refinancing, extension, renewal or refunding of any
such Indebtedness not involving an increase in the principal amount
thereof or a reduction of more than 10% in the remaining weighted
average life to maturity thereof (computed in accordance with
standard financial practice),
PROVIDED that (A) at the time of any incurrence thereof after the date
hereof, and after giving effect thereto, the Borrower would be in
compliance with section 9.7, 9.8 and 9.9, and no Event of Default shall
have occurred and be continuing or would result therefrom; and (B) the
aggregate outstanding principal amount (using Capitalized Lease Obligations
in lieu of principal amount, in the case of any Capital Lease, and using
the present value, based on the implicit interest rate, in lieu of
principal amount, in the case of any Synthetic Lease) of Indebtedness
permitted by this clause (e), when taken together with any outstanding
Indebtedness permitted by clause (b) above which is represented by a
Capital Lease or a Synthetic Lease or which is secured by any Lien, shall
not exceed 10% of the Borrower's Consolidated Net Worth as of the end of
the most recent fiscal period for which financial statements have been
delivered to the Lenders hereunder;
(f) INTERCOMPANY DEBT: Indebtedness of the Borrower to any of its
Subsidiaries, and Indebtedness of any of the Borrower's Subsidiaries to the
Borrower or to another Subsidiary of the Borrower, in each case as
permitted by section 9.5;
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(g) HEDGE AGREEMENTS: Indebtedness of the Borrower and its
Subsidiaries under Hedge Agreements; and
(h) ADDITIONAL UNSECURED DEBT AND GUARANTY OBLIGATIONS: additional
unsecured Indebtedness of the Borrower (including additional unsecured
Guaranty Obligations of the Borrower), not in excess of $30,000,000
aggregate principal amount outstanding at any time, PROVIDED that at the
time of incurrence thereof, and after giving effect thereto, (i) the
Borrower would be in compliance with sections 9.7, 9.8 and 9.9; (ii) no
Event of Default shall have occurred and be continuing or would result
therefrom; and (iii) the Consolidated Total Balance Sheet Debt does not
exceed $350,000,000.
9.5. ADVANCES, INVESTMENTS, LOANS AND GUARANTY OBLIGATIONS. The Borrower
will not, and will not permit any of its Subsidiaries to, (1) lend money or
credit or make advances to any person, (2) purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, or other investment in, any person, (3) create, acquire or hold
any Subsidiary, (4) be or become a party to any joint venture or partnership, or
(5) be or become obligated under any Guaranty Obligations (other than those
created in favor of the Lenders pursuant to the Credit Documents), EXCEPT:
(a) the Borrower or any of its Subsidiaries may invest in cash
and Cash Equivalents;
(b) any endorsement of a check or other medium of payment for
deposit or collection, or any similar transaction in the normal course of
business;
(c) the Borrower and its Subsidiaries may acquire and hold
receivables owing to them in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(d) investments acquired by the Borrower or any of its Subsidiaries
(i) in exchange for any other investment held by the Borrower or any such
Subsidiary in connection with or as a result of a bankruptcy, workout,
reorganization or recapitalization of the issuer of such other investment,
or (ii) as a result of a foreclosure by the Borrower or any of its
Subsidiaries with respect to any secured investment or other transfer of
title with respect to any secured investment in default;
(e) loans and advances to employees for business-related travel
expenses, moving expenses, costs of replacement homes, business machines or
supplies, automobiles and other similar expenses, in each case incurred in
the ordinary course of business, shall be permitted;
(f) existing investments in any Subsidiaries (and any increases
thereof attributable to increases in retained earnings), and existing loans
and advances to any Subsidiary;
(g) to the extent not permitted by the foregoing clauses, the
existing loans, advances, investments and guarantees described on Annex V
hereto;
(h) any unsecured Guaranty Obligations permitted by section 9.4;
(i) investments of the Borrower and its Subsidiaries in Hedge
Agreements;
(j) loans and advances by any Subsidiary of the Borrower to the
Borrower, PROVIDED that the Indebtedness represented thereby constitutes
Subordinated Indebtedness;
(k) to the extent not permitted by the foregoing clauses, loans and
advances by the Borrower or by any Subsidiary of the Borrower to, or other
investments in, any Subsidiary of the Borrower which is a Subsidiary
Guarantor;
(l) the Acquisitions permitted by section 9.2;
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(m) loans, advances and investments of any person which are
outstanding at the time such person becomes a Subsidiary of the Borrower as
a result of an Acquisition permitted by section 9.2, but not any increase
in the amount thereof;
(n) additional investments of up to $15,000,000 made after the end
of the Borrower's fiscal quarter ended on or nearest to October 31, 1998 in
Bouclair, Inc., PROVIDED that at the time of making any such additional
investment no Event of Default shall have occurred and be continuing, or
would result therefrom;
(o) additional investments of up to $5,000,000 made after the end of
the Borrower's fiscal quarter ended on or nearest to October 31, 1998 in
The Country Sampler Store, L.L.C., PROVIDED that at the time of making any
such additional investment no Event of Default shall have occurred and be
continuing, or would result therefrom; and
(p) any other loans, advances, investments (whether in the form of
cash or contribution of property, and if in the form of a contribution of
property, such property shall be valued for purposes of this clause at the
fair value thereof as reasonably determined by the Borrower), in or to any
corporation, partnership, limited liability company, joint venture or other
business entity, not otherwise permitted by the foregoing clauses, made
after the end of the most recent fiscal quarter of the Borrower for which
financial statements were furnished to the Lenders prior to the Effective
Date (such loans, advances and investments, collectively, "BASKET
INVESTMENTS"), PROVIDED that (i) at the time of making any such Basket
Investment no Event of Default shall have occurred and be continuing, or
would result therefrom, and (ii) the maximum cumulative amount of Basket
Investments which are so made and outstanding at any time shall not exceed
an aggregate of $20,000,000, taking into account the repayment of any loans
or advances comprising such Basket Investments.
9.6. MINIMUM CONSOLIDATED NET WORTH. The Borrower will not permit its
Consolidated Net Worth as of the end of any fiscal quarter to be less than
$225,000,000, EXCEPT that
(a) effective as of the end of the Borrower's fiscal quarter ended
on or nearest to April 30, 1999, and as of the end of each fiscal quarter
thereafter, the foregoing amount (as it may from time to time be increased
as herein provided), shall be increased by 50% of the Consolidated Net
Income of the Borrower and its Subsidiaries for the fiscal quarter ended on
such date, if any, as determined in conformity with GAAP (there being no
reduction in the case of any such Consolidated Net Income which reflects a
deficit),
(b) the foregoing amount (as it may from time to time be increased
as herein provided), shall be increased by an amount equal to 100% of the
cash proceeds (net of underwriting discounts and commissions and other
customary fees and costs associated therewith) from any sale or issuance of
equity (other than Redeemable Stock) by the Borrower after the end of the
Borrower's fiscal quarter ended on or nearest to October 31, 1998 (other
than any sale or issuance to management or employees pursuant to employee
benefit plans of general application),
(c) the foregoing amount (as it may from time to time be increased
as herein provided), shall be increased by an amount equal to 100% of (x)
the principal amount of Indebtedness or (y) the higher of stated value or
liquidation value of Redeemable Stock, as the case may be, held by any
person other than the Borrower or any of its Subsidiaries, which is
converted or exchanged after the end of the Borrower's fiscal quarter ended
on or nearest to October 31, 1998 into common stock of the Borrower or any
of its Subsidiaries, and
(d) the foregoing amount (as it may from time to time be increased
as herein provided), shall be increased by an amount equal to 100% of the
increase in Consolidated Net Worth attributable to the issuance of common
stock or other equity interests subsequent to the end of the Borrower's
fiscal quarter ended on or nearest to October 31, 1998 as consideration in
any Acquisitions permitted under section 9.2.
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9.7. SENIOR LEVERAGE RATIO. The Borrower will not permit the ratio of (i)
the amount of its Consolidated Total Senior Balance Sheet Debt as of the end of
any fiscal quarter, TO (ii) its Consolidated Total Capital as of the end of such
fiscal quarter, to exceed (i) .25 to 1.00 as of the end of the first fiscal
quarter of any fiscal year, (ii) .30 to 1.00 as of the end of the second fiscal
quarter of any fiscal year, (iii) .40 to 1.00 as of the end of the third fiscal
quarter of any fiscal year, or (iv) .20 to 1.00 as of the end of the fourth
fiscal quarter of any fiscal year.
9.8. TOTAL LEVERAGE RATIO. The Borrower will not permit the ratio of (i)
the amount of its Consolidated Total Balance Sheet Debt as of the end of any
fiscal quarter, TO (ii) its Consolidated Total Capital as of the end of such
fiscal quarter, to exceed the ratio specified below for such fiscal quarter:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
FQ1 FQ2 FQ3 FQ4
OF SUCH FY OF SUCH FY OF SUCH FY OF SUCH FY
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal .50 to 1.00 .55 to 1.00 .60 to 1.00 .45 to 1.00
Year 2000
------------------------------------------------------------------------------
Fiscal .45 to 1.00 .55 to 1.00 .55 to 1.00 .45 to 1.00
Year 2001
------------------------------------------------------------------------------
Any Fiscal .45 to 1.00 .55 to 1.00 .55 to 1.00 .40 to 1.00
Year
thereafter
------------------------------------------------------------------------------
</TABLE>
9.9. FIXED CHARGE COVERAGE RATIO. The Borrower will not permit its Fixed
Charge Coverage Ratio for the Testing Period ended on or nearest to January 31,
1999, or for any Testing Period ended thereafter, to be less than 1.50 to 1.00.
9.10. RATIO OF CONSOLIDATED CURRENT ASSETS/CONSOLIDATED CURRENT LIABILITIES
PLUS CONSOLIDATED TOTAL SENIOR BALANCE SHEET DEBT. The Borrower will not permit
the ratio, as of the end of any fiscal quarter, of (i) its Consolidated Current
Assets, TO (ii) the sum of (x) its Current Consolidated Liabilities, PLUS (y)
its Consolidated Total Senior Balance Sheet Debt, to be less than 1.50 to 1.00.
9.11. ANNUAL CLEAN DOWN. The Borrower will not at any time permit its
Consolidated Total Senior Balance Sheet Debt to exceed $85,000,000 on any day
during at least one period of 30 consecutive days during the 12 consecutive
calendar months then most recently ended, PROVIDED that (i) the foregoing amount
(as it may from time to time be increased as herein provided), shall be
increased by $15,000,000 effective as of the last day of each fiscal year,
commencing with the Borrower's fiscal year ended on or nearest to January 31,
2001, and (ii) for purposes of determining the amount of Consolidated Total
Senior Balance Sheet Debt outstanding for any period prior to the Closing Date,
the aggregate principal amount of Subordinated Notes outstanding on the Closing
Date shall be deemed to have refinanced an equivalent principal amount of such
Consolidated Total Senior Balance Sheet Debt.
9.12. LIMITATION ON SUBSIDIARY INDEBTEDNESS. The Borrower will not permit
the aggregate principal amount (using Capitalized Lease Obligation, in the case
of a Capital Lease, or present value, in the case of a Synthetic Lease, in lieu
of principal amount) of Indebtedness of its Subsidiaries (exclusive of (i)
Indebtedness of a Subsidiary owed to the Borrower or another Subsidiary, (ii)
Indebtedness represented by the Subsidiary Guaranty, and (iii) Indebtedness
represented by the senior subordinated guarantees of the Subordinated Notes),
when taken together with (x) Indebtedness of the Borrower permitted by section
9.4(e) and (y) Indebtedness of the Borrower permitted by section 9.4(b) which is
represented by a Capital Lease or a Synthetic Lease or which is secured by any
Lien, to exceed 10% of the Borrower's Consolidated Net Worth as of the end of
the most recent fiscal period for which financial statements have been delivered
to the Lenders hereunder.
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9.13. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into, incur or permit to exist or become effective, any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur or suffer to exist
any Lien upon any of its property or assets as security for Indebtedness, or (b)
the ability of any such Subsidiary to pay dividends or make any other
distributions on its capital stock or any other interest or participation in its
profits owned by the Borrower or any Subsidiary of the Borrower, or pay any
Indebtedness owed to the Borrower or a Subsidiary of the Borrower, or to make
loans or advances to the Borrower or any of the Borrower's other Subsidiaries,
or transfer any of its property or assets to the Borrower or any of the
Borrower's other Subsidiaries, EXCEPT for such restrictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest, (iv) customary provisions restricting
assignment of any licensing agreement entered into in the ordinary course of
business, (v) customary provisions restricting the transfer or further
encumbering of assets subject to Liens permitted under section 9.3 (b), (c) or
(d), (vi) restrictions contained in the Existing Indebtedness Agreements as in
effect on the Effective Date (and any similar restrictions contained in any
agreement governing any refinancing or refunding thereof not prohibited by this
Agreement), (vii) restrictions contained in the Subordinated Note Indenture as
in effect on the Closing Date (and any similar restrictions contained in any
indenture governing any refinancing or refunding thereof not prohibited by this
Agreement), (viii) customary restrictions affecting only a Subsidiary of the
Borrower under any agreement or instrument governing any of the Indebtedness of
a Subsidiary permitted pursuant to 9.4, (ix) any document relating to
Indebtedness secured by a Lien permitted by section 9.3, insofar as the
provisions thereof limit grants of junior liens on the assets securing such
Indebtedness, and (x) any Operating Lease or Capital Lease, insofar as the
provisions thereof limit grants of a security interest in, or other assignments
of, the related leasehold interest to any other person.
9.14. PREPAYMENTS AND REFINANCINGS OF OTHER DEBT, ETC. The Borrower will
not, and will not permit any of its Subsidiaries to, make (or give any notice in
respect thereof) any voluntary or optional payment or prepayment or redemption
or acquisition for value of (including, without limitation, by way of depositing
with the trustee with respect thereto money or securities before due for the
purpose of paying when due) or exchange of, or refinance or refund,
(a) any of the Subordinated Notes, OTHER THAN pursuant to the
registered Exchange Offer referred to in the Preliminary Offering
Memorandum identified in section 6.1(h); or
(b) any other Indebtedness of the Borrower or its Subsidiaries which
has an outstanding principal balance (or Capitalized Lease Obligation, in
the case of a Capital Lease, or present value, in the case of a Synthetic
Lease) greater than $1,000,000 (other than the Obligations and intercompany
loans and advances among the Borrower and its Subsidiaries); PROVIDED that
the Borrower or any Subsidiary may refinance or refund any such
Indebtedness if the aggregate principal amount thereof (or Capitalized
Lease Obligation, in the case of a Capital Lease, or present value, in the
case of a Synthetic Lease) is not increased and the weighted average life
to maturity thereof (computed in accordance with standard financial
practice) is not reduced by more than 10%.
9.15. TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any Subsidiary to, enter into any transaction or series of transactions
with any Affiliate (other than, in the case of the Borrower, any Subsidiary, and
in the case of a Subsidiary, the Borrower or another Subsidiary) other than in
the ordinary course of business of and pursuant to the reasonable requirements
of the Borrower's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary than would obtain in
a comparable arm's-length transaction with a person other than an Affiliate,
EXCEPT (i) sales of goods to an Affiliate for use or distribution outside the
United States which in the good faith judgment of the Borrower complies with any
applicable legal requirements of the Code, or (ii) agreements and transactions
with and payments to officers, directors and shareholders which are either (A)
entered into in the ordinary course of business and not prohibited by any of the
provisions of this Agreement, or (B) entered into outside the ordinary course of
business, approved by the directors or shareholders of the Borrower, and not
prohibited by any of the provisions of this Agreement.
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9.16. PLAN TERMINATIONS, MINIMUM FUNDING, ETC. The Borrower will not, and
will not permit any ERISA Affiliate to, (i) terminate any Plan or Plans so as to
result in liability of the Borrower or any ERISA Affiliate to the PBGC in excess
of $3,000,000 in the aggregate, (ii) permit to exist one or more events or
conditions which reasonably present a material risk of the termination by the
PBGC of any Plan or Plans with respect to which the Borrower or any ERISA
Affiliate would, in the event of such termination, incur liability to the PBGC
in excess of such amount in the aggregate, or (iii) fail to comply with the
minimum funding standards of ERISA and the Code with respect to any Plan.
SECTION 10. EVENTS OF DEFAULT.
10.1. EVENTS OF DEFAULT. Any of the following specified events shall
constitute an Event of Default (each an "EVENT OF DEFAULT"):
(a) PAYMENTS: the Borrower shall (i) default in the payment when due
of any principal of the Loans, or any reimbursement obligation in respect
of any LC Disbursement; or (ii) default, and such default shall continue
for five or more days, in the payment when due of any interest on the Loans
or any Fees or any other amounts owing hereunder or under any other Credit
Document; or
(b) REPRESENTATIONS, ETC.: any representation, warranty or statement
made by the Borrower or any other Credit Party herein or in any other
Credit Document or in any statement or certificate delivered or required to
be delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made; or
(c) CERTAIN NEGATIVE COVENANTS: the Borrower shall default in the
due performance or observance by it of any term, covenant or agreement
contained in sections 9.2 through 9.12, inclusive, of this Agreement; or
(d) OTHER COVENANTS: the Borrower shall default in the due
performance or observance by it of any term, covenant or agreement
contained in this Agreement or any other Credit Document, other than those
referred to in section 10.1(a) or (b) or (c) above, and such default is not
remedied within 30 days after the earlier of (i) an officer of the Borrower
obtaining actual knowledge of such default and (ii) the Borrower receiving
written notice of such default from the Administrative Agent or the
Required Lenders (any such notice to be identified as a "notice of default
" and to refer specifically to this paragraph); or
(e) CROSS DEFAULT UNDER OTHER AGREEMENTS: the Borrower or any of its
Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) owed to any Lender, or having an
unpaid principal amount of $5,000,000 or greater, and such default shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Indebtedness, or (ii) default in
the observance or performance of any agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto (and all grace periods applicable to such
observance, performance or condition shall have expired), or any other
event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or
any such Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable, or shall be required to be prepaid (other
than by a regularly scheduled required prepayment or redemption, prior to
the stated maturity thereof); or
(f) OTHER CREDIT DOCUMENTS: the Subsidiary Guaranty (once executed
and delivered) shall cease for any reason (other than termination in
accordance with its terms) to be in full force and effect; or any Credit
Party shall default in any payment obligation thereunder; or any Credit
Party shall default in any material respect in the due performance and
observance of any other obligation thereunder and such default shall
continue unremedied for a period of at least 30 days after notice by the
Administrative Agent or the
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Required Lenders; or any Credit Party shall (or seek to) disaffirm or
otherwise limit its obligations thereunder otherwise than in strict
compliance with the terms thereof; or
(g) JUDGMENTS: one or more judgments or decrees shall be entered
against the Borrower and/or any of its Subsidiaries involving a liability
(other than a liability covered by insurance, as to which the carrier has
adequate claims paying ability and has not reserved its rights) of
$1,000,000 or more in the aggregate for all such judgments and decrees for
the Borrower and its Subsidiaries, and any such judgments or decrees shall
not have been vacated, discharged or stayed or bonded pending appeal within
30 days (or such longer period, not in excess of 60 days, during which
enforcement thereof, and the filing of any judgment lien, is effectively
stayed or prohibited) from the entry thereof; or
(h) BANKRUPTCY, ETC.: the Borrower or any of its Material
Subsidiaries shall commence a voluntary case concerning itself under Title
11 of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "BANKRUPTCY CODE"); or an involuntary
case is commenced against the Borrower or any of its Material Subsidiaries
and the petition is not controverted within 10 days, or is not dismissed
within 60 days, after commencement of the case; or a custodian (as defined
in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Borrower or any of its Material
Subsidiaries; or the Borrower or any of its Material Subsidiaries commences
(including by way of applying for or consenting to the appointment of, or
the taking of possession by, a rehabilitator, receiver, custodian, trustee,
conservator or liquidator (collectively, a "CONSERVATOR") of itself or all
or any substantial portion of its property) any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency, liquidation, rehabilitation, conservatorship or
similar law of any jurisdiction whether now or hereafter in effect relating
to the Borrower or any of its Material Subsidiaries; or any such proceeding
is commenced against the Borrower or any of its Material Subsidiaries to
the extent such proceeding is consented by such person or remains
undismissed for a period of 60 days; or the Borrower or any of its Material
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief
or other order approving any such case or proceeding is entered; or the
Borrower or any of its Material Subsidiaries suffers any appointment of any
conservator or the like for it or any substantial part of its property
which continues undischarged or unstayed for a period of 60 days; or the
Borrower or any of its Material Subsidiaries makes a general assignment for
the benefit of creditors; or any corporate (or similar organizational)
action is taken by the Borrower or any of its Material Subsidiaries for the
purpose of effecting any of the foregoing; or
(i) ERISA: (i) any of the events described in clauses (i) through
(viii) of section 8.1(f) shall have occurred; or (ii) there shall result
from any such event or events the imposition of a lien, the granting of a
security interest, or a liability or a material risk of incurring a
liability; and (iii) any such event or events or any such lien, security
interest or liability, individually, and/or in the aggregate, in the
opinion of the Required Lenders, has had, or could reasonably be expected
to have, a Material Adverse Effect.
10.2. ACCELERATION, ETC. Upon the occurrence of any Event of Default, and
at any time thereafter, if any Event of Default shall then be continuing, the
Administrative Agent shall, upon the written request of the Required Lenders, by
written notice to the Borrower, take any or all of the following actions,
without prejudice to the rights of the Administrative Agent or any Lender to
enforce its claims against the Borrower or any other Credit Party in any manner
permitted under applicable law:
(a) declare the Total Commitment terminated, whereupon the
Commitment of each Lender shall forthwith terminate immediately without any
other notice of any kind;
(b) declare the principal of and any accrued interest in respect of
all Loans, all LC Disbursements which remain unreimbursed, and all other
Obligations owing hereunder and under the other Credit Documents to be,
whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower;
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(c) terminate any Letter of Credit which may be terminated in
accordance with its terms;
(d) direct the Borrower to pay (and the Borrower hereby agrees that
on receipt of such notice or upon the occurrence of an Event of Default
with respect to the Borrower under section 10.1(h), it will pay) to the
Administrative Agent an amount of cash equal to 100% of the aggregate
Stated Amount of all Letters of Credit then outstanding, with such amount
to be held as security for the Borrower's (and any Subsidiary which is an
account party) reimbursement and payment obligations in respect thereof;
and/or
(e) exercise any other right or remedy available under any of the
Credit Documents or applicable law;
PROVIDED that, if an Event of Default specified in section 10.1(h) shall occur
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Administrative Agent as specified in clauses (a) and/or
(b) above shall occur automatically without the giving of any such notice.
10.3. APPLICATION OF LIQUIDATION PROCEEDS. All monies received by the
Administrative Agent or any Lender from the exercise of remedies hereunder or
under the other Credit Documents or under any other documents relating to this
Agreement shall, unless otherwise required by the terms of the other Credit
Documents or by applicable law, be applied as follows:
(i) FIRST, to the payment of all expenses (to the extent not paid by
the Borrower) incurred by the Administrative Agent and the Lenders in
connection with the exercise of such remedies, including, without
limitation, all reasonable costs and expenses of collection, attorneys'
fees, court costs and any foreclosure expenses;
(ii) SECOND, to the payment PRO RATA of interest then accrued on the
outstanding Loans;
(iii) THIRD, to the payment PRO RATA of any Fees then accrued and
payable to the Administrative Agent, any Issuing Bank or any Lender under
this Agreement in respect of the Loans or the Total LC Exposure;
(iv) FOURTH, to the payment PRO RATA of (A) the principal balance on
the outstanding Loans, (B) the amount of the LC Disbursements which remain
unreimbursed, and (C) the Stated Amount of all Letters of Credit which are
outstanding (to be held and applied by the Administrative Agent as security
for the reimbursement obligations in respect thereof);
(v) FIFTH, to the payment to the Lenders of any amounts then accrued
and unpaid under sections 2.8, 2.9, 3.7 and 5.4 hereof, and if such
proceeds are insufficient to pay such amounts in full, to the payment of
such amounts PRO RATA;
(vi) SIXTH, to the payment PRO RATA of all other amounts owed by the
Borrower to the Administrative Agent, to any Issuing Bank or any Lender
under this Agreement or any other Credit Document, and if such proceeds are
insufficient to pay such amounts in full, to the payment of such amounts
PRO RATA; and
(vii) FINALLY, any remaining surplus after all of the Obligations
have been paid in full, to the Borrower or to whomsoever shall be lawfully
entitled thereto.
SECTION 11. THE ADMINISTRATIVE AGENT.
11.1. APPOINTMENT. Each Lender hereby irrevocably designates and appoints
KeyBank as Administrative Agent to act as specified herein and in the other
Credit Documents, and each such Lender hereby irrevocably
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authorizes KeyBank as the Administrative Agent for such Lender, to take such
action on its behalf under the provisions of this Agreement and the other Credit
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent agrees to act as such upon the
express conditions contained in this section 11. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein or
in the other Credit Documents, nor any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Administrative Agent. The provisions of this section 11 are solely for the
benefit of the Administrative Agent, and the Lenders, and the Borrower and its
Subsidiaries shall not have any rights as a third party beneficiary of any of
the provisions hereof. In performing its functions and duties under this
Agreement, the Administrative Agent shall act solely as agent of the Lenders and
does not assume and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for the Borrower or any of its
Subsidiaries.
11.2. DELEGATION OF DUTIES. The Administrative Agent may execute any
of its duties under this Agreement or any other Credit Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by section 11.3.
11.3. EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of
its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such person under or in connection with this Agreement (except
for its or such person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or of its Subsidiaries or any
of their respective officers contained in this Agreement, any other Credit
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or any other Credit Document or for any failure
of the Borrower or any Subsidiary of the Borrower or any of their respective
officers to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
the Borrower or any of its Subsidiaries. The Administrative Agent shall not be
responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any Credit
Document or for any representations, warranties, recitals or statements made
herein or therein or made in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
in connection herewith or therewith furnished or made by the Administrative
Agent to the Lenders or by or on behalf of the Borrower or any of its
Subsidiaries to the Administrative Agent or any Lender or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default.
11.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile transmission, telex or teletype message, statement, order or
other document or conversation believed by it, in good faith, to be genuine and
correct and to have been signed, sent or made by the proper person or persons
and upon advice and statements of legal counsel (including, without limitation,
counsel to the Borrower or any of its Subsidiaries), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Credit Documents in accordance with a request of the Required Lenders (or
all of the Lenders, as to any matter which,
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pursuant to section 12.12, can only be effectuated with the consent of all
Lenders), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders.
11.5. NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give prompt notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders, PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
11.6. NON-RELIANCE. Each Lender expressly acknowledges that neither the
Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates have made any representations or warranties to
it and that no act by the Administrative Agent hereinafter taken, including any
review of the affairs of the Borrower or any of its Subsidiaries, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Lender. Each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent, or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent, or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Borrower and its Subsidiaries.
The Administrative Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, assets, property, financial and other conditions, prospects or
creditworthiness of the Borrower or any of its Subsidiaries which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
11.7. INDEMNIFICATION. The Lenders agree to indemnify the Administrative
Agent in its capacity as such ratably according to their respective Commitments,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Obligations) be imposed on,
incurred by or asserted against the Administrative Agent in its capacity as such
in any way relating to or arising out of this Agreement or any other Credit
Document, or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted to be taken by
the Administrative Agent under or in connection with any of the foregoing, but
only to the extent that any of the foregoing is not paid by the Borrower,
PROVIDED that no Lender shall be liable to the Administrative Agent for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent resulting solely from the Administrative Agent's gross negligence or
willful misconduct. If any indemnity furnished to the Administrative Agent for
any purpose shall, in the opinion of the Administrative Agent, be insufficient
or become impaired, the Administrative Agent may call for additional indemnity
and cease, or not commence, to do the acts indemnified against until such
additional indemnity is furnished. The agreements in this section 11.7 shall
survive the payment of all Obligations.
11.8. THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. The Administrative
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower, its Subsidiaries and their
Affiliates as though not acting as Administrative Agent hereunder. With respect
to the Loans made by it and all Obligations owing to it, the Administrative
Agent shall have the same rights and powers under this
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Agreement as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
11.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign
as the Administrative Agent upon 20 Business Days' notice to the Lenders and the
Borrower. The Administrative Agent may be removed for cause as the
Administrative Agent upon 20 Business Days' notice to the Administrative Agent
and the Borrower from the Required Lenders, which notice shall specify the
conduct constituting the cause for removal. The Required Lenders shall appoint
from among the Lenders a successor Administrative Agent for the Lenders subject
to prior approval by the Borrower (such approval not to be unreasonably withheld
or delayed), whereupon such successor agent shall succeed to the rights, powers
and duties of the Administrative Agent, and the term "Administrative Agent"
shall include such successor agent effective upon its appointment, and the
resigning or removed Administrative Agent's rights, powers and duties as the
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After the retiring Administrative Agent's resignation or removal
hereunder as the Administrative Agent, the provisions of this section 11 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.
11.10. OTHER AGENTS. Any Lender identified herein as a Co-Agent,
Syndication Agent, Documentation Agent, Managing Agent, Manager or any other
corresponding title, other than "Administrative Agent", shall have no right,
power, obligation, liability, responsibility or duty under this Agreement or any
other Credit Document except those applicable to all Lenders as such. Each
Lender acknowledges that it has not relied, and will not rely, on any Lender so
identified in deciding to enter into this Agreement or in taking or not taking
any action hereunder.
SECTION 12. MISCELLANEOUS.
12.1. PAYMENT OF EXPENSES ETC. (a) Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to pay (or reimburse
the Administrative Agent for) all reasonable out-of-pocket costs and expenses of
the Administrative Agent in connection with the negotiation, preparation,
execution and delivery of the Credit Documents and the documents and instruments
referred to therein, and the syndication of the Commitments provided for herein,
including, without limitation, the reasonable fees and disbursements of Jones,
Day, Reavis & Pogue, special counsel to the Administrative Agent.
(b) The Borrower agrees to pay (or reimburse the Administrative Agent for)
all reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with any amendment, waiver or consent relating to any of the Credit
Documents which is requested by any Credit Party, including, without limitation,
the reasonable fees and disbursements of Jones, Day, Reavis & Pogue, special
counsel to the Administrative Agent.
(c) The Borrower agrees to pay (or reimburse the Administrative Agent and
the Lenders for) all reasonable out-of-pocket costs and expenses of the
Administrative Agent and the Lenders in connection with the enforcement of any
of the Credit Documents or the other documents and instruments referred to
therein, including, without limitation, (i) the reasonable fees and
disbursements of Jones, Day, Reavis & Pogue, special counsel to the
Administrative Agent, and (ii) the reasonable fees and disbursements of any
individual counsel to any Lender (and any allocated costs of internal counsel).
(d) Without limitation of the preceding section 12.1(c), in the event of
the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of the Borrower or any of its Subsidiaries, the Borrower agrees to pay
all costs of collection and defense, including reasonable attorneys' fees in
connection therewith and in connection with any appellate proceeding or
post-judgment action involved therein, which shall be due and payable together
with all required service or use taxes.
(e) The Borrower agrees to pay and hold the Administrative Agent and each
of the Lenders harmless from and against any and all present and future stamp
and other similar taxes with respect to the foregoing matters
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and save the Administrative Agent and each of the Lenders harmless from and
against any and all liabilities with respect to or resulting from any delay or
omission (other than to the extent attributable to such Lender) to pay such
taxes.
(f) The Borrower agrees to indemnify the Administrative Agent and each
Lender, its officers, directors, employees, representatives and agents
(collectively, the "INDEMNITEES") from and hold each of them harmless against
any and all losses, liabilities, claims, damages or expenses reasonably incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of
(i) any investigation, litigation or other proceeding (whether or
not the Administrative Agent or any Lender is a party thereto) related to
the entering into and/or performance of any Credit Document or the use of
the proceeds of any Loans hereunder or the consummation of any transactions
contemplated in any Credit Document, other than any such investigation,
litigation or proceeding arising out of transactions solely between any of
the Lenders or the Administrative Agent, transactions solely involving the
assignment by a Lender of all or a portion of its Loans and Commitments, or
the granting of participations therein, as provided in this Agreement, or
arising solely out of any examination of a Lender by any regulatory or
other governmental authority having jurisdiction over it, or
(ii) the actual or alleged presence of Hazardous Materials in the
air, surface water or groundwater or on the surface or subsurface of any
Real Property owned, leased or at any time operated by the Borrower or any
of its Subsidiaries, the release, generation, storage, transportation,
handling or disposal of Hazardous Materials at any location, whether or not
owned or operated by the Borrower or any of its Subsidiaries, if the
Borrower or any such Subsidiary could have or is alleged to have any
responsibility in respect thereof, the non-compliance of any such Real
Property with foreign, federal, state and local laws, regulations and
ordinances (including applicable permits thereunder) applicable thereto, or
any Environmental Claim asserted against the Borrower or any of its
Subsidiaries, in respect of any such Real Property,
including, in each case, without limitation, the reasonable documented fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the person to be indemnified or of any other
Indemnitee who is such person or an Affiliate of such person). To the extent
that the undertaking to indemnify, pay or hold harmless any person set forth in
the preceding sentence may be unenforceable because it is violative of any law
or public policy, the Borrower shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
12.2. RIGHT OF SETOFF. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence of an Event of Default, each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Lender (including, without limitation, by
branches, agencies and Affiliates of such Lender wherever located) to or for the
credit or the account of the Borrower against and on account of the Obligations
and liabilities of the Borrower to such Lender under this Agreement or under any
of the other Credit Documents, including, without limitation, all interests in
Obligations of the Borrower purchased by such Lender pursuant to section
12.4(c), and all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document, irrespective of
whether or not such Lender shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
12.3. NOTICES. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
telegraphic, telex, facsimile transmission or cable communication) and mailed,
telegraphed, telexed, transmitted, cabled or delivered, if to the Borrower, at
5555 Darrow Road, Hudson, Ohio 44236, attention: Chief Financial Officer
(facsimile: (330) 463-6716); if to any Lender
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at its address specified for such Lender on Annex I hereto; if to the
Administrative Agent, at its Notice Office; or at such other address as shall be
designated by any party in a written notice to the other parties hereto. All
such notices and communications shall be mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, and shall be effective when
received.
12.4. BENEFIT OF AGREEMENT. (a) GENERAL. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns, PROVIDED that the Borrower may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of all the Lenders, and, PROVIDED, FURTHER, that any assignment
by a Lender of its rights and obligations hereunder shall be effected in
accordance with section 12.4(c).
(b) PARTICIPATIONS. Notwithstanding the foregoing, each Lender may at any
time grant participations in any of its rights hereunder or under any of the
Notes to (x) another Lender that is not a Defaulting Lender or to an Affiliate
of such Lender which is a commercial bank, financial institution or other
"accredited investor" (as defined in SEC Regulation D), or (y) one or more
Eligible Transferees, PROVIDED that in the case of any such participation,
(i) the participant shall not have any rights under this Agreement
or any of the other Credit Documents, including rights of consent, approval
or waiver (the participant's rights against such Lender in respect of such
participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto),
(ii) such Lender's obligations under this Agreement (including,
without limitation, its Commitment hereunder) shall remain unchanged,
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations,
(iv) such Lender shall remain the holder of any Note for all
purposes of this Agreement, and
(v) the Borrower, the Administrative Agent, and the other Lenders
shall continue to deal solely and directly with the selling Lender in
connection with such Lender's rights and obligations under this Agreement,
and all amounts payable by the Borrower hereunder shall be determined as if
such Lender had not sold such participation, except that the participant
shall be entitled to the benefits of sections 2.9 and 2.10 of this
Agreement to the extent that such Lender would be entitled to such benefits
if the participation had not been entered into or sold,
and, PROVIDED FURTHER, that no Lender shall transfer, grant or sell any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (x) extend the final scheduled
maturity of the Loans or Commitment in which such participant is participating,
or extend the expiration date of a Letter of Credit (including any acceptance or
time draft relating thereto) in which such participant is participating beyond
the latest expiration date provided for herein, or extend any date provided
herein for a reimbursement payment by the Borrower (or any other applicable
account party) in respect of an LC Disbursement related to a Letter of Credit in
which such participant is participating, or reduce the rate or extend the time
of payment of interest or Fees on any such Loan, Letter of Credit, LC
Disbursement or Commitment (except in connection with a waiver of the
applicability of any post-default increase in interest rates), or reduce the
principal amount of any such Loan or LC Disbursement, or increase such
participant's participating interest in any Loan, Letter of Credit, LC
Disbursement or Commitment over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default shall not constitute
a change in the terms of any such Loan, Letter of Credit, LC Disbursement or
Commitment), (y) release any guarantor from its guaranty of any of the
Obligations, except strictly in accordance with the terms of the Credit
Documents, or (z) consent to the assignment or transfer by the Borrower of any
of its rights or obligations under this Agreement.
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(c) ASSIGNMENTS BY LENDERS. Notwithstanding the foregoing, (x) any Lender
may assign all or a fixed portion of its Loans and/or Commitment, and its rights
and obligations hereunder, which assignment does not have to be PRO RATA among
the Facilities, to another Lender that is not a Defaulting Lender, or to an
Affiliate of any Lender (including itself) and which is not a Defaulting Lender
and which is a commercial bank, financial institution or other "accredited
investor" (as defined in SEC Regulation D), and (y) any Lender may assign all,
or if less than all, a fixed portion, equal to at least $10,000,000 in the
aggregate for the assigning Lender or assigning Lenders, of its Loans and/or
Commitment and its rights and obligations hereunder, which assignment does not
have to be PRO RATA among the Facilities, to one or more Eligible Transferees,
each of which assignees shall become a party to this Agreement as a Lender by
execution of an Assignment Agreement, PROVIDED that
(i) the Swing Line Lender may only assign its Swing Line Commitment
and its Swing Line Loans as an entirety and only if the assignee thereof is
or becomes a Lender with a General Revolving Commitment,
(ii) in the case of any assignment of a portion of any Loans and/or
Commitment of a Lender, such Lender shall retain a minimum fixed portion of
all Loans and Commitments equal to at least $10,000,000,
(iii) at the time of any such assignment Annex I shall be deemed
modified to reflect the Commitments of such new Lender and of the existing
Lenders,
(iv) upon surrender of the old Notes, new Notes will be issued to
such new Lender and to the assigning Lender, such new Notes to be in
conformity with the requirements of section 2.4 (with appropriate
modifications) to the extent needed to reflect the revised Commitments,
(v) in the case of clause (y) only, the consent of the
Administrative Agent and each Issuing Bank shall be required in connection
with any such assignment (which consent shall not be unreasonably withheld
or delayed), and
(vi) the Administrative Agent shall receive at the time of each such
assignment (other than an assignment from a Lender to any of its
Affiliates), from the assigning or assignee Lender, the payment of a
non-refundable assignment fee of $3,500,
and, PROVIDED FURTHER, that such transfer or assignment will not be effective
until the Assignment Agreement in respect thereof is recorded by the
Administrative Agent on the Lender Register maintained by it as provided herein.
To the extent of any assignment pursuant to this section 12.4(c) the
assigning Lender shall be relieved of its obligations hereunder with respect to
its assigned Commitments.
At the time of each assignment pursuant to this section 12.4(c) to a person
which is not already a Lender hereunder and which is not a United States person
(as such term is defined in section 7701(a)(30) of the Code) for Federal income
tax purposes, the respective assignee Lender shall provide to the Borrower and
the Administrative Agent the appropriate Internal Revenue Service Forms (and, if
applicable a Section 5.4(b)(ii) Certificate) described in section 5.4(b). To the
extent that an assignment of all or any portion of a Lender's Commitment and
related outstanding Obligations pursuant to this section 12.4(c) would, at the
time of such assignment, result in increased costs under section 2.10 from those
being charged by the respective assigning Lender prior to such assignment, then
the Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
assignment).
Nothing in this section 12.4(c) shall prevent or prohibit (x) any Lender
which is a bank or other financial institution from pledging its Notes or Loans
to a Federal Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (y) in the case of any other Lender, from pledging its
Notes or Loans to a trustee
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or agent for the holders of certificates or Indebtedness issued by such Lender
which have a rating from Moody's or S&P acceptable to the Administrative Agent,
acting in its reasonable discretion.
(d) NO SEC REGISTRATION OR BLUE SKY COMPLIANCE. Notwithstanding any other
provisions of this section 12.4, no transfer or assignment of the interests or
obligations of any Lender hereunder or any grant of participation therein shall
be permitted if such transfer, assignment or grant would require the Borrower to
file a registration statement with the SEC or to qualify the Loans under the
"Blue Sky" laws of any State.
(e) REPRESENTATIONS OF LENDERS. Each Lender initially party to this
Agreement hereby represents, and each person that became a Lender pursuant to an
assignment permitted by this section 12.4 will, upon its becoming party to this
Agreement, represent that it is a commercial lender, other financial institution
or other "accredited" investor (as defined in SEC Regulation D) which makes or
acquires loans in the ordinary course of its business and that it will make or
acquire Loans for its own account in the ordinary course of such business,
PROVIDED that subject to the preceding sections 12.4(b) and (c), the disposition
of any promissory notes or other evidences of or interests in Indebtedness held
by such Lender shall at all times be within its exclusive control.
(f) GRANTS BY LENDERS TO SPCS. Notwithstanding anything to the contrary
contained herein, any Lender, (a "GRANTING LENDER") may grant to a special
purpose funding vehicle (an "SPC"), identified as such in writing from time to
time by the Granting Lender to the Administrative Agent, the Borrower and the
other Lenders, the option to provide to the Borrower all or any part of any Loan
that such Granting Lender would otherwise be obligated to make to the Borrower
pursuant to this Agreement; PROVIDED that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan, and (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of such Loan,
the Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of
the Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for
any indemnity or payment under this Agreement for which a Lender would otherwise
be liable for so long as, and to the extent, the Granting Lender provides such
indemnity or makes such payment. In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this
Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness
of any SPC, it will not institute against, or join any other person in
instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under the laws of the United States or any
State thereof. In addition, notwithstanding anything to the contrary contained
in this section 12.4, any SPC may (i) with notice to, but without the prior
written consent of, the Borrower and the Administrative Agent and without paying
any processing fee therefor, assign all or a portion of its interests in any
Loans to the Granting Lender or to any financial institutions providing
liquidity and/or credit support to or for the account of such SPC to support the
funding or maintenance of Loans and (ii) disclose on a confidential basis any
non-public information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guarantee or credit or liquidity
enhancements to such SPC. This section 12.4(f) may not be amended without the
written consent of any Granting Lender affected thereby.
12.5. NO WAIVER: REMEDIES CUMULATIVE. No failure or delay on the part of
the Administrative Agent or any Lender in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and the Administrative Agent or any Lender shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Administrative
Agent or any Lender would otherwise have. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
12.6. PAYMENTS PRO RATA. (a) The Administrative Agent agrees that promptly
after its receipt of each payment from or on behalf of the Borrower in respect
of any Obligations, it shall distribute such payment to the
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Lenders (other than any Lender that has expressly waived in writing its right to
receive its PRO RATA share thereof) PRO RATA based upon their respective shares,
if any, of the Obligations with respect to which such payment was received. As
to any such payment received by the Administrative Agent prior to 1:00 P.M.
(local time at the Payment Office) in funds which are immediately available on
such day, the Administrative Agent will use all reasonable efforts to distribute
such payment in immediately available funds on the same day to the Lenders as
aforesaid.
(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Lenders is in a greater proportion than the total of such
Obligation then owed and due to such Lender bears to the total of such
Obligation then owed and due to all of the Lenders immediately prior to such
receipt, then such Lender receiving such excess payment shall purchase for cash
without recourse or warranty from the other Lenders an interest in the
Obligations to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount, PROVIDED that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding sections 12.6(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Lenders which are not Defaulting Lenders, as opposed to
Defaulting Lenders.
12.7. CALCULATIONS: COMPUTATIONS. (a) The financial statements to be
furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders); PROVIDED, that if at any time the computations
determining compliance with section 9 utilize accounting principles different
from those utilized in the financial statements furnished to the Lenders, such
computations shall set forth in reasonable detail a description of the
differences and the effect upon such computations.
(b) All computations of interest on Prime Rate Loans hereunder shall be
made on the basis of a year or 365 or 366 days, as applicable, and the actual
number of days elapsed. All computations of interest on Eurodollar Loans and of
Facility Fee, Letter of Credit Fees and other Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF OHIO, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE STATE
OF OHIO GOVERNS THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS. Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought in the Court of Common Pleas of Cuyahoga County, Ohio, or of the
United States for the Northern District of Ohio, and, by execution and delivery
of this Agreement, the Borrower hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The Borrower hereby further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address for notices pursuant to section
12.3, such service to become effective 30 days after such mailing or at such
earlier time as may be provided under applicable law. Nothing herein shall
affect the right of the Administrative Agent or any Lender to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrower in any other jurisdiction.
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<PAGE>
(b) The Borrower hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in section 12.8(a) above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
12.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same agreement. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
12.10. EFFECTIVENESS. This Agreement shall become effective on the date
(the "EFFECTIVE DATE") on which the Borrower and each of the Lenders shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered the same to the Administrative Agent at the Notice Office of the
Administrative Agent or, in the case of the Lenders, shall have given to the
Administrative Agent telephonic (confirmed in writing), written telex or
facsimile transmission notice (actually received) at such office that the same
has been signed and mailed to it.
12.11. HEADINGS DESCRIPTIVE. The headings of the several sections and other
portions of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12. AMENDMENT OR WAIVER. Neither this Agreement, any of the other Credit
Documents, nor any terms hereof or thereof, may be amended, changed, waived,
discharged or terminated UNLESS such amendment, change, waiver, discharge or
termination is in writing signed by the Borrower (or other appropriate Credit
Party) and the Required Lenders, PROVIDED that no such amendment, change,
waiver, discharge or termination shall, without the consent of each Lender
(other than a Defaulting Lender) affected thereby,
(a) extend any maturity date provided for herein applicable to a
Loan or a Commitment, or extend the expiration date of a Letter of Credit
(including any acceptance or time draft relating thereto) beyond the latest
expiration date provided for herein, or extend any date provided herein for
a reimbursement payment by the Borrower (or any other applicable account
party) in respect of an LC Disbursement, or reduce the rate or extend the
time of payment of interest or Fees (other than as a result of waiving the
applicability of any post-default increase in interest rates) on any Loan,
Letter of Credit, LC Disbursement or Commitment, or reduce the principal
amount of any Loan or LC Disbursement, or increase the Commitment of any
Lender over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default shall not constitute a change in
the terms of any Commitment of any Lender),
(b) release the Borrower from any obligations as a guarantor of its
Subsidiaries' obligations under any Credit Document,
(c) release any Subsidiary from its obligations as a guarantor of
any of the Obligations, except strictly in accordance with the terms of the
Credit Documents,
(d) change the definition of the term "Change of Control" or any of
the provisions of section 4.3 or 5.2 which are applicable upon a Change of
Control,
(e) amend, modify or waive any provision of this section 12.12, or
section 11.7, 12.1, 12.4, 12.6 or 12.7(b), or any other provision of any of
the Credit Documents pursuant to which the consent or
73
<PAGE>
approval of all Lenders, all Non-Defaulting Lenders, each Lender, each
Non-Defaulting Lender, any single Lender or any single Non-Defaulting
Lender, is by the terms of such provision explicitly required,
(f) reduce the percentage specified in, or otherwise modify, the
definition of Required Lenders, or
(g) consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement.
No provision of section 3 or 11 may be amended without the consent of (x)
any Issuing Bank adversely affected thereby or (y) the Administrative Agent,
respectively. No provision of section 2.3 may be amended without the consent of
the Swing Line Lender.
12.13. SURVIVAL OF INDEMNITIES. All indemnities set forth herein including,
without limitation, in section 2.8, 2.9, 3.7, 5.4, 11.7 or 12.1 shall survive
the execution and delivery of this Agreement and the making and prepayment or
repayment of the Loans.
12.14. DOMICILE OF LOANS. Each Lender may transfer and carry its Loans at,
to or for the account of any branch office, subsidiary or Affiliate of such
Lender, PROVIDED that the Borrower shall not be responsible for costs arising
under section 2.8 resulting from any such transfer (other than a transfer
pursuant to section 2.10) to the extent not otherwise applicable to such Lender
prior to such transfer.
12.15. CONFIDENTIALITY. Each Lender shall hold all non-public information
obtained pursuant to the requirements of this Agreement in accordance with its
customary procedure for handling confidential information of this nature and in
accordance with safe and sound banking practices. Notwithstanding the foregoing,
any Lender may in any event make disclosures of, and furnish copies of such
information (i) to another Lender; (ii) when reasonably required by any BONA
FIDE transferee or participant in connection with the contemplated transfer of
any Loans or Commitment or participation therein (PROVIDED that each such
prospective transferee and/or participant shall execute an agreement for the
benefit of the Borrower with such prospective transferor Lender and/or
participant containing provisions substantially identical to those contained in
this section 12.15); (iii) to its parent corporation or corporations and its and
their Affiliates, and to its and their auditors and attorneys; and (iv) as
required or requested by any governmental agency or representative thereof or
pursuant to legal process, PROVIDED that, unless specifically prohibited by
applicable law or court order, each Lender shall notify the Borrower of any
request by any governmental agency or representative thereof (other than any
such request in connection with an examination of the financial condition of
such Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information. In no event shall any
Lender be obligated or required to return any materials furnished by or on
behalf of the Borrower or any of its Subsidiaries. The Borrower hereby agrees
that the failure of a Lender to comply with the provisions of this section 12.15
shall not relieve the Borrower of any of the obligations to such Lender under
this Agreement and the other Credit Documents.
12.16. LENDER REGISTER. The Borrower hereby designates the Administrative
Agent to serve as its agent, solely for purposes of this section 12.16, to
maintain a register (the "LENDER REGISTER") on or in which it will record the
names and addresses of the Lenders, and the Commitments from time to time of
each of the Lenders, the Loans made to the Borrower by each of the Lenders and
each repayment and prepayment in respect of the principal amount of such Loans
of each such Lender. Failure to make any such recordation, or (absent manifest
error) any error in such recordation, shall not affect the Borrower's
obligations in respect of such Loans. With respect to any Lender, the transfer
of the Commitment of such Lender and the rights to the principal of, and
interest on, any Loan made pursuant to such Commitment shall not be effective
until such transfer is recorded on the Lender Register maintained by the
Administrative Agent with respect to ownership of such Commitment and Loans and
prior to such recordation all amounts owing to the transferor with respect to
such Commitment and Loans shall remain owing to the transferor. The registration
of assignment or transfer of all or part of any Commitments and Loans shall be
recorded by the Administrative Agent on the Lender Register only upon the
acceptance by the Administrative Agent of a properly executed and delivered
Assignment Agreement pursuant to section 12.4(c). The Borrower agrees to
indemnify the
74
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Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this section
12.16, except to the extent attributable to the gross negligence or wilful
misconduct of the Administrative Agent. The Lender Register shall be available
for inspection by the Borrower or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
12.17. LIMITATIONS ON LIABILITY OF THE ISSUING BANKS. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither any
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by a an Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, EXCEPT that the
Borrower (or a Subsidiary or Affiliate which is the account party in respect of
the Letter of Credit in question) shall have a claim against an Issuing Bank,
and an Issuing Bank shall be liable to the Borrower (or such Subsidiary or
Affiliate), to the extent of any direct, but not consequential, damages suffered
by the Borrower (or such Subsidiary or Affiliate) which the Borrower (or such
Subsidiary or Affiliate) proves were caused by (i) such Issuing Bank's willful
misconduct or gross negligence in determining whether documents presented under
a Letter of Credit comply with the terms of such Letter of Credit, or (ii) such
Issuing Bank's willful failure to make lawful payment under any Letter of Credit
after the presentation to it of documentation strictly complying with the terms
and conditions of such Letter of Credit. In furtherance and not in limitation of
the foregoing, an Issuing Bank may accept documents that appear on their face to
be in order, without responsibility for further investigation.
12.18. GENERAL LIMITATION OF LIABILITY. No claim may be made by the
Borrower, any Lender, the Administrative Agent, any Issuing Bank or any other
person against the Administrative Agent, any Issuing Bank, or any other Lender
or the Affiliates, directors, officers, employees, attorneys or agents of any of
them for any damages other than actual compensatory damages in respect of any
claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement or any of the other
Credit Documents, or any act, omission or event occurring in connection
therewith; and each of the Borrower, each Lender, the Administrative Agent and
each Issuing Bank hereby, to the fullest extent permitted under applicable law,
waives, releases and agrees not to sue or counterclaim upon any such claim for
any special, consequential or punitive damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
12.19. NO DUTY. All attorneys, accountants, appraisers, consultants and
other professional persons (including the firms or other entities on behalf of
which any such person may act) retained by the Administrative Agent or any
Lender with respect to the transactions contemplated by the Credit Documents
shall have the right to act exclusively in the interest of the Administrative
Agent or such Lender, as the case may be, and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Borrower, to any of its Subsidiaries, or to any other person,
with respect to any matters within the scope of such representation or related
to their activities in connection with such representation. The Borrower agrees,
on behalf of itself and its Subsidiaries, not to assert any claim or
counterclaim against any such persons with regard to such matters, all such
claims and counterclaims, now existing or hereafter arising, whether known or
unknown, foreseen or unforseeable, being hereby waived, released and forever
discharged.
12.20. LENDERS AND AGENT NOT FIDUCIARY TO BORROWER, ETC. The relationship
among the Borrower and its Subsidiaries, on the one hand, and the Administrative
Agent, each Issuing Bank and the Lenders, on the other hand, is solely that of
debtor and creditor, and the Administrative Agent, each Issuing Bank and the
Lenders have no fiduciary or other special relationship with the Borrower and/or
its Subsidiaries, and no term or provision of any Credit Document, no course of
dealing, no written or oral communication, or other action, shall be construed
so as to deem such relationship to be other than that of debtor and creditor.
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12.21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties herein shall survive the making of Loans and the issuance of Letters
of Credit hereunder, the execution and delivery of this Agreement, the Notes and
the other documents the forms of which are attached as Exhibits hereto, the
issue and delivery of the Notes, any disposition thereof by any holder thereof,
and any investigation made by the Administrative Agent or any Lender or any
other holder of any of the Notes or on its behalf. All statements contained in
any certificate or other document delivered to the Administrative Agent or any
Lender or any holder of any Notes by or on behalf of the Borrower or of its
Subsidiaries pursuant hereto or otherwise specifically for use in connection
with the transactions contemplated hereby shall constitute representations and
warranties by the Borrower hereunder, made as of the respective dates specified
therein or, if no date is specified, as of the respective dates furnished to the
Administrative Agent or any Lender
12.22. INTEREST RATE LIMITATION. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the "CHARGES"), shall exceed the maximum
lawful rate (the "MAXIMUM RATE") which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
12.23. JUDGMENT CURRENCY. (a) If for the purposes of obtaining judgment in
any court it is necessary to convert a sum due hereunder or under the Notes in
any currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER
CURRENCY") the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the Original Currency with the Other Currency at the principal New York
office of a major United States financial institution selected by the
Administrative Agent on the Business Day immediately preceding the date on which
final judgment is rendered.
(b) The obligation of the Borrower in respect of any sum due in the
Original Currency from it to any Lender or the Administrative Agent hereunder or
under the Note held by such Lender shall, notwithstanding any judgment in any
Other Currency, be discharged only to the extent that on the Business Day
following receipt by such Lender or the Administrative Agent (as the case may
be) of any sum adjudged to be so due in such Other Currency such Lender or the
Administrative Agent (as the case may be) may in accordance with normal banking
procedures purchase Dollars with such Other Currency; if the amount of the
Original Currency so purchased is less than the sum originally due to such
Lender or the Administrative Agent (as the case may be) in the Original
Currency, the Borrower agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Lender or the Administrative Agent (as the case
may be) against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to any Lender or the Administrative
Agent (as the case may be) in the Original Currency, such Lender or the
Administrative Agent (as the case may be) agrees to remit to the Borrower such
excess.
(c) For purposes of determining the equivalent in one currency of another
currency as provided in this section, such amount shall include any premium and
costs payable in connection with the conversion into or from any currency.
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.
JO-ANN STORES, INC. KEYBANK NATIONAL ASSOCIATION,
INDIVIDUALLY AS A LENDER,
THE ISSUING BANK AND THE
ADMINISTRATIVE AGENT
BY: /S/ BRIAN P. CARNEY BY: /S/ THOMAS J. PURCELL
---------------------------- ------------------------------
EXECUTIVE VICE PRESIDENT VICE PRESIDENT
& CHIEF FINANCIAL OFFICER
THE FIRST NATIONAL BANK OF CHICAGO, NATIONAL CITY BANK,
INDIVIDUALLY AS A LENDER AND INDIVIDUALLY AS A LENDER AND
AS DOCUMENTATION AGENT AS A CO-AGENT
BY: /S/ DEBORA K. OBERLING BY: /S/ TERRI L. CABLE
---------------------------- -------------------------------
TITLE: VICE PRESIDENT TITLE: SENIOR VICE PRESIDENT
COMERICA BANK, FIRSTAR BANK, N. A.
INDIVIDUALLY AS A LENDER AND
AS A CO-AGENT
BY: /S/ JEFFREY J. JUDGE BY: /S/ DAVID J. DANNEMILLER
------------------------------ ---------------------------------
TITLE: VICE PRESIDENT TITLE: VICE PRESIDENT
FLEET NATIONAL BANK UNION BANK OF CALIFORNIA, N. A.
BY: /S/ ROBERT T. P. STORER BY: /S/ TIMOTHY P. STREB
----------------------------- ---------------------------------
TITLE: S. V. P. TITLE: VICE PRESIDENT
HARRIS TRUST AND SAVINGS BANK MERCANTILE BANK NATIONAL ASSOCIATION
BY: /S/ PETER KRAWCHUK BY: /S/ STEPHEN M. REESE
----------------------------- ---------------------------------
TITLE: VICE PRESIDENT TITLE: VICE PRESIDENT
MELLON BANK, N. A. THE HUNTINGTON NATIONAL BANK
BY: /S/ CHARLES H. STRAUB BY: /S/ TIMOTHY M. WARD
----------------------------- ---------------------------------
TITLE: FIRST VICE PRESIDENT TITLE: V. P.
THE FIFTH THIRD BANK
BY: /S/ R. C. LANCTOT
-----------------------------
TITLE: V. P.
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ANNEX I
INFORMATION AS TO LENDERS
<TABLE>
<CAPTION>
NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KeyBank National KeyBank National Association KeyBank National Association
Association GENERAL REVOLVING 127 Public Square 127 Public Square
COMMITMENT: Cleveland, Ohio 44114 Cleveland, Ohio 44114
$55,000,000 PRIMARY CONTACT:
Thomas J. Purcell
SWING LINE Vice President
COMMITMENT: Telephone: (216) 689-4439
Facsimile: (216) 689-4981
$5,000,000 CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
Kathy Koenig
Telephone: (216) 689-4228
Facsimile: (216) 689-4981
WIRING INFORMATION:
ABA No. 041 001 039
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan
Operations
- --------------------------------------------------------------------------------------------------------------------------
The First National Bank The First National Bank of Chicago The First National Bank of
of Chicago One First National Plaza Chicago
GENERAL REVOLVING 14th Floor, Suite 0086 One First National Plaza
COMMITMENT: Chicago, Illinois 60670 14th Floor, Suite 0086
Chicago, Illinois 60670
$50,000,000 PRIMARY CONTACT:
Debora Oberling
Tel.: (312) 732-4644
Vince Hencheck
Tel.: (312) 732-9772
Facsimile: (312) 732-1117
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
WIRING INFORMATION:
ABA No.
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan
Operations
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
National City Bank National City Bank National City Bank
GENERAL REVOLVING 1900 East Ninth Street 1900 East Ninth Street
COMMITMENT: Cleveland, Ohio 44114 Cleveland, Ohio 44114
PRIMARY CONTACT:
$30,000,000 Terri L. Cable
Senior Vice President
Tel. : (216) 575-3354
Fax.: (216) 222-0003
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
Sue Ann Lewalski
Tel.: (216) 575-7080
Fax.: (216) 488-7110
WIRING INFORMATION:
ABA No. 041 00 124
A/C No. 151804
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Comerica Bank Comerica Bank Comerica Bank
GENERAL REVOLVING 500 Woodward Avenue 500 Woodward Avenue
COMMITMENT: Detroit, Michigan 48226 Detroit, Michigan 48226
$30,000,000 PRIMARY CONTACT:
Jeff Judge
Tel.: (313) 222-3801
Fax.: (313) 222-9514
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
Stacie McVeigligh
Tel.: (313) 222-4515
Fax.: (313) 222-9514
WIRING INFORMATION:
ABA No. 072 000 096
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan Operations
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fleet National Bank Fleet National Bank Fleet National Bank
GENERAL REVOLVING One Federal Street One Federal Street
COMMITMENT: Boston, Massachusetts 02110-2010 Boston, Massachusetts 02110-2010
$20,000,000 PRIMARY CONTACT:
Robert Storer
Tel.: (617) 346-0431
Fax.: (617) 346-0689
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
WIRING INFORMATION:
ABA No. 011 000 138
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan
Operations
- --------------------------------------------------------------------------------------------------------------------------
Harris Trust and Harris Trust and Savings Bank Harris Trust and Savings Bank
Savings Bank GENERAL REVOLVING 111 West Monroe Street 111 West Monroe Street
COMMITMENT: Chicago, Illinois 60603 Chicago, Illinois 60603
$20,000,000 PRIMARY CONTACT:
Peter Krawchuk
Corporate Banking --10W
Tel.: (312) 461-2783
Fax.: (312) 461-5225
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
WIRING INFORMATION:
ABA No. 071 000 028
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan Operations
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mellon Bank, Mellon Bank, N. A. Mellon Bank, N. A.
N. A. GENERAL REVOLVING Three Mellon Bank Center, Room 1203 Three Mellon Bank Center, Room 1203
COMMITMENT: Pittsburgh, Pennsylvania 15259-0003 Pittsburgh, Pennsylvania 15259-0003
$20,000,000 PRIMARY CONTACT:
Richard J. Schaich
Tel.: (412) 234-4420
Fax.: (412) 236-1914
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
Lloyd Martin
Tel.: (412) 234-9448
Fax.: (412) 209-6138
WIRING INFORMATION:
ABA No. 043 000 261
A/C No. 990873800
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan
Operations
- --------------------------------------------------------------------------------------------------------------------------------
The Fifth Third Bank The Fifth Third Bank The Fifth Third Bank
GENERAL REVOLVING 1404 East Ninth Street 1404 East Ninth Street
COMMITMENT: Cleveland, Ohio 44114 Cleveland, Ohio 44114
$15,000,000 PRIMARY CONTACT:
Roy Lanctot
Tel.: (216) 274-5473
Fax.: (216) 274-5510
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
Robert Bryant, Credit Dep't.
Telephone: (216) 274-5914
Facsimile: (216) 274-5558
WIRING INFORMATION:
ABA No. 042 000 314
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan Operations
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Firstar Bank, Firstar Bank, N. A. Firstar Bank, N. A.
N. A. GENERAL REVOLVING 1350 Euclid Avenue, 8th Floor 1850 Osborn Ave.
COMMITMENT: Cleveland, Ohio 44115 Oshkosh, Wisconsin 54902
$15,000,000 PRIMARY CONTACT:
David J. Dannemiller
Tel.: (216) 623-9233
Fax.: (216) 623-9208
CONTACT FOR BORROWINGS,
PAYMENTS, ETC.:
WIRING INFORMATION:
ABA No. 042 000 013
A/C No. 9901893
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan Operations
- ----------------------------------------------------------------------------------------------------------------------------------
Union Bank of
California, N. A. Union Bank of California, N. A. Union Bank of California, N. A.
GENERAL REVOLVING 350 California Street, 6th Floor 350 California Street, 6th Floor
COMMITMENT: San Francisco, California 94104 San Francisco, California 94104
$15,000,000 PRIMARY CONTACT:
Timothy P. Streb
Vice President
Tel. : (415) 705-7021
Fax.: (415) 705-7085
CONTACT FOR BORROWINGS, PAYMENTS,
ETC.:
Gohar Karaperyan
Tel.: (323) 720-2679
Fax. : (323) 724-6198
WIRING INFORMATION:
Union Bank of California, N. A.
1980 Saturn Street
Monterey Park, CA. 91755
ABA No. 122 000 496
A/C No. 070196431--Wire Transfer
Clearing
Ref.: Jo-Ann Stores, Inc.
Attention: 192--Note Center CLO
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME OF LENDER COMMITMENT DOMESTIC LENDING OFFICE EURODOLLAR LENDING OFFICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mercantile Bank National Mercantile Bank National Association Mercantile Bank National Association
Association GENERAL REVOLVING One Mercantile Center One Mercantile Center
COMMITMENT: St. Louis, Missouri 63101 St. Louis, Missouri 63101
$15,000,000 PRIMARY CONTACT:
Steve Reese
Tel.: (314) 418-2459
Fax.: (314) 418-1963
CONTACT FOR BORROWINGS, PAYMENTS,
ETC.:
Cheryl Pannier
Tel.: (314) 418-3631
Fax.: (314) 418-1945
WIRING INFORMATION:
ABA No. 081 0000 210
A/C No. 140117-939
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan Operations
- -----------------------------------------------------------------------------------------------------------------------------------
The Huntington National
Bank The Huntington National Bank The Huntington National Bank
GENERAL REVOLVING 917 Euclid Avenue 917 Euclid Avenue
COMMITMENT: Cleveland, Ohio 44115 Cleveland, Ohio 44115
$15,000,000 PRIMARY CONTACT:
Timothy M. Ward
Corporate Banking
Tel.: (216) 515-6832
Fax. : (216) 515-6082
CONTACT FOR BORROWINGS, PAYMENTS,
ETC.:
Andrielle I. Pickett
Corporate Banking
Tel.: (216) 515-6217
Fax.: (216) 515-6082
WIRING INFORMATION:
ABA No. 044 0000 24
A/C No. 15804
Ref.: Jo-Ann Stores, Inc.
Attention: Commercial Loan Operations
</TABLE>
6
<PAGE>
ANNEX II
INFORMATION AS TO SUBSIDIARIES
(as of May 5, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
OUTSTANDING STOCK
NAME OF TYPE OF JURISDICTION OR OTHER EQUITY
SUBSIDIARY ORGANIZATION WHERE INTERESTS OWNED
ORGANIZED (INDICATING WHETHER
OWNED BY THE
BORROWER OR A
SPECIFIED SUBSIDIARY)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FCA of California, Inc. corp. Ohio 100%, by the Borrower
- -----------------------------------------------------------------------------------------------------------------------------------
FCA of Ohio, Inc. corp. Ohio 100%, by the Borrower
- -----------------------------------------------------------------------------------------------------------------------------------
FCA of South Dakota, Inc. corp. Ohio 100%, by the Borrower
- -----------------------------------------------------------------------------------------------------------------------------------
House of Fabrics, Inc. corp. Delaware 100%, by the Borrower
- -----------------------------------------------------------------------------------------------------------------------------------
FCA Financial, Inc. corp. Ohio 100%, by the Borrower
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX III
DESCRIPTION OF EXISTING INDEBTEDNESS
1. Revolving Credit Facility --- as of 4/30/99
- $215 million borrowed under facility including $15.0 million under
the $40.0 million temporary committed facility
- Six separate loans with various borrowing dates
- Any additional borrowings subsequent to such date in the ordinary
course of business
2. Uncommitted Lines of Credit --- as of 4/30/99
- $25.1 million borrowed with three banks
- Borrowings are on an overnight basis
- Any additional borrowings subsequent to such date in the ordinary
course of business.
3. Guarantor on $490,000 of $1.0 million line of credit that The Country
Sampler Store, L.L.C. (of which Jo-Ann Stores has a 49% interest) has with
American National Bank and Trust Company of Chicago.
4. Trade Letters of Credit --- as of 4/30/99
- Approximately $45.0 million consisting of $30.2 million of
outstanding trade letters of credit and $14.8 million of related
acceptances
- Additional L/Cs incurred subsequent to such date in the ordinary
course of business
5. Insurance Standby Letter of Credit --- as of 4/30/99
- $1.941 million for Workers Compensation, General Liability and Auto
Insurance
- Beneficiary: Kemper Insurance
6. Lease Standby Letter of Credit ---- as of 4/30/99
- $100,000 covering lease
- Beneficiary: Echo, L.L.C.
<PAGE>
ANNEX IV
DESCRIPTION OF EXISTING LIENS
-----None-----
<PAGE>
ANNEX V
DESCRIPTION OF EXISTING ADVANCES, LOANS, INVESTMENTS AND GUARANTEES
1. Existing investment in the capital of The Country Sampler Store, L.L.C. of
approximately $1,049,000, representing a 49% interest.
2. Five separate advances to The Country Sampler Store, L.L.C. (of which
Jo-Ann Stores has a 49% interest) as follows:
- $147,000 at 7% interest paid quarterly--due June 30, 2007
- $294,000 at 7% interest paid quarterly--due March 31, 2008
- $134,750 at 7% interest paid quarterly--due June 15, 2008
- $247,250 at 7% interest paid quarterly--due September 30, 2008
- $196,000 at 7% interest paid quarterly--due March 31, 2009
3. Existing investment in the capital of Bouclair, Inc., of approximately
$3,159,225, representing a 24% interest.
4. See Guarantee of $490,000 of $1.0 million line of credit for The Country
Sampler Store, L.L.C., described in Annex III.
5. McDonald Ohio Tax Credit Fund
- Invests in low income housing to take advantage of tax credits
- Jo-Ann Stores owns 4 of 47 limited partnership units at $500,000
each---$2.0 million investment
- Jo-Ann currently has note payable to partnership for balance of
investment contribution of approximately $1.1 million
6. The Cleveland Development Partnership II
- Invests in projects that further the growth and development of
Cleveland
- Jo-Ann Stores has invested $175,000 and has committed to another
$75,000 in November 1999
7. Ohio Innovation Fund
- Invests in early stage technology based businesses located
primarily in Ohio
- Jo-Ann Stores has invested $35,000 and has committed to another
$87,500
<PAGE>
ANNEX VI
DESCRIPTION OF LETTERS OF CREDIT
DEEMED ISSUED UNDER
THE CREDIT AGREEMENT
Letters of Credit issued by KeyBank National Association and outstanding on the
Closing Date. At the close of business on April 30, 1999, the aggregate
outstandings were:
STANDBY LETTERS OF CREDIT
$2,041,000
DOCUMENTARY LETTERS OF CREDIT
(INCLUDING ACCEPTANCES AND TIME DRAFTS)
$45,064,000
At the Closing Date, the total may be greater or less than the amount indicated
above, because of transactions in the ordinary course of business under the
Borrower's existing revolving credit agreement..
<PAGE>
EXHIBIT A-1
GENERAL REVOLVING NOTE
$_______________ Cleveland, Ohio
_________, 1999
FOR VALUE RECEIVED, the undersigned JO-ANN STORES, INC., an Ohio
corporation (herein, together with its successors and assigns, the "BORROWER"),
hereby promises to pay to the order of _________________________ (the "LENDER"),
in lawful money of the United States of America in immediately available funds,
at the Payment Office (such term and certain other terms used herein without
definition shall have the meanings ascribed thereto in the Credit Agreement
referred to below) of KeyBank National Association (the "ADMINISTRATIVE AGENT"),
on the Maturity Date, the principal sum of ________________ DOLLARS AND NO CENTS
($ ) or, if less, the then unpaid principal amount of all General Revolving
Loans made by the Lender to the Borrower pursuant to the Credit Agreement.
The Borrower promises also to pay interest on the unpaid principal amount
of each General Revolving Loan made by the Lender to the Borrower in like money
at said office from the date hereof until paid at the rates and at the times
provided in section 2.6 of the Credit Agreement.
This Note is one of the General Revolving Notes referred to in the Credit
Agreement, dated as of May 5, 1999, among the Borrower, the financial
institutions from time to time party thereto (including the Lender), and KeyBank
National Association, as Administrative Agent (as from time to time in effect,
the "CREDIT AGREEMENT"), and is entitled to the benefits thereof and of the
other Credit Documents. As provided in the Credit Agreement, this Note is
subject to mandatory prepayment prior to the Maturity Date, in whole or in part.
In case an Event of Default shall occur and be continuing, the principal of
and accrued interest on this Note may be declared to be due and payable in the
manner and with the effect provided in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note. No failure to exercise, or delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of any such rights.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF OHIO.
JO-ANN STORES, INC.
By: ____________________________________
Executive Vice President
& Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
LOANS AND PAYMENTS OF PRINCIPAL
AMOUNT
OF
DATE AMOUNT TYPE PRINCIPAL UNPAID
OF OF OF INTEREST PAID OR PRINCIPAL MADE
NOTATION LOAN LOAN PERIOD PREPAID BALANCE BY
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A-2
SWING LINE NOTE
$________________ Cleveland, Ohio
_________, 1999
FOR VALUE RECEIVED, the undersigned JO-ANN STORES, INC., an Ohio
corporation (herein, together with its successors and assigns, the "BORROWER"),
hereby promises to pay to the order of _______________________ (the "LENDER"),
in lawful money of the United States of America in immediately available funds,
at the Payment Office (such term and certain other terms used herein without
definition shall have the meanings ascribed thereto in the Credit Agreement
referred to below) of KeyBank National Association (the "ADMINISTRATIVE AGENT"),
the principal sum of ________________ DOLLARS ($ ) or, if less, the then unpaid
principal amount of all Swing Line Loans made by the Lender to the Borrower
pursuant to the Credit Agreement. The Borrower will pay the principal amount of
each Swing Line Loan on the maturity date specified therefor in the Notice of
Borrowing relating thereto, which maturity date shall in any event be not more
than 7 days following the date such Swing Line Loan was made.
The Borrower promises also to pay interest on the unpaid principal amount
of each Swing Line Loan made by the Lender in like money at said office from the
date hereof until paid at the rates and at the times provided in section 2.6 of
the Credit Agreement.
This Note is the Swing Line Note referred to in the Credit Agreement, dated
as of May 5, 1999, among the Borrower, the financial institutions from time to
time party thereto (including the Lender), and KeyBank National Association, as
Administrative Agent (as from time to time in effect, the "CREDIT AGREEMENT"),
and is entitled to the benefits thereof and of the other Credit Documents. As
provided in the Credit Agreement, this Note is subject to mandatory prepayment
prior to the maturity of any Swing Line Loan evidenced hereby, in whole or in
part.
In case an Event of Default shall occur and be continuing, the principal of
and accrued interest on this Note may be declared to be due and payable in the
manner and with the effect provided in the Credit Agreement.
The Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note. No failure to exercise, or delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of any such rights.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF OHIO.
JO-ANN STORES, INC.
By: ____________________________________
Executive Vice President
& Chief Financial Officer
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
AMOUNT
OF
DATE AMOUNT TYPE PRINCIPAL UNPAID
OF OF OF PAID OR PRINCIPAL MADE
NOTATION LOAN LOAN MATURITY PREPAID BALANCE BY
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B-1
NOTICE OF BORROWING
[Date]
KeyBank National Association,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
127 Public Square
Cleveland, Ohio 44114
Attention: LARGE CORPORATE GROUP
RE: NOTICE OF BORROWING
UNDER CREDIT AGREEMENT
Ladies and Gentlemen:
The undersigned, Jo-Ann Stores, Inc., an Ohio corporation (the "BORROWER"),
refers to the Credit Agreement, dated as of May 5, 1999 (as amended from time to
time, the "CREDIT AGREEMENT", the terms defined therein being used herein as
therein defined), among the Borrower, the financial institutions from time to
time party thereto (the "LENDERS"), and KeyBank National Association, as
Administrative Agent for such Lenders, and hereby gives you notice, irrevocably,
pursuant to section 2.2(a) of the Credit Agreement, that the undersigned hereby
requests one or more Borrowings under the Credit Agreement, and in that
connection sets forth in the schedule attached hereto the information relating
to each such Borrowing (collectively the "PROPOSED BORROWING") as required by
section 2.2(a) of the Credit Agreement.
The Borrower hereby specifies that the Proposed Borrowing will consist of
Loans as indicated in the schedule attached hereto.
The Borrower hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties of the Credit Parties
contained in the Credit Agreement and the other Credit Documents are and
will be true and correct in all material respects, before and after giving
effect to the Proposed Borrowing and to the application of the proceeds
thereof, as though made on such date, except to the extent that such
representations and warranties expressly relate to an earlier specified
date, in which case such representations and warranties were true and
correct in all material respects as of the date when made; and
(B) no Default or Event of Default has occurred and is continuing,
or would result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
JO-ANN STORES, INC.
By: ____________________________________
Title:
<PAGE>
BORROWING SCHEDULE
PROPOSED BORROWING #1:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
BUSINESS DAY INTEREST PERIOD
OF AGGREGATE IF LOANS ARE
PROPOSED FACILITY TYPE OF AMOUNT EURODOLLAR
BORROWING LOANS OF LOANS LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Revolving Prime Rate Loans One Month
____, 19___ Facility
Eurodollar Loans $_______ Two Months
Swing Line
Facility Money Market Rate Loans with Three Months
a maturity of ___ days (not
[Circle one of more than 7 days) and a Six Months
above] Quoted rate of ____%
[Circle one of
[Circle and/or above]
complete one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROPOSED BORROWING #2:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
BUSINESS DAY INTEREST PERIOD
OF AGGREGATE IF LOANS ARE
PROPOSED FACILITY TYPE OF AMOUNT EURODOLLAR
BORROWING LOANS OF LOANS LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Revolving Prime Rate Loans One Month
____, 19___ Facility
Eurodollar Loans $_______ Two Months
Swing Line
Facility Money Market Rate Loans with Three Months
a maturity of ___ days (not
[Circle one of more than 7 days) and a Six Months
above] Quoted rate of ____%
[Circle one of
[Circle and/or above]
complete one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPOSED BORROWING #3:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
BUSINESS DAY INTEREST PERIOD
OF AGGREGATE IF LOANS ARE
PROPOSED FACILITY TYPE OF AMOUNT EURODOLLAR
BORROWING LOANS OF LOANS LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Revolving Prime Rate Loans One Month
____, 19___ Facility
Eurodollar Loans $_______ Two Months
Swing Line
Facility Money Market Rate Loans with Three Months
a maturity of ___ days (not
[Circle one of more than 7 days) and a Six Months
above] Quoted rate of ____%
[Circle one of
[Circle and/or above]
complete one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROPOSED BORROWING #4:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
BUSINESS DAY INTEREST PERIOD
OF AGGREGATE IF LOANS ARE
PROPOSED FACILITY TYPE OF AMOUNT EURODOLLAR
BORROWING LOANS OF LOANS LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Revolving Prime Rate Loans One Month
____, 19___ Facility
Eurodollar Loans $_______ Two Months
Swing Line
Facility Money Market Rate Loans with Three Months
a maturity of ___ days (not
[Circle one of more than 7 days) and a Six Months
above] Quoted rate of ____%
[Circle one of
[Circle and/or above]
complete one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT B-2
NOTICE OF CONVERSION
[Date]
KeyBank National Association,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
127 Public Square
Cleveland, Ohio 44114
Attention: LARGE CORPORATE GROUP
RE: NOTICE OF CONVERSION
OF OUTSTANDING GENERAL REVOLVING LOANS
UNDER THE CREDIT AGREEMENT
Ladies and Gentlemen:
The undersigned, Jo-Ann Stores, Inc., an Ohio corporation (the "BORROWER"),
refers to the Credit Agreement, dated as of May 5, 1999 (as amended from time to
time, the "CREDIT AGREEMENT", the terms defined therein being used herein as
therein defined), among the Borrower, the financial institutions from time to
time party thereto (the "LENDERS"), and KeyBank National Association, as
Administrative Agent for such Lenders, and hereby gives you notice, irrevocably,
pursuant to section 2.5 of the Credit Agreement, that the undersigned hereby
requests one or more Conversions of General Revolving Loans of one Type into
General Revolving Loans of another Type, pursuant to section 2.5 of the Credit
Agreement, and in that connection sets forth in the schedule attached hereto the
information relating to each such conversion.
Very truly yours,
JO-ANN STORES, INC.
By: ____________________________________
Title:
<PAGE>
CONVERSION SCHEDULE
PROPOSED CONVERSION #1
[OF THE GENERAL REVOLVING LOANS DESCRIBED IN THE FIRST TABLE BELOW
INTO GENERAL REVOLVING LOANS DESCRIBED IN THE SECOND TABLE BELOW,
SUCH CONVERSION TO BE MADE ON __________]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AGGREGATE INTEREST PERIOD
AMOUNT IF LOANS ARE
DATE OF LOANS TYPE OF LOANS OF LOANS EURODOLLAR LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Month
____, 19__ Prime Rate Loans
$________ Two Months
Eurodollar Loans
Three Months
[Circle One of Six Months
Above]
[Circle one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AGGREGATE INTEREST PERIOD
AMOUNT IF LOANS ARE
DATE OF LOANS TYPE OF LOANS OF LOANS EURODOLLAR LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Month
____, 19__ Prime Rate Loans
$________ Two Months
Eurodollar Loans
Three Months
[Circle One of Six Months
Above]
[Circle one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROPOSED CONVERSION #2
[OF THE GENERAL REVOLVING LOANS DESCRIBED IN THE FIRST TABLE BELOW
INTO GENERAL REVOLVING LOANS DESCRIBED IN THE SECOND TABLE BELOW,
SUCH CONVERSION TO BE MADE ON __________]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AGGREGATE INTEREST PERIOD
AMOUNT IF LOANS ARE
DATE OF LOANS TYPE OF LOANS OF LOANS EURODOLLAR LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Month
____, 19__ Prime Rate Loans
$________ Two Months
Eurodollar Loans
Three Months
[Circle One of Six Months
Above]
[Circle one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AGGREGATE INTEREST PERIOD
AMOUNT IF LOANS ARE
DATE OF LOANS TYPE OF LOANS OF LOANS EURODOLLAR LOANS
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Month
____, 19__ Prime Rate Loans
$________ Two Months
Eurodollar Loans
Three Months
[Circle One of Six Months
Above]
[Circle one of
above]
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT B-3
LETTER OF CREDIT REQUEST
No. ______________(1)
Dated __________(2)
KeyBank National Association,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
127 Public Square
Cleveland, Ohio 44114
Attention: LARGE CORPORATE GROUP
& INTERNATIONAL DEPARTMENT
Ladies and Gentlemen:
The undersigned, Jo-Ann Stores, Inc., an Ohio corporation (the "BORROWER"),
refers to the Credit Agreement, dated as of May 5, 1999 (as amended, modified or
supplemented from time to time, the "CREDIT AGREEMENT", the capitalized terms
defined therein being used herein as therein defined), among the Borrower, the
financial institutions from time to time party thereto (the "LENDERS"), and
KeyBank National Association, as Administrative Agent for such Lenders.
The Borrower hereby requests that ________ , as an Issuing Bank, issue a
Letter of Credit on ______________, 19__ (the "DATE OF ISSUANCE") in the
aggregate amount of U.S. $________________, for the account of_________.
The beneficiary of the requested Letter of Credit will be
________________,(3) and such Letter of Credit will be in support of
_____________________(4) and will have a stated termination date of
______________________.(5)
The Borrower hereby certifies that after giving effect to the requested
issuance of the Letter of Credit:
(i) $_________ principal amount of Loans will be outstanding;
and
(ii) $________ aggregate undrawn face amount of Letters of Credit will
be outstanding.
The Borrower hereby certifies that the following statements are true on the
date hereof, and will be true on the Date of Issuance:
- ---------------------------------
(1) Letter of Request Number
(2) Date of Letter of Request (at least three Business Days prior to the
Date of Issuance or such lesser number as may be agreed by the
relevant Issuing Bank).
(3) Insert name and address of beneficiary.
(4) Insert description of the supported obligations, name of agreement and/or
the commercial transaction to which this Letter of Credit Request relates.
(5) Insert last date upon which drafts may be presented (which may not be
beyond the 15th Business Day next preceding the Maturity Date).
<PAGE>
(A) the representations and warranties of the Credit Parties contained
in the Credit Agreement and the other Credit Documents are and will be true
and correct in all material respects, before and after giving effect to the
issuance of the Letter of Credit requested hereby, as though made on the
Date of Issuance, except to the extent that such representations and
warranties expressly relate to an earlier specified date, in which case
such representations and warranties were true and correct in all material
respects when made; and
(B) no Default or Event of Default has occurred and is continuing, or
would result after giving effect to the issuance of the Letter of Credit
requested hereby.
Copies of all documentation with respect to the supported transaction are
attached hereto.
Very truly yours,
JO-ANN STORES, INC.
By: ____________________________________
Title:
2
<PAGE>
EXHIBIT C
----------------------------
FORM OF
SUBSIDIARY GUARANTY
----------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
THE SUBSIDIARIES OF JO-ANN STORES, INC.
NAMED HEREIN
AS GUARANTORS
WITH
[LOGO]
KEYBANK NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT
-----------------------------
SUBSIDIARY GUARANTY
DATED AS OF
MAY 5, 1999
-----------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY, dated as of May 5, 1999 (as amended, modified or
supplemented from time to time, "THIS GUARANTY"), made by each of the
undersigned (each, together with its successors and assigns, a "GUARANTOR" and
collectively, the "GUARANTORS"), with KEYBANK NATIONAL ASSOCIATION, a national
banking association, as Administrative Agent (herein, together with its
successors and assigns in such capacity, the "ADMINISTRATIVE AGENT") under the
Credit Agreement referred to below:
PRELIMINARY STATEMENTS:
(1) Except as otherwise defined herein, terms used herein and defined in
the Credit Agreement (as defined below) shall be used herein as therein defined.
(2) This Guaranty is made pursuant to the Credit Agreement, dated as of the
date hereof (herein, as amended or otherwise modified, restated or replaced from
time to time, the "CREDIT AGREEMENT"), among Jo-Ann Stores, Inc., an Ohio
corporation (herein, together with its successors and assigns, the "BORROWER"),
the financial institutions named as lenders therein (herein, together with their
successors and assigns, the "LENDERS"), and KeyBank National Association, as the
Administrative Agent for the Lenders under the Credit Agreement, providing,
among other things, for loans or advances or other extensions of credit to or
for the benefit of the Borrower of up to $300,000,000, with such loans or
advances being evidenced by promissory notes (the "NOTES", such term to include
all notes and other securities issued in exchange therefor or in replacement
thereof).
(3) This Guaranty is made for the benefit of the Administrative Agent, each
Issuing Bank and the Lenders (all of the foregoing, collectively, the
"CREDITORS") to guarantee the payment of the principal of and interest on the
Notes and the payment and performance by the Borrower of its obligations under
the Credit Agreement and the other Credit Documents to which the Borrower is a
party. This Guaranty is one of the Credit Documents referred to in the Credit
Agreement.
(4) It is a condition to the making of Loans and the issuance of, and
participation in, Letters of Credit, under the Credit Agreement that each
Guarantor shall have executed and delivered this Guaranty.
(5) Each Guarantor is a direct or indirect Subsidiary of the Borrower. Each
Guarantor will obtain benefits from the incurrence of Loans by the Borrower, and
the issuance of Letters of Credit for the account of the Borrower or any of its
Subsidiaries, under the Credit Agreement and, accordingly, desires to execute
this Guaranty in order to satisfy the condition described in the preceding
paragraph and to induce the Lenders to make Loans to the Borrower, and to issue
and participate in Letters of Credit for the account of the Borrower or any of
its Subsidiaries.
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Administrative Agent and the other Creditors and hereby
covenants and agrees with the Administrative Agent and each other Creditor as
follows:
1. GUARANTY BY THE GUARANTORS, ETC. (a) Each Guarantor, jointly and
severally, irrevocably and unconditionally guarantees the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of the following:
(i) the principal of and interest on the Notes issued by, and the
Loans made to, the Borrower under the Credit Agreement,
<PAGE>
(ii) all reimbursement obligations with respect to Letters of Credit
issued under the Credit Agreement, including (without limitation) all
obligations to reimburse LC Disbursements made pursuant to Letters of
Credit issued (or deemed issued) under the Credit Agreement, and
(iii) all other obligations and liabilities owing by the Borrower to
the Administrative Agent or any of the other Creditors under the Credit
Agreement and the other Credit Documents to which the Borrower is now or
may hereafter become a party (including, without limitation, indemnities,
Fees and other amounts payable thereunder),
in all cases whether now existing, or hereafter incurred under, arising out of,
or in connection with, the Credit Agreement or any of such other Credit
Documents, including any such interest or other amounts which, but for any
automatic stay under section 362(a) of the Bankruptcy Code, would become due.
Such guaranty is an absolute, unconditional, present and continuing guaranty of
payment and not of collectibility and is in no way conditioned or contingent
upon any attempt to collect from the Borrower or any other Subsidiary or
Affiliate of the Borrower, or any other action, occurrence or circumstance
whatsoever.
(b) In addition to the foregoing, each Guarantor also, jointly and
severally, irrevocably and unconditionally guarantees that each of the terms,
conditions, covenants and agreements of the Borrower under the Credit Agreement
and the other Credit Documents will be duly and punctually performed and
observed strictly in accordance with the terms thereof and that if for any
reason whatsoever the Borrower shall fail to do so, such Guarantor shall duly
and punctually perform and observe, or cause the Borrower to duly and punctually
perform and observe, the same. Such guaranty is an absolute, unconditional,
present and continuing guaranty of performance and is in no way conditioned or
contingent upon any attempt to enforce performance by the Borrower or any other
Subsidiary or Affiliate of the Borrower, or any other act, occurrence or
circumstance whatsoever.
(c) All indebtedness, liabilities and obligations guaranteed under section
1(a) and 1(b) hereof are herein collectively referred to as the "GUARANTEED
OBLIGATIONS".
(d) In addition to the foregoing, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations to the Administrative Agent and the other Creditors,
whether or not due or payable by the obligor thereon, upon the occurrence in
respect of the Borrower or other applicable obligor of any bankruptcy or
insolvency proceeding or case under the Bankruptcy Code, and unconditionally and
irrevocably, jointly and severally, promises to pay such Guaranteed Obligations
to the Administrative Agent, for the benefit of the Creditors, on demand, in
such currency and otherwise in such manner as is provided in the Credit
Documents governing such Guaranteed Obligations.
(e) As a separate, additional and continuing obligation, each Guarantor
unconditionally and irrevocably undertakes and agrees, for the benefit of the
Creditors, that, should any amounts constituting Guaranteed Obligations not be
recoverable from the Borrower or other applicable obligor for any reason
whatsoever (including, without limitation, by reason of any provision of any
Credit Document or any other agreement or instrument executed in connection
therewith being or becoming, at any time, voidable, void, unenforceable, or
otherwise invalid under any applicable law), THEN notwithstanding any notice or
knowledge thereof by the Administrative Agent, any other Creditor, any of their
respective Affiliates, or any other person, each Guarantor, jointly and
severally, as sole, original and independent obligor, upon demand by the
Administrative Agent, will make payment to the Administrative Agent, for the
account of the Creditors, of all such obligations not so recoverable by way of
full indemnity, in such currency and otherwise in such manner as is provided in
the Credit Documents.
(f) Each Guarantor understands, agrees and confirms that the Administrative
Agent and the other Creditors may enforce this Guaranty up to the full amount of
the Guaranteed Obligations against any Guarantor without proceeding against any
other Guarantor, the Borrower or other person, against any security for all or
any portion of the Guaranteed Obligations, or under any other guaranty covering
all or any portion of the Guaranteed Obligations. All payments by each Guarantor
under this Guaranty shall be made in such currency and otherwise in such manner
as is provided in the Credit Documents to which such payments relate.
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2. SUBORDINATION. (a) Any Indebtedness of the Borrower now or hereafter
held by any Guarantor is hereby subordinated to the Indebtedness of the Borrower
to the Administrative Agent and the other Creditors; and such Indebtedness of
the Borrower to any Guarantor, if the Administrative Agent, after an Event of
Default has occurred so requests, shall be collected, enforced and received by
such Guarantor as trustee for the Administrative Agent and the other Creditors
and be paid over to the Administrative Agent, for the benefit of the
Administrative Agent and the other Creditors, on account of the Indebtedness of
the Borrower to the Administrative Agent and the other Creditors, but without
affecting or impairing in any manner the liability of such Guarantor under the
other provisions of this Guaranty. Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any Indebtedness of the Borrower to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination.
(b) If and to the extent that any Guarantor makes any payment to the
Administrative Agent or any other Creditor or to any other person pursuant to or
in respect of this Guaranty, any reimbursement or similar claim which such
Guarantor may have against the Borrower by reason thereof shall be subject and
subordinate to the prior termination of the Total Commitment and indefeasible
payment in full of all Guaranteed Obligations owed to the Administrative Agent
and the other Creditors.
3. GUARANTORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Guarantor
under this Guaranty shall be absolute and unconditional, shall not be subject to
any counterclaim, setoff, deduction or defense based on any claim such Guarantor
may have against the Borrower or any other person, including, without
limitation, the Administrative Agent, any other Creditor, any of their
respective Affiliates, or any other Guarantor, and shall remain in full force
and effect without regard to, and shall not be released, suspended, abated,
deferred, reduced, limited, discharged, terminated or otherwise impaired or
adversely affected by any circumstance or occurrence whatsoever, other than
indefeasible payment in full of, and complete performance of, all of the
Guaranteed Obligations, including, without limitation:
(1) any increase in the amount of the Guaranteed Obligations
outstanding from time to time, including, without limitation, any increase
in the aggregate outstanding amount of the Loans and Letters of Credit
above any specific maximum amount referred to herein or in the Credit
Agreement as in effect on the date hereof, and any increase in any interest
rate, Fee or other amount applicable to any portion of the Guaranteed
Obligations or otherwise payable under any Credit Document;
(2) any direction as to the application of any payment by the Borrower
or by any other person;
(3) any incurrence of additional Guaranteed Obligations at any time or
under any circumstances, including, without limitation, (x) during the
continuance of a Default or Event of Default, (y)(1) at any time when all
conditions to such incurrence have not been satisfied, or (z) in excess of
borrowing base, sublimit or other similar or dissimilar limitations
contained in the Credit Agreement or any of the other Credit Documents;
(4) any renewal or extension of the time for payment or maturity of
any of the Guaranteed Obligations, or any amendment or modification of, or
addition or supplement to, or deletion from, the Credit Agreement, any
other Credit Document, or any other instrument or agreement applicable to
the Borrower or any other person, or any part thereof, or any assignment,
transfer or other disposition of any thereof;
(5) any failure of the Credit Agreement, any other Credit Document, or
any other instrument or agreement applicable to the Borrower or any other
person, to constitute the legal, valid and binding agreement or obligation
of any party thereto, enforceable in accordance with its terms, or any
irregularity in the form of any Credit Document;
(6) any failure on the part of the Borrower or any other person to
perform or comply with any term or provision of the Credit Agreement, any
other Credit Document, or any such other instrument or agreement;
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(7) any waiver, consent, extension, indulgence or other action or
inaction (including, without limitation, any lack of diligence, any failure
to mitigate damages or marshall assets, or any election of remedies) under
or in respect of (x) the Credit Agreement, any other Credit Document, or
any such other instrument or agreement, or (y) any obligation or liability
of the Borrower or any other person;
(8) any exercise or non-exercise of any right, power or remedy under
or in respect of the Credit Agreement, any other Credit Document, or any
such other instrument or agreement, or any such obligation or liability,
including, without limitation, (x) any failure of the Administrative Agent
or any other Creditor to give notice of any Default or Event of Default
under any Credit Document, or to advance funds for the protection or
preservation of, or provision of insurance for, or payment of taxes on, any
property which is collateral security for any of the Guaranteed
Obligations, and (y) any act or failure to act on the part of the
Administrative Agent or any other Creditor, in any manner referred to in
this Guaranty, or otherwise, which may deprive such Guarantor of its right
to (A) subrogation against the Borrower to recover full reimbursement or
indemnity for any payments made pursuant to this Guaranty, or (B)
contribution from any other Guarantor for any such payments made by it, or
which otherwise may adversely affect the amount recoverable upon the
exercise of any such right of subrogation or contribution;
(9) any application of any amounts by whomsoever paid or howsoever
realized to the Guaranteed Obligations or any other liabilities owed to the
Administrative Agent or any other Creditor, regardless of the order or
priority of any such application, and regardless of what liabilities of the
Borrower or any other person remain unpaid;
(10) any settlement or compromise of any of the Guaranteed
Obligations, any security therefor or guaranty thereof;
(11) any payment made to the Administrative Agent or any other
Creditor on the Guaranteed Obligations which the Administrative Agent or
any other Creditor repays, returns or otherwise restores to the Borrower or
any other applicable obligor pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding;
(12) any subordination of any of the claims of the Administrative
Agent or any other Creditor to any claims of any creditors of the Borrower
or any other person, or any subordination of any liens or security
interests in favor of the Administrative Agent or any other Creditor to any
liens or security interests of any other person;
(13) any sale, exchange, release, surrender or foreclosure of, or any
realization upon, or other dealing with, in any manner and in any order,
any property, rights or interests by whomsoever at any time granted,
assigned, pledged or mortgaged to secure, or howsoever securing, the
Guaranteed Obligations, or any other liabilities or obligations (including
any of those hereunder), or any portion of any thereof;
(14) the existence of any right of setoff, offset or banker's lien, or
any failure to exercise rights in respect thereof, or any release thereof;
(15) any furnishing of any new or additional security or any new or
additional guaranty to or for the benefit of the Administrative Agent or
any other Creditor, or any acceptance thereof, including, without
limitation, any addition of any Guarantor to this Guaranty;
(16) any release of any security or any guaranty by or at the
direction of the Administrative Agent or any other Creditor, or any release
or discharge of, or limitation of recourse against, any person furnishing
any security or guaranty, including, without limitation, any release or
discharge of any Guarantor from this Guaranty;
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(17) any limitation on any person's liability or obligation under the
Credit Agreement, any other Credit Document, or any such other instrument
or agreement, or any such obligation or liability, or any termination,
cancellation, avoidance, commercial or other frustration, impracticability,
invalidity, unenforceability or ineffectiveness, in whole or in part, of
the Credit Agreement, any other Credit Document, or any such other
instrument or agreement or any such obligation or liability or any term or
provision of any thereof;
(18) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition, arrangement or other similar
proceeding relating to the Borrower or to any of its properties or assets,
or any such proceeding by, among or on behalf of any of its creditors, as
such, or any proceeding for the voluntary liquidation or dissolution or
other winding up of the Borrower, whether or not insolvency or bankruptcy
proceedings, or any assignment for the benefit of its creditors, or any
other marshaling of its assets, or any action taken by any trustee or
receiver or by any court in any such proceeding;
(19) any disallowance or limitation of any claim of the Administrative
Agent, any other Creditor, or any other person, in any such proceeding;
(20) any change in the ownership of all or any part of the capital
stock of, or other equity interests in, the Borrower, any of its
Subsidiaries or Affiliates, or any other person, or any merger or
consolidation involving the Borrower, any of its Subsidiaries or
Affiliates, or any other person, or any purchase, acquisition, sale, lease
or disposition by the Borrower, any of its Subsidiaries or Affiliates, or
any other person, of any assets or properties;
(21) any breach by the Borrower or any of its other Subsidiaries or
Affiliates of any of their representations or warranties contained in any
of the Credit Documents or any other certificate or document executed and
delivered in connection therewith;
(22) any inability of the Borrower to create or incur any Subordinated
Indebtedness or other Indebtedness, or the existence of any contractual or
other restriction upon the ability of the Borrower to issue and sell shares
of its capital stock, to purchase, sell, lease or otherwise dispose of
assets, to incur Subordinated Indebtedness or other Indebtedness, or to
otherwise conduct its business affairs;
(23) any assignment, transfer or other disposition, in whole or in
part, by the Borrower or any other person of its interest in any of the
property, rights or interests constituting security for all or any portion
of the Guaranteed Obligations or any other Indebtedness, liabilities or
obligations;
(24) any failure of any of the Credit Documents, or any other
agreement or instrument securing all or any portion of the Guaranteed
Obligations, to effectively subject any property, rights or interests to
any liens or security interests purported to be granted or created thereby,
or any failure of any such liens or security interests to be or become
perfected or to establish or maintain the priority over other liens and
security interests contemplated thereby;
(25) any condemnation or taking of, or any encumbrance on or
interference with any use of, or any damage to, or any destruction of, any
such property, or any part thereof or interest therein;
(26) any lack of notice to, or knowledge by, any Guarantor of any of
the matters referred to above; and/or
(27) any other circumstance or occurrence, whether similar or
dissimilar to any of the foregoing, which could or might constitute a
defense available to, or a discharge of the obligations of, a guarantor or
other surety.
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4. WAIVERS. Each Guarantor unconditionally waives, to the maximum extent
permitted under any applicable law now or hereafter in effect, insofar as its
obligations under this Guaranty are concerned, (i) notice of any of the matters
referred to in section 3, (ii) all notices required by statute, rule of law or
otherwise to preserve any rights against such Guarantor hereunder, including,
without limitation, any demand, presentment, proof or notice of dishonor or
non-payment of any Guaranteed Obligation, notice of acceptance of this Guaranty,
notice of the incurrence of any Guaranteed Obligation, notice of any failure on
the part of the Borrower, any of its Subsidiaries or Affiliates, or any other
person, to perform or comply with any term or provision of the Credit Agreement,
any other Credit Document or any other agreement or instrument to which the
Borrower or any other person is a party, or notice of the commencement of any
proceeding against any other person or its any of its property or assets, (iii)
any right to the enforcement, assertion or exercise against the Borrower or
against any other person or any collateral of any right, power or remedy under
or in respect of the Credit Agreement, the other Credit Documents or any other
agreement or instrument, and (iv) any requirement that such Guarantor be joined
as a party to any proceedings against the Borrower or any other person for the
enforcement of any term or provision of the Credit Agreement, the other Credit
Documents, this Guaranty or any other agreement or instrument.
5. SUBROGATION RIGHTS. Until such time as the Guaranteed Obligations have
been paid in full in cash and otherwise fully performed and the Total Commitment
under the Credit Agreement has been terminated, each Guarantor hereby
irrevocably waives all rights of subrogation which it may at any time otherwise
have as a result of this Guaranty (whether contractual, under section 509 of the
Bankruptcy Code, or otherwise) to the claims of the Administrative Agent and/or
the other Creditors against the Borrower, any other Guarantor or any other
guarantor of or surety for the Guaranteed Obligations and all contractual,
statutory or common law rights of reimbursement, contribution or indemnity from
the Borrower or any other Guarantor which it may at any time otherwise have as a
result of this Guaranty.
6. SEPARATE ACTIONS. A separate action or actions may be brought and
prosecuted against any Guarantor whether or not action is brought against any
other Guarantor, any other guarantor or the Borrower, and whether or not any
other Guarantor, any other guarantor of the Borrower or the Borrower be joined
in any such action or actions.
7. GUARANTORS FAMILIAR WITH BORROWER'S AFFAIRS, ETC. Each Guarantor
confirms that an executed (or conformed) copy of each of the Credit Documents
has been made available to its principal executive officers, that such officers
are familiar with the contents thereof and of this Guaranty, and that it has
executed and delivered this Guaranty after reviewing the terms and conditions of
the Credit Agreement, the other Credit Documents and this Guaranty and such
other information as it has deemed appropriate in order to make its own credit
analysis and decision to execute and deliver this Guaranty. Each Guarantor
confirms that it has made its own independent investigation with respect to the
creditworthiness of the Borrower and its other Subsidiaries and Affiliates and
is not executing and delivering this Guaranty in reliance on any representation
or warranty by the Administrative Agent or any other Creditor or any other
person acting on behalf of the Administrative Agent or any other Creditor as to
such creditworthiness. Each Guarantor expressly assumes all responsibilities to
remain informed of the financial condition of the Borrower and its other
Subsidiaries and Affiliates and any circumstances affecting (i) the Borrower's
or any other Subsidiary's or Affiliate's ability to perform its obligations
under the Credit Agreement and the other Credit Documents to which it is a
party, or (ii) any collateral securing, or any other guaranty for, all or any
part of the Borrower's or such other Subsidiary's or Affiliate's payment and
performance obligations thereunder; and each Guarantor further agrees that the
Administrative Agent and the other Creditors shall have no duty to advise any
Guarantor of information known to them regarding such circumstances or the risks
such Guarantor undertakes in this Guaranty.
8. COVENANT NOT TO CAUSE EVENTS OF DEFAULT UNDER CREDIT AGREEMENT, ETC.
Each Guarantor covenants and agrees that on and after the date hereof and until
this Guaranty is terminated in accordance with section 25 hereof, such Guarantor
shall take, or will refrain from taking, as the case may be, all actions that
are necessary to be taken or not taken so that no violation of any provision,
covenant or agreement contained in section 8 or 9 of the Credit Agreement, and
so that no Default or Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
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9. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants
that:
(a) it is a duly organized or formed and validly existing corporation,
partnership or limited liability company, as the case may be, in good
standing under the laws of the jurisdiction of its formation and has the
corporate, partnership or limited liability company power and authority, as
applicable, to own its property and assets and to transact the business in
which it is engaged and presently proposes to engage;
(b) it has the corporate or other organizational power and authority
to execute, deliver and carry out the terms and provisions of the Credit
Documents to which it is party and has taken all necessary corporate or
other organizational action to authorize the execution, delivery and
performance of the Credit Documents to which it is party;
(c) it has duly executed and delivered each Credit Document to which
it is party and each Credit Document to which it is party constitutes the
legal, valid and binding agreement or obligation of such Guarantor
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law);
(d) neither the execution, delivery and performance by such Guarantor
of the Credit Documents to which it is party nor compliance with the terms
and provisions thereof (i) will contravene any provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court
or governmental instrumentality applicable to such Guarantor or its
properties and assets, (ii) will conflict with or result in any breach of,
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets
of such Guarantor pursuant to the terms of any promissory note, bond,
debenture, indenture, mortgage, deed of trust, credit or loan agreement, or
any other material agreement or other instrument, to which such Guarantor
is a party or by or to which it or any of its property or assets are bound
or affected, or (iii) will violate any provision of the certificate or
articles of incorporation, code of regulations or by-laws, or other charter
or organizational documents of such Guarantor;
(e) no order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, any foreign
or domestic governmental or public body or authority, or any subdivision
thereof, is required to authorize or is required as a condition to (i) the
execution, delivery and performance by such Guarantor of any Credit
Document to which it is a party, or (ii) the legality, validity, binding
effect or enforceability of any Credit Document to which such Guarantor is
a party;
(f) there are no actions, suits or proceedings pending or, to, the
knowledge of such Guarantor, threatened with respect to such Guarantor
which question the validity or enforceability of any of the Credit
Documents to which such Guarantor is a party, or of any action to be taken
by such Guarantor pursuant to any of the Credit Documents to which it is a
party; and
(g) as of the date such Guarantor has become a party to this Guaranty,
(i) such Guarantor has received consideration which is the reasonable
equivalent value of the obligations and liabilities that such Guarantor has
incurred to the Administrative Agent and the other Creditors under this
Guaranty and the other Credit Documents to which such Guarantor is a party;
(ii) such Guarantor has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to
engage and is solvent and able to pay its debts as they mature; (iii) such
Guarantor owns property having a value, both at fair valuation and at
present fair salable value, greater than the amount required to pay its
debts; and (iv) such Guarantor is not entering into the Credit Documents to
which it is a party with the intent to hinder, delay or defraud its
creditors.
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10. CONTINUING GUARANTY; REMEDIES CUMULATIVE, ETC. This Guaranty is a
continuing guaranty, all liabilities to which it applies or may apply under the
terms hereof shall be conclusively presumed to have been created in reliance
hereon, and this Guaranty shall remain in full force and effect until terminated
as provided in section 25 hereof. No failure or delay on the part of the
Administrative Agent or any other Creditor in exercising any right, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein expressly specified are cumulative and
not exclusive of any rights or remedies which the Administrative Agent or any
other Creditor would otherwise have. No notice to or demand on any Guarantor in
any case shall entitle such Guarantor to any other further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or any other Creditor to any other or further action in any
circumstances without notice or demand. It is not necessary for the
Administrative Agent or any other Creditor to inquire into the capacity or
powers of the Borrower or any of its Subsidiaries or the officers, directors,
partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
11. ENFORCEMENT EXPENSES. The Guarantors hereby jointly and severally agree
to pay, to the extent not paid pursuant to section 12.1 of the Credit Agreement,
all reasonable out-of-pocket costs and expenses of the Administrative Agent and
each Creditor in connection with the enforcement of this Guaranty and any
amendment, waiver or consent relating hereto (including, without limitation, the
reasonable fees and disbursements of counsel employed by the Administrative
Agent or any of the other Creditors).
12. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon each
Guarantor and its successors and assigns, and shall inure to the benefit of the
Administrative Agent and the other Creditors and their successors and assigns.
13. AMENDMENTS AND WAIVERS. Neither this Guaranty nor any provision hereof
may be changed, waived, discharged or terminated except with the written consent
of (i) the Administrative Agent, acting with the written consent of the Required
Lenders (or to the extent required by section 12.12 of the Credit Agreement,
with the written consent of each Lender), and (ii) each Guarantor affected
thereby (it being understood that the addition or release of any Guarantor
hereunder shall not constitute a change, waiver, discharge or termination
affecting any Guarantor other than the Guarantor so added or released).
14. HEADINGS DESCRIPTIVE. The headings of the several sections of this
Guaranty are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Guaranty.
15. SEVERABILITY. Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
16. RIGHT OF SETOFF. 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 and during the continuance of an Event of Default, each Creditor is
hereby authorized at any time or from time to time, without notice to any
Guarantor or to any other person, any such notice being expressly waived, to set
off and to appropriate and apply any and all deposits (general or special) and
any other indebtedness at any time held or owing by such Creditor to or for the
credit or the account of such Guarantor, against and on account of the
obligations and liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not the Administrative Agent or such
Creditor shall have made any demand hereunder and although said obligations,
liabilities, deposits or claims, or any of them, shall be contingent or
unmatured. Each Creditor agrees to promptly notify the relevant Guarantor after
any such set off and application, PROVIDED, HOWEVER, that the failure to give
such notice shall not affect the validity of such set off and application.
17. NOTICES. All notices requests, demands or other communications pursuant
hereto shall be made in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed,
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transmitted, cabled or delivered, if to any Guarantor, at the address specified
for it in Annex II to the Credit Agreement (or if no such address is specified,
to it c/o the Borrower), with a courtesy copy to the Borrower at its address
specified in or pursuant to the Credit Agreement; if to the Administrative Agent
or any Lender, as provided in the Credit Agreement; or in any case at such other
address as any of the persons listed above may hereafter notify the others in
writing. All such notices and communication shall be mailed, telegraphed,
telexed, facsimile transmitted, or cabled or sent by overnight courier, and
shall be effective when received.
18. REINSTATEMENT. If claim is ever made upon the Administrative Agent or
any other Creditor for recission, repayment, recovery or restoration of any
amount or amounts received by the Administrative Agent or any other Creditor in
payment or on account of any of the Guaranteed Obligations and any of the
aforesaid payees repays all or part of said amount by reason of (x) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property, or (y) any settlement or
compromise of any such claim effected by such payee with any such claimant
(including the Borrower), THEN and in such event (i) any such judgment, decree,
order, settlement or compromise shall be binding upon each Guarantor,
notwithstanding any revocation hereof or other instrument evidencing any
liability of the Borrower, (ii) each Guarantor shall be and remain liable to the
aforesaid payees hereunder for the amount so repaid or otherwise recovered or
restored to the same extent as if such amount had never originally been received
by any such payee, and (iii) this Guaranty shall continue to be effective or be
reinstated, as the case may be, all as if such repayment or other recovery had
not occurred.
19. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. (a) THIS GUARANTY AND THE
RIGHTS AND OBLIGATIONS OF THE ADMINISTRATIVE AGENT, THE CREDITORS AND OF THE
UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF OHIO. Any legal action or proceeding with respect to this
Guaranty may be brought in the Courts of the State of Ohio, or of the United
States of America for the Northern District of Ohio, and, by execution and
delivery of this Guaranty, each Guarantor hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. Each Guarantor hereby irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered mail, return receipt
requested, to such Guarantor at its address provided herein, such service to
become effective 30 days after such mailing, or such earlier time as may be
provided by applicable law. Nothing herein shall affect the right of the
Administrative Agent or any of the other Creditors to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against each Guarantor in any other jurisdiction.
(b) Each Guarantor hereby irrevocably waives any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Guaranty or any other
Credit Document or Credit Document brought in the courts referred to in section
19(a) above and hereby further irrevocably waives and agrees not to plead or
claim in any such court that such action or proceeding brought in any such court
has been brought in an inconvenient forum.
(c) EACH GUARANTOR, THE ADMINISTRATIVE AGENT AND EACH OTHER CREDITOR HEREBY
IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
20. SALE OF CAPITAL STOCK OF A GUARANTOR. In the event that all of the
capital stock of one or more Guarantors is sold or otherwise disposed of or
liquidated in compliance with the requirements of section 9.2 of the Credit
Agreement (or such sale or other disposition has been approved in writing by the
Required Lenders (or all Lenders if required by section 12.12 of the Credit
Agreement)) and the proceeds of such sale, disposition or liquidation are
applied, to the extent applicable, in accordance with the provisions of the
Credit Agreement, such Guarantor shall be released from this Guaranty and this
Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no
further force or effect (it being understood and agreed that the sale of one or
more persons that own, directly or indirectly, all of the capital stock or other
equity interests of any Guarantor shall be deemed to be a sale of such Guarantor
for the purposes of this section 20).
9
<PAGE>
21. CONTRIBUTION AMONG GUARANTORS. Each Guarantor, in addition to the
subrogation rights it shall have against the Borrower under applicable law as a
result of any payment it makes hereunder, shall also have a right of
contribution against all other Guarantors in respect of any such payment PRO
RATA among same based on their respective net fair value as enterprises,
PROVIDED any such right of contribution shall be subject and subordinate to the
prior payment in full of the Guaranteed Obligations (and such Guarantor's
obligations in respect thereof).
22. FULL RECOURSE OBLIGATIONS; EFFECT OF FRAUDULENT TRANSFER LAWS, ETC. It
is the desire and intent of each Guarantor, the Administrative Agent and the
other Creditors that this Guaranty shall be enforced as a full recourse
obligation of each Guarantor to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
If and to the extent that the obligations of any Guarantor under this Guaranty
would, in the absence of this sentence, be adjudicated to be invalid or
unenforceable because of any applicable state or federal law relating to
fraudulent conveyances or transfers, then the amount of such Guarantor's
liability hereunder in respect of the Guaranteed Obligations shall be deemed to
be reduced AB INITIO to that maximum amount which would be permitted without
causing such Guarantor's obligations hereunder to be so invalidated.
23. PAYMENTS FREE AND CLEAR OF SETOFFS, COUNTERCLAIMS AND TAXES, ETC. (a)
All payments made by any Guarantor hereunder will be made without setoff,
counterclaim or other defense and, except as provided for in section 23(b), all
such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding, except as provided in the
second succeeding sentence, any tax, imposed on or measured by the net income or
net profits of a Creditor pursuant to the laws of the jurisdiction under which
such Creditor is organized or the jurisdiction in which the principal office or
Applicable Lending Office of such Creditor is located or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect to
such non excluded taxes, levies imposts, duties, fees, assessments or other
charges (all such nonexcluded taxes levies, imposts, duties, fees assessments or
other charges being referred to collectively as "TAXES"). If any Taxes are so
levied or imposed, the applicable Guarantor agrees to pay the full amount of
such Taxes and such additional amounts as may be necessary so that every payment
by it of all amounts due hereunder, after withholding or deduction for or on
account of any Taxes will not be less than the amount provided for herein. If
any amounts are payable in respect of Taxes pursuant to the preceding sentence,
the applicable Guarantor agrees to reimburse each Creditor, upon the written
request of such Creditor for taxes imposed on or measured by the net income or
profits of such Creditor pursuant to the laws of the jurisdiction in which such
Creditor is organized or in which the principal office or Applicable Lending
Office of such Creditor is located or under the laws of any political
subdivision or taxing authority of any such jurisdiction in which the principal
office or Applicable Lending Office of such Creditor is located and for any
withholding of income or similar taxes imposed by the United States of America
as such Creditor shall determine are payable by, or withheld from, such Creditor
in respect of such amounts so paid to or on behalf of such Creditor pursuant to
the preceding sentence, which request shall be accompanied by a statement from
such Creditor setting forth, in reasonable detail, the computations used in
determining such amounts. The applicable Guarantor will furnish to the
Administrative Agent within 45 days after the date the payment of any Taxes, or
any withholding or deduction on account thereof, is due pursuant to applicable
law certified copies of tax receipts, or other evidence satisfactory to the
applicable Creditor, evidencing such payment by the applicable Creditor. Each
applicable Guarantor will indemnify and hold harmless the Administrative Agent
and each Creditor, and reimburse the Administrative Agent or such Creditor upon
its written request, for the amount of any Taxes so levied or imposed and paid
or withheld by such Creditor.
(b) Notwithstanding anything to the contrary contained in section 23(a),
(i) any applicable Guarantor shall be entitled, to the extent it is required to
do so by law, to deduct or withhold income or other similar taxes imposed by the
United States (or any political subdivision or taxing authority thereof or
therein) from any amounts payable hereunder for the account of any Creditor
which is not a United States person (as such term is defined in section
7701(a)(30) of the Code) for United States federal income tax purposes and which
has not provided to the Borrower such forms that establish a complete exemption
from such deduction or withholding; and (ii) any applicable Guarantor shall not
be obligated pursuant to section 23(a) hereof to gross-up payments to be made to
a Creditor in
10
<PAGE>
respect of income or similar taxes imposed by the United States or any
additional amounts with respect thereto if such Lender has not provided to the
Borrower such forms.
24. JUDGMENT CURRENCY. (a) If for the purposes of obtaining judgment in
any court it is necessary to convert a sum due hereunder in any currency (the
"ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY") each
Guarantor, the Administrative Agent and the other Creditors, by their acceptance
of the benefits hereof, agree, to the fullest extent that they may effectively
do so, that the rate of exchange used shall be that at which in accordance with
normal banking procedures the Administrative Agent could purchase the Original
Currency with the Other Currency at the Payment Office on the second Business
Day preceding that on which final judgment is given.
(b) The obligation of a Guarantor in respect of any sum due in the Original
Currency from it to the Administrative Agent or any other Creditor hereunder
shall, notwithstanding any judgment in any Other Currency, be discharged only to
the extent that on the Business Day following receipt by such Creditor or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such Other Currency such Creditor or the Administrative Agent (as the case may
be) may in accordance with normal banking procedures purchase U.S. Dollars with
such Other Currency; if the amount of the Original Currency so purchased is less
than the sum originally due to such Creditor or the Administrative Agent (as the
case may be) in the Original Currency, such Guarantor agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such Creditor or
the Administrative Agent (as the case may be) against such loss, and if the
amount of the Original Currency so purchased exceeds the sum originally due to
the Administrative Agent or any other Creditor (as the case may be) in the
Original Currency, such Creditor or the Administrative Agent (as the case may
be) agrees to remit to such Guarantor such excess.
25. TERMINATION. Upon receipt by the Administrative Agent of evidence
satisfactory to it (1) of the termination of the Total Commitment, (2) that no
Letters of Credit remain outstanding, (3) of the payment (or prepayment) in full
of the principal of and interest on all the Notes in accordance with the terms
thereof and of the Credit Agreement, and (4) of the payment (or the making of
provision satisfactory to the Administrative Agent for the payment) of all other
amounts included in the Guaranteed Obligations, THEN this Guaranty shall
terminate and the Administrative Agent, at the request and expense of the
Borrower or any of the the Guarantors, will execute and deliver to the Borrower
and the Guarantors a proper instrument or instruments acknowledging the
satisfaction and termination of this Guaranty.
26. ENFORCEMENT BY ADMINISTRATIVE AGENT. The Creditors agree that this
Guaranty may be enforced only by the action of the Administrative Agent, acting
upon the instructions of the Required Lenders, and that no Creditor other than
the Administrative Agent shall have any right individually to seek to enforce or
to enforce this Guaranty, it being understood and agreed that such rights and
remedies may be exercised by the Administrative Agent, for the benefit of the
Creditors, upon the terms of this Guaranty. The Administrative Agent and the
other Creditors further agree that this Guaranty may not be enforced against any
director, officer or employee of any Guarantor, as such.
27. GENERAL LIMITATION OF LIABILITY. No claim may be made by any Guarantor
against the Administrative Agent or any other Creditor, or the Affiliates,
directors, officers, employees, attorneys or agents of any of them, for any
damages other than actual compensatory damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Guaranty or any of the other Credit
Documents, or any act, omission or event occurring in connection therewith; and
each Guarantor hereby, to the fullest extent permitted under applicable law,
waives, releases and agrees not to sue or counterclaim upon any such claim for
any special, consequential or punitive damages, whether or not accrued and
whether or not known or suspected to exist in its favor.
28. NO DUTY. All attorneys, accountants, appraisers, consultants and other
professional persons (including the firms or other entities on behalf of which
any such person may act) retained by the Administrative Agent or any other
Creditor with respect to the transactions contemplated by the Credit Documents
shall have the right to act exclusively in the interest of the Administrative
Agent or such other Creditor, as the case may be, and shall have
11
<PAGE>
no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any type or nature whatsoever to any Guarantor, to any of its
Affiliates, or to any other person, with respect to any matters within the scope
of such representation or related to their activities in connection with such
representation. Each Guarantor agrees, on behalf of itself and its Affiliates,
not to assert any claim or counterclaim against any such persons with regard to
such matters, all such claims and counterclaims, now existing or hereafter
arising, whether known or unknown, foreseen or unforeseeable, being hereby
waived, released and forever discharged.
29. CREDITORS NOT FIDUCIARY TO GUARANTORS, ETC. The relationship among any
Guarantor and its Affiliates, on the one hand, and the Administrative Agent and
the other Creditors, on the other hand, is solely that of debtor and creditor,
and the Administrative Agent and the other Creditors have no fiduciary or other
special relationship with any Guarantor or any of its Affiliates, and no term or
provision of any Credit Document, no course of dealing, no written or oral
communication, or other action, shall be construed so as to deem such
relationship to be other than that of debtor and creditor.
30. COUNTERPARTS. This Guaranty may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Administrative Agent.
12
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
FCA FINANCIAL, INC., FABRI-CENTERS OF SOUTH DAKOTA, INC.,
AS A GUARANTOR AS A GUARANTOR
BY: /S/ BRIAN P. CARNEY BY: /S/ BRIAN P. CARNEY
---------------------------- -----------------------------
TITLE: TITLE:
FCA OF OHIO, INC., FABRI-CENTERS OF CALIFORNIA, INC.,
AS A GUARANTOR AS A GUARANTOR
BY: /S/ BRIAN P. CARNEY BY: /S/ BRIAN P. CARNEY
---------------------------- -----------------------------
TITLE: TITLE:
HOUSE OF FABRICS, INC.,
AS A GUARANTOR
BY: /S/ BRIAN P. CARNEY
-----------------------------
TITLE:
ACCEPTED AND AGREED.
KEYBANK NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT
BY: /S/ ILLEGIBLE
---------------------------
VICE PRESIDENT
13
<PAGE>
EXHIBIT D
----------------------------
FORM OF
OPINION OF SPECIAL COUNSEL
TO THE
BORROWER
----------------------------
<PAGE>
________ __, 1999
To the Administrative Agent and
each of the Lenders party
to the Credit Agreement
referred to below
c/o KeyBank National Association
127 Public Square
Cleveland, Ohio 44114
Attention: LARGE CORPORATE GROUP
RE: $300,000,000 CREDIT AGREEMENT
WITH JO-ANN STORES, INC.
Ladies and Gentlemen:
We have acted as special counsel to Jo-Ann Stores, Inc., an Ohio
corporation (the "BORROWER"), in connection with (i) the execution and delivery
of the Credit Agreement, dated as of May 5, 1999 (the "CREDIT AGREEMENT"), among
the Borrower, the financial institutions party thereto (the "LENDERS"), and
KeyBank National Association, as Administrative Agent, and (ii) the transactions
contemplated thereby. Unless otherwise indicated, capitalized terms used herein
but not otherwise defined herein shall have the respective meanings set forth in
the Credit Agreement. This opinion letter is delivered by us to you at the
request of the Borrower in accordance with the requirements of section 6.1(f) of
the Credit Agreement.
As such special counsel, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, records and matters
of law as we have considered necessary as a basis for the opinions set forth
herein, including without limitation the following:
(a) the Credit Agreement;
(b) the Notes delivered today pursuant to the Credit Agreement; and
(c) the Subsidiary Guaranty.
The documents referred to in clauses (a) through (c) above are herein sometimes
referred to as the "CREDIT DOCUMENTS".
In our examination we have assumed the genuineness of all signatures (other
than as to any Credit Party), the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies. As to questions of fact not independently verified by us we have
relied, to the extent we deemed appropriate, upon representations and
certificates of officers of the respective Credit Parties, public officials and
other appropriate persons. We have also assumed, with your approval, the due
authorization, execution and delivery of the Credit Documents on the part of the
Administrative Agent and the Lenders and the legality, validity, binding effect
on, and enforceability of the Credit Documents against those persons. All
assumptions and statements of reliance as to factual matters herein have been
made without any independent investigation or verification on our part except to
the extent otherwise expressly stated, and we express no opinion with respect to
the subject matter or accuracy of such assumptions or items relied upon.
<PAGE>
We understand that you have considered the applicability of fraudulent
transfer laws to the transactions contemplated by the Credit Documents, as to
which laws we express no opinion, and have satisfied yourself with respect
thereto.
Our examination of matters of law in connection with the opinions expressed
herein has been limited to the federal laws of the United States, the laws of
the State of Ohio, and the corporate laws of the State of Delaware, and
accordingly, no opinions expressed herein shall be deemed to cover any other
laws.
We have neither examined nor requested an examination of the indices or
records of any court or governmental or other agency, authority, instrumentality
or entity, nor have we made inquiry of any person or entity, except as expressly
set forth in this opinion letter. In addition, we have not independently
verified or investigated the accuracy or completeness of any factual information
and, because the scope of our examination did not include such verification, we
assume no responsibility for the accuracy or completeness of any such
information.
As used herein, "to our knowledge" shall mean to the actual knowledge of
the lawyers who have been actively involved in the negotiation of the Credit
Documents and the lawyers in our firm who are the current primary contacts for
the Borrower at the firm.
Based upon the foregoing and subject to the qualifications, assumptions and
limitations contained in this opinion letter, we are of the opinion that:
1. CORPORATE STATUS, ETC. Each of the Borrower and its Subsidiaries
(i) is a validly existing corporation under the laws of the jurisdiction of
its formation and has the corporate power and authority to own its property
and assets and to transact the business in which it is engaged and
presently proposed to engage and (ii) to our knowledge, is duly qualified
and is authorized to do business and is in good standing in each
jurisdiction where it is required to be so qualified except where the
failure to be so qualified would not have a Material Adverse Effect.
2. SUBSIDIARIES. To our knowledge, Annex II to the Credit Agreement
correctly sets forth each Subsidiary of the Borrower and the ownership
interest of the Borrower therein.
3. CORPORATE POWER AND AUTHORITY, ETC. Each Credit Party has the
corporate or other organizational power and authority to execute, deliver
and carry out the terms and provisions of the Credit Documents to which it
is a party and has taken all necessary corporate or other organizational
action to authorize the execution, delivery and performance of the Credit
Documents to which it is a party.
4. CREDIT DOCUMENTS. Each Credit Party has duly executed and delivered
each Credit Document to which it is a party and each such Credit Document
to which it is a party constitutes the legal, valid and binding agreement
or obligation of such Credit Party enforceable against such Credit Party in
accordance with its terms, except to the extent that the enforceability
thereof may be limited by (i) applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or similar laws, and
related judicial doctrines, from time to time in effect affecting
creditors' rights and remedies generally, (ii) general principles of equity
(including, without limitation, standards of materiality, good faith, fair
dealing and reasonableness, equitable defenses and limits on the
availability of equitable remedies), whether such principles are considered
in a proceeding at law or in equity, and (iii) the qualification that
certain other provisions of such Credit Documents may be unenforceable in
whole or in part under the laws (including judicial decisions) of the State
of Ohio or other applicable jurisdictions, but the inclusion of such
provisions does not affect the validity as against any Credit Party of any
of such Credit Documents as a whole, and such Credit Documents contain
adequate provisions for enforcing payment of the obligations governed
thereby and for the realization of the principal rights and benefits
afforded thereby, subject to the other qualifications and limitations
contained in this opinion letter.
2
<PAGE>
5. NO VIOLATION. Neither the execution, delivery or performance by any
Credit Party of the Credit Documents to which it is a party nor compliance
with the terms and provisions thereof, (i) will contravene any provision of
any State of Ohio or United States federal law, statute, rule, regulation
(including, without limitation, Regulations T and U of the Board of
Governors of the Federal Reserve System), or, to our knowledge, any order,
writ, injunction or decree of any court or governmental instrumentality
applicable to the Borrower or its properties and assets, (ii) will conflict
or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of any Credit Party pursuant to the terms of any
indenture, mortgage, deed of trust, or other material agreement or other
instrument, in each case of which we have knowledge to which any Credit
Party is a party or by which it or any of its property or assets are bound
or affected or (iii) will violate any provision of the charter, by-laws or
code of regulations of any Credit Party.
6. GOVERNMENTAL APPROVALS. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with,
or exemption by, any Ohio or United States federal governmental or public
body or authority, or any subdivision thereof, is required to authorize or
is required as a condition to (i) the execution, delivery and performance
by any Credit Party of any Credit Document to which it is a party, or (ii)
the legality, validity, binding effect or enforceability of any such Credit
Document.
7. LITIGATION. To our knowledge, there are no actions, suits or
proceedings pending or, to, the knowledge of the Borrower, threatened with
respect to the Borrower or any of its Subsidiaries (i) that have, or could
reasonably be expected to have, a Material Adverse Effect, or (ii) which
question the validity or enforceability of any of the Credit Documents, or
of any action to be taken by any Credit Party pursuant to any of the Credit
Documents.
8. INVESTMENT COMPANY ACT, ETC. Neither the Borrower nor any of its
Subsidiaries is subject to regulation with respect to the creation or
incurrence of Indebtedness under the Investment Company Act of 1940, as
amended, the Interstate Commerce Act, as amended, the Federal Power Act, as
amended, the Public Utility Holding Company Act of 1935, as amended, or any
applicable Ohio state public utility law.
9. SENIOR DEBT. The Obligations constitute "Senior Indebtedness" as
such term is defined in the Indenture, dated as of May 5, 1999, relating to
the Borrower's $150,000,000 aggregate principal amount of 10.375% Senior
Subordinated Notes due May 1, 2007.
This opinion letter is being furnished only to the addresses and is solely
for their benefit and the benefit of their participants and assigns in
connection with the transactions contemplated by the Credit Documents. This
opinion letter may not be relied upon for any other purpose, or relied upon by
any other person, firm or corporation for any purpose, without our prior written
consent.
Very truly yours,
3
<PAGE>
EXHIBIT E
----------------------------
FORM OF
ASSIGNMENT AGREEMENT
----------------------------
<PAGE>
ASSIGNMENT AGREEMENT
DATED _____________
Reference is made to the Credit Agreement described in Item 2 of Annex I
annexed hereto (as such Credit Agreement may hereafter be amended, modified or
supplemented from time to time, the "CREDIT AGREEMENT"). Unless defined in Annex
I attached hereto, terms defined in the Credit Agreement are used herein as
therein defined.
_____________ (the "ASSIGNOR") and ______________ (the "ASSIGNEE") hereby
agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without recourse
and without representation or warranty (other than as expressly provided
herein), and the Assignee hereby purchases and assumes from the Assignor, that
interest in and to all of the Assignor's rights and obligations under the Credit
Agreement as of the date hereof which represents the percentage interest
specified in Item 4 of Annex I (the "ASSIGNED SHARE") of all of Assignor's
outstanding rights and obligations under the Credit Agreement indicated in Item
4 of Annex I, including, without limitation, all rights and obligations with
respect to the Assigned Share of the Assignor's Commitment and of the Loans, the
Letters of Credit, and the Notes held by the Assignor. After giving effect to
such sale and assignment, the Assignee's Commitment will be as set forth in Item
4 of Annex I.
2. The Assignor (i) represents and warrants that it is duly authorized to
enter into and perform the terms of this Assignment Agreement, that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any liens or security interests; (ii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or any of its Subsidiaries or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or the other
Credit Documents or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is duly authorized to
enter into and perform the terms of this Assignment Agreement; (ii) confirms
that it has received a copy of the Credit Agreement and the other Credit
Documents, together with copies of the financial statements referred to therein
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment Agreement;
(iii) agrees that it will, independently and without reliance upon the
Administrative Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iv) appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement and the other Credit Documents as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; [and] (v) agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Credit Agreement
are required to be performed by it as a Lender[; and (vi) to the extent legally
entitled to do so, attaches the forms described in section 5.4(b)(ii) of the
Credit Agreement (6)
4. Following the execution of this Assignment Agreement by the Assignor and
the Assignee, an executed original hereof (together with all attachments) will
be delivered to the Administrative Agent. The effective date of this Assignment
Agreement shall be the date of execution hereof by the Assignor, the Assignee
and the consent hereof by the Administrative Agent and the receipt by the
Administrative Agent of the administrative fee referred to
- ---------------------------
(6) If the Assignee isorganized under the laws of a jurisdiction outside the
United States.
<PAGE>
in section 12.4(c) of the Credit Agreement, unless otherwise specified in Item 5
of Annex I hereto (the "SETTLEMENT DATE").
5. Upon the delivery of a fully executed original hereof to the
Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment
Agreement, have the rights and obligations of a Lender thereunder and under the
other Credit Documents and (ii) the Assignor shall, to the extent provided in
this Assignment Agreement, relinquish its rights and be released from its
obligations under the Credit Agreement and the other Credit Documents.
6. It is agreed that upon the effectiveness hereof, the Assignee shall be
entitled to (1) all interest on the Assigned Share of the Loans at the rates
specified in Item 6 of Annex I, (2) all Facility Fee on the Assigned Share of
the Commitment at the rate specified in Item 7 of Annex I, and (3) all Letter of
Credit Fees on the Assignee's participation in all Letters of Credit at the rate
specified in Item 8 of Annex I hereto, which, in each case, accrue on and after
the Settlement Date, such interest and Facility Fee and Letter of Credit Fees,
to be paid by the Administrative Agent, upon receipt thereof from the Borrower,
directly to the Assignee. It is further agreed that all payments of principal
made by the Borrower on the Assigned Share of the Loans which occur on and after
the Settlement Date will be paid directly by the Administrative Agent to the
Assignee.
7. Upon the Settlement Date, the Assignee shall pay to the Assignor an
amount specified by the Assignor in writing which represents the Assigned Share
of the principal amount of the respective Loans made by the Assignor pursuant to
the Credit Agreement which are outstanding on the Settlement Date, net of any
closing costs, and which are being assigned hereunder. The Assignor and the
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Settlement Date directly between themselves
on the Settlement Date.
8. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee
By:_________________________________ By:_________________________________
Vice President Vice President
Acknowledged and agreed.
KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent
By:_________________________________
Vice President
2
<PAGE>
ANNEX I
FOR
ASSIGNMENT AND ASSUMPTION AGREEMENT
8. The Borrower:
JO-ANN STORES, INC.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of May 5, 1999, among Jo-Ann Stores,
Inc., the Lenders from time to time party thereto, and KeyBank
National Association, as Administrative Agent.
3. Date of Assignment Agreement:
--------- ---, -----
4. Amounts (as of date of item #3 above):
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
General General Swing Line Swing Line
Revolving Revolving Commitment Loans
Commitment Loans
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate Amount $____ $_____
for all Lenders
-----------------------------------------------------------------------------
Assigned Share _____% _____%
-----------------------------------------------------------------------------
Amount of $_____ $_____
Assigned Share
-----------------------------------------------------------------------------
Amount Retained $_____ $_____
by Assignor
-----------------------------------------------------------------------------
</TABLE>
5. Settlement Date:
--------- ---, ---
6. Rate of Interest to the Assignee:
As set forth in section 2.6 of the Credit Agreement (unless
otherwise agreed to by the Assignor and the Assignee).(7)
(7) The Borrower and the Administrative Agent shall direct the entire amount of
the interest to the Assignee at the rate set forth in section 2.6 of the
Credit Agreement, with the Assignor and Assignee effecting any agreed upon
sharing of interest through payments by the Assignee to the Assignor.
<PAGE>
7. Facility
Fee:
As set forth in section 4.1(a) of the Credit Agreement
(unless otherwise agreed to by the Assignor and the
Assignee).(8)
8. Letter of
Credit Fees:
As set forth in section 4.1(b) of the Credit Agreement
(unless otherwise agreed to by the Assignor and the
Assignee).(9)
9. Notices:
ASSIGNOR: ASSIGNEE:
Attention:__________________ Attention:__________________
Telephone: Telephone:
Facsimile: Facsimile:
10. Payment Instructions:
ASSIGNOR: ASSIGNEE:
ABA No.: ABA No.:
Account No.: Account No.:
Ref.: Jo-Ann Stores, Inc. Ref.: Jo-Ann Stores, Inc.
Attention:__________________ Attention:__________________
Telephone: Telephone:
Facsimile: Facsimile:
- ----------------------------
(8) The Borrower and the Administrative Agent shall direct the entire amount of
the Facility Fee to the Assignee at the rate set forth in section 4.1(a) of
the Credit Agreement, with the Assignor and the Assignee effecting any
agreed upon sharing of Facility Fee through payment by the Assignee to the
Assignor.
(9) The Borrower and the Administrative Agent shall direct the entire amount of
the Letter of Credit Fees to the Assignee at the rate set forth in section
4.1(b) of the Credit Agreement, with the Assignor and the Assignee
effecting any agreed upon sharing of the Letter of Credit Fees through
payment by the Assignee to the Assignor.
2
<PAGE>
EXHIBIT F
SECTION 5.4(b)(ii) CERTIFICATE
Reference is hereby made to the Credit Agreement, dated as of May 5, 1999,
among Jo-Ann Stores, Inc., the financial institutions party thereto from time to
time, and KeyBank National Association, as Administrative Agent (the "CREDIT
AGREEMENT"). Pursuant to the provisions of section 5.4(b)(ii) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" as such term
is used in section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended.
[NAME OF BANK]
By:_________________________________
Title:
Dated:__________
<PAGE>
EXHIBIT 12
JO-ANN STORES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------
JANUARY 28, JANUARY 27, FEBRUARY 1, JANUARY 31, JANUARY 30,
1995 1996 1997 1998 1999
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Income before income taxes $ 19.1 $ 27.9 $ 39.3 $ 51.2 $ 22.4
Interest expense 8.4 12.0 10.7 5.8 12.5
Portion of occupancy expense deemed representative
of interest 17.9 21.5 22.3 23.5 30.9
-----------------------------------------------------------------------
Total Earnings $ 45.4 $ 61.4 $ 72.3 $ 80.5 $ 65.8
-----------------------------------------------------------------------
-----------------------------------------------------------------------
FIXED CHARGES:
Interest expense $ 8.4 $ 12.0 $ 10.7 $ 5.8 $ 12.5
Portion of occupancy expense deemed representative
of interest 17.9 21.5 22.3 23.5 30.9
-----------------------------------------------------------------------
Total Fixed Charges $ 26.3 $ 33.5 $ 33.0 $ 29.3 $ 43.4
-----------------------------------------------------------------------
-----------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 1.7x 1.8x 2.2x 2.7x 1.5x
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 14, 1999 included herein and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
June 16, 1999
<PAGE>
EXHIBIT 24
DIRECTORS AND OFFICERS
POWER OF ATTORNEY
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: JO-ANN STORES, INC.
COMMISSION FILE NO. 1-6695
REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
Each of the persons signing his or her name below confirms, as of the date
appearing opposite his or her signature, that Alan Rosskamm, Brian P. Carney,
and each of them, are authorized on his or her behalf to sign and to submit
to the Securities and Exchange Commission this Registration Statement on Form
S-4 and any and all amendments to the Registration Statement, making such
changes in the Registration Statement as appropriate, and generally to do all
such things in their behalf in their capacities as directors and/or officers
to enable Jo-Ann Stores, Inc. to comply with the provisions of the Securities
Act of 1933, and all requirements of the Securities and Exchange Commission.
The authority confirmed herein shall remain in effect as to each person
signing his or her name below until such time as the Securities and Exchange
Commission shall receive from such person a written communication terminating
or modifying the authority.
/s/ Alan Rosskamm
- -------------------------------
Alan Rosskamm June 11, 1999
/s/ Brian P. Carney
- -------------------------------
Brian P. Carney June 11, 1999
/s/ Betty Rosskamm
- -------------------------------
Betty Rosskamm June 11, 1999
/s/ Alma Zimmerman
- -------------------------------
Alma Zimmerman June 11, 1999
/s/ Scott Cowen
- -------------------------------
Scott Cowen June 11, 1999
<PAGE>
/s/ Frank Newman
- -------------------------------
Frank Newman June 11, 1999
/s/ Ira Gumberg
- -------------------------------
Ira Gumberg June 11, 1999
/s/ Gregg Searle
- -------------------------------
Gregg Searle June 11, 1999
/s/ Debra Walker
- -------------------------------
Debra Walker June 11, 1999
-2-
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as Trustee
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) ______
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Judith Bartolini, Harris Trust and Savings Bank,
311 West Monroe Street, Chicago, Illinois, 60606
312-461-2527 phone 312-461-3525 facsimile
(Name, address and telephone number for agent for service)
JO-ANN STORES, INC.
(Obligor)
Ohio 34-0720629
(State of Incorporation) (I.R.S. Employer Identification No.)
FCA OF OHIO, INC.
FCA FINANCIAL, INC.
FABRI-CENTERS OF CALIFORNIA, INC.
FABRI-CENTERS OF SOUTH DAKOTA, INC.
HOUSE OF FABRICS, INC.
(Guarantors)
Ohio 34-1780524
Ohio 34-0819987
Ohio 34-1694372
Ohio 34-1451235
Delaware 95-3426136
(State of Incorporation) (I.R.S. Employer Identification No.)
5555 Darrow Road
Hudson, Ohio 44236
(Address of principal executive offices)
10 3/8% Senior Subordinated Notes due 2007
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of
Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise
corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the
Trustee, describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. through 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in
effect which includes the authority of the trustee to commence
business and to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between
Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc.
which constitutes the articles of association of the Trustee as
now in effect and includes the authority of the Trustee to
commence business and to exercise corporate trust powers was filed
in connection with the Registration Statement of Louisville Gas
and Electric Company, File No. 2-44295, and is incorporated herein
by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in
connection with the Registration Statement of Commercial Federal
Corporation, File No. 333-20711, and is incorporated herein by
reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
(included as Exhibit B on page 3 of this statement)
1
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 26th day of May, 1999.
HARRIS TRUST AND SAVINGS BANK
By: /s/ J. Bartolini
----------------------------------------
J. Bartolini
Vice President
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /s/ J. Bartolini
----------------------------------------
J. Bartolini
Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of December 31, 1998, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on December 31, 1998, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS:
NON-INTEREST BEARING BALANCES AND CURRENCY AND COIN........................ $1,435,233
INTEREST BEARING BALANCES.................................................. $98,929
SECURITIES:..............................................................................
a. HELD-TO-MATURITY SECURITIES $0
b. AVAILABLE-FOR-SALE SECURITIES $5,295,498
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL $151,575
LOANS AND LEASE FINANCING RECEIVABLES:
LOANS AND LEASES, NET OF UNEARNED INCOME................................... $9,320,939
LESS: ALLOWANCE FOR LOAN AND LEASE LOSSES................................. $108,280
------------
LOANS AND LEASES, NET OF UNEARNED INCOME, ALLOWANCE, AND RESERVE
(ITEM 4.a MINUS 4.b)....................................................... $9,212,659
ASSETS HELD IN TRADING ACCOUNTS.......................................................... $252,881
PREMISES AND FIXED ASSETS (INCLUDING CAPITALIZED LEASES)................................. $271,540
OTHER REAL ESTATE OWNED.................................................................. $366
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED COMPANIES...................... $57
CUSTOMER'S LIABILITY TO THIS BANK ON ACCEPTANCES OUTSTANDING............................. $30,829
INTANGIBLE ASSETS........................................................................ $257,627
OTHER ASSETS............................................................................. $1,093,599
----------------------------
TOTAL ASSETS $18,100,793
----------------------------
----------------------------
3
<PAGE>
LIABILITIES
DEPOSITS:
IN DOMESTIC OFFICES................................................................. $10,270,499
NON-INTEREST BEARING....................................................... $3,410,568
INTEREST BEARING........................................................... $6,859,931
IN FOREIGN OFFICES, EDGE AND AGREEMENT SUBSIDIARIES, AND IBF'S...................... $935,609
NON-INTEREST BEARING....................................................... $69,215
INTEREST BEARING........................................................... $866,394
FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE IN DOMESTIC
OFFICES OF THE BANK AND OF ITS EDGE AND AGREEMENT SUBSIDIARIES, AND IN IBF'S:
FEDERAL FUNDS PURCHASED & SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE............. $3,642,049
TRADING LIABILITIES 131,909
OTHER BORROWED MONEY:....................................................................
a. WITH REMAINING MATURITY OF ONE YEAR OR LESS $1,107,125
b. WITH REMAINING MATURITY OF MORE THAN ONE YEAR $0
BANK'S LIABILITY ON ACCEPTANCES EXECUTED AND OUTSTANDING $30,829
SUBORDINATED NOTES AND DEBENTURES........................................................ $225,000
OTHER LIABILITIES........................................................................ $424,376
----------------------------
TOTAL LIABILITIES $16,767,396
----------------------------
----------------------------
EQUITY CAPITAL
COMMON STOCK............................................................................. $100,000
SURPLUS.................................................................................. $608,116
a. UNDIVIDED PROFITS AND CAPITAL RESERVES.............................................. $593,973
b. NET UNREALIZED HOLDING GAINS (LOSSES) ON AVAILABLE-FOR-SALE SECURITIES $31,308
----------------------------
TOTAL EQUITY CAPITAL $1,333,397
----------------------------
----------------------------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK, AND EQUITY CAPITAL...................... $18,100,793
----------------------------
----------------------------
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
1/27/99
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
RICHARD E. TERRY
Directors.
4
