<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1997
REGISTRATION NO. 33-97100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 1
ON
FORM S-3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LOEHMANN'S, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5621 22-2341356
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
------------------------
2500 HALSEY STREET
BRONX, NEW YORK 10461
(718) 409-2000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
PHILIP KAPLAN
PRESIDENT AND CHIEF OPERATING OFFICER
LOEHMANN'S, INC.
2500 HALSEY STREET
BRONX, NEW YORK 10461
(718) 409-2000
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------------
COPIES TO:
MITCHELL S. FISHMAN, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 373-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
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 earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment to the Registration Statement contains an
additional form of Prospectus relating to certain market-making transactions in
the $100,000,000 11 7/8% Senior Notes due 2003 of Loehmann's, Inc. In order to
register under Rule 415 of the Securities Act of 1933 those Senior Notes that
will be offered and sold in market-making transactions, the appropriate box on
the cover page of the Registration Statement has been checked and the
undertakings required by Item 512(a) of Regulation S-K have been included in
Item 17 of Part II.
<PAGE>
PROSPECTUS
, 1997
$100,000,000
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[LOGO]
11 7/8% SENIOR NOTES DUE 2003
The 11 7/8% Senior Notes due 2003 (the "Senior Notes") were originally
issued by Loehmann's, Inc. (the "Company") pursuant to a Prospectus dated May 7,
1996. The Senior Notes bear interest at the rate of 11 7/8% per annum, payable
semiannually on May 15 and November 15, commencing on November 15, 1996 and will
mature on May 15, 2003. The Senior Notes are subject to optional redemption on
and after May 15, 2000, in whole or in part, at the option of the Company, at
the redemption prices set forth herein, plus accrued and unpaid interest to the
date of redemption. Upon the occurrence of a Change of Control (as defined
herein), the Company will be obligated to make an offer to purchase all
outstanding Senior Notes at a price of 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of repurchase. In addition, the
Company is obligated, subject to certain conditions, to make offers to purchase
Senior Notes at a price of 100% of the principal amount thereof, plus accrued
and unpaid interest to the date of repurchase, with the net cash proceeds of
certain sales or other dispositions of assets. See "Description of the Senior
Notes."
The Senior Notes are unsecured general obligations of the Company and rank
PARI PASSU in right of payment with all senior indebtedness of the Company. The
Company is party to a revolving credit facility which is secured by security
interests in substantially all of the Company's assets. In addition, the
indenture in respect of the Senior Notes permits the Company to issue additional
indebtedness and grant additional security interests in its assets securing such
indebtedness in certain circumstances. The Senior Notes will be effectively
subordinated to all such secured indebtedness to the extent of such security
interests. At May 3, 1997, the Company had outstanding approximately $14.1
million in indebtedness and had approximately $19.3 million in unused borrowing
capacity under the revolving credit facility. See "Description of the Senior
Notes."
The Senior Notes are non-investment grade debt securities and are not listed
on any national securities exchange or authorized for trading on NASDAQ. The
Company has been advised by Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") that DLJ currently makes a market for the Senior Notes; however, DLJ is
not obligated to do so. Any market making may be discontinued at any time and
there is no assurance as to the liquidity of, or trading market for, the Senior
Notes. This Prospectus, accompanied when appropriate by a prospectus supplement,
has been prepared for use by DLJ in connection with offers and sales of the
Senior Notes which may be made by it from time to time in market-making
transactions at negotiated prices relating to prevailing market prices at the
time of sale. DLJ may act as principal or agent in such transactions. See "Plan
of Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). The registration statement of which this
Prospectus forms a part, as well as reports, proxy statement and other
information filed by the Company, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be accessed electronically by
means of the Commission's home page on the Internet at http://www.sec.gov.
This Prospectus constitutes a part of the Post-Effective Amendment on Form
S-3 to the Registration Statement on Form S-1 (together with all amendments and
exhibits thereto, the "Registration Statement") filed with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Senior Notes. This Prospectus does not contain all of the information set
forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to such Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Senior Notes. Any statements
contained herein concerning the provisions of any document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission or
incorporated by reference herein are not necessarily complete and in each
instance reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended February 1, 1997
and Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 1997
previously filed by the Company with the Commission are incorporated by
reference in this Prospectus.
All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the termination of the offering of the Senior Notes offered hereby, shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statements as modified or superseded shall be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus (other than certain exhibits to
such documents). Requests for such documents should be directed to Loehmann's,
Inc., 2500 Halsey Street, Bronx, New York 10461, Attention: Corporate Secretary
(Telephone: (718) 409-2000).
2
<PAGE>
USE OF PROCEEDS
Loehmann's, Inc. will not receive any proceeds from the sale of the Senior
Notes in any market making transaction with which this Prospectus may be
delivered.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
the Company for the periods indicated.
<TABLE>
<CAPTION>
THREE
FISCAL YEAR MONTHS
-------------------------------------------------------- ENDED
1992 1993 1994 1995 1996 MAY 3, 1997
--------- --------- --------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1)(2)................ 0.97 0.59 0.93 0.33 1.61 1.09
Pro forma ratio of earnings to fixed charges(3)......... -- -- -- -- 1.90 --
</TABLE>
- ------------------------
(1) For the purpose of calculating the ratio of earnings to fixed charges (i)
earnings consist of income before provision for income taxes and fixed
charges and (ii) fixed charges consist of interest expense on all
indebtedness, including amortization of debt issuance costs, and that
portion of operating lease expenses that is deemed to be representative of
an interest factor.
(2) Earnings were insufficient to cover fixed charges by approximately $0.7
million, $8.6 million, $1.5 million, $14.9 million for fiscal 1992, 1993,
1994, and 1995, respectively.
(3) The pro forma ratio of earnings to fixed charges for fiscal 1996 is
calculated assuming that the Stock Offering and the Notes Offering (each as
defined in "Plan of Distribution") had been completed on the first day of
fiscal 1996.
3
<PAGE>
THE COMPANY
Loehmann's, Inc., founded in 1921 as the "Original Designer Outlet," is a
leading national specialty retailer of well known designer and brand name
women's fashion apparel, accessories and shoes offered at prices that are
typically 30% to 65% below department store prices. The Company believes it has
developed a unique franchise as the largest national upscale off-price specialty
retailer in the industry. The Company's strong brand name, loyal customer base
and long-standing relationships with leading designers and vendors of quality
merchandise has enabled it to maintain its franchise. The Company's target
customers are relatively affluent women between the ages of 30 and 55 who are
attracted to designer and other high quality merchandise offered at exceptional
values. As of June 1, 1997 the Company operated 77 stores in major metropolitan
markets located in 23 states.
The Company's strategy is to deliver value to its customers by offering at
substantial discounts a wide selection of high quality in-season merchandise,
including designer and bridge apparel, accessories and shoes. The Company
believes that it differentiates itself from finer department stores by offering
similar merchandise at significantly lower prices and from other off-price
apparel retailers by offering a broad range of designer and bridge merchandise.
The principal elements of the Company's business strategy are as follows:
EMPHASIS ON IN-SEASON DESIGNER AND HIGH QUALITY MERCHANDISE
The Company offers a wide selection of in-season apparel, accessories and
shoes, approximately one-third of which is designer and bridge merchandise. The
Company, like finer department stores, is known for carrying designer and bridge
labels, including Donna Karan, Calvin Klein, Ralph Lauren, Adrienne Vittadini,
Tahari, Dana Buchman, Andrea Jovine and Emanuel Ungaro.
VALUE PRICING
The Company provides its customers with exceptional value by offering its
merchandise at prices that are typically 30% to 65% below prices charged by
department stores for the same items and that are comparable to or lower than
prices charged by other off-price retailers.
CAPITALIZE ON LONG-STANDING VENDOR RELATIONSHIPS
Loehmann's believes that it is uniquely positioned among off-price retailers
as a principal choice for well known designers who believe that their prestige
will be preserved by having their merchandise offered by Loehmann's because of
its highly quality image and affluent customer base. Loehmann's long-standing
vendor relationships and its ability to sell large quantities of goods have
provided the Company with ready access to a wide selection of merchandise, often
on a preferential basis.
BROADEN MERCHANDISE CATEGORIES
The Company continually seeks to broaden its appeal and has over the past
several years expanded its merchandise mix to include shoes and a broader range
of accessories and intimate apparel. These items, which typically generate
higher gross margins than the Company's traditional apparel categories,
accounted for approximately 20% of the Company's net sales in fiscal 1996, an
increase from 8% in fiscal 1992.
FLEXIBLE PURCHASING STRATEGY
The Company relies on a flexible purchasing strategy under which it enters
any given month with a substantial portion of its purchasing requirements
unfulfilled. This strategy enables the Company to react to sales trends, fashion
trends and changing customer preferences while enhancing the Company's ability
4
<PAGE>
to negotiate with its vendors and take advantage of market inefficiencies and
opportunities as they may arise.
EFFICIENT INVENTORY MANAGEMENT
The Company ships new high quality merchandise to its stores on a daily
basis. The Company believes it is able to constantly replenish its stores
because of its allocation and distribution system, which enables the Company to
distribute merchandise to its stores typically within 48 to 72 hours after
delivery to its distribution center. In addition, the Company utilizes a
cyclical markdown strategy which automatically reduces prices as goods age. As a
result of this inventory management, the Company is able to enhance its gross
margin, maintain a comparatively low investment in inventory, increase its
inventory turn and react more effectively to changing fashion trends and
customer preferences.
LOW-COST STRUCTURE
In order to provide its customers with exceptional value while maximizing
profitability and cash flow, the Company is focused on maintaining an efficient,
low-cost operating structure. Key elements of this focus include the Company's
no-frills store format, lean corporate overhead and disciplined real estate
strategy.
EXPANSION STRATEGY
In fiscal 1996 the Company embarked on a store expansion program by opening
new stores in existing suburban markets where the Loehmann's franchise is well
established and in other locations which have appealing demographics. The
Company opened seven stores in fiscal 1996 including a 60,000 square foot
flagship store in downtown Manhattan at the site which recently housed Barney's
Seventh Avenue Men's Store. The Company additionally plans to open 14-16 stores
during 1997 and 1998, three of these stores already have been opened in Seattle,
Washington, Fort Lauderdale, Florida, and Irvine, California. The Company closed
three stores in fiscal 1996 and converted one store into a clearance center. The
Company closed one store in February 1997, and expects to close one additional
store during the year, which will be replaced by a new store.
The Company has retained the services of a retail consulting firm that has
conducted an extensive analysis of the relevant demographics to advise the
Company with respect to its expansion strategy. All decisions as to store
openings are decided on a case-by-case basis by the Company's Board of Directors
based on the recommendations of management.
The Company is a Delaware corporation whose executive offices are located at
2500 Halsey Street, Bronx, New York 10461 and its telephone number is (718)
409-2000.
5
<PAGE>
DESCRIPTION OF THE SENIOR NOTES
The Senior Notes offered hereby were issued under the Indenture, dated as of
May 10, 1996, between the Company and United States Trust Company of New York,
as trustee (the "Trustee"), a copy of the form of which is filed as an exhibit
to the Registration Statement and will be made available to prospective
purchasers of the Senior Notes upon request. The Indenture is subject to and
governed by the Trust Indenture Act. The following summary of the material
provisions of the Indenture does not purport to be complete, and where reference
is made to particular provisions of the Indenture, such provisions, including
the definitions of certain terms, are qualified in their entirety by reference
to all of the provisions of the Indenture and those terms made a part of the
Indenture by the Trust Indenture Act. For definitions of certain capitalized
terms used in the following summary, see "--Certain Definitions."
GENERAL
The Senior Notes will mature on May 15, 2003, are limited to $100 million
aggregate principal amount, and are unsecured senior obligations of the Company,
senior in right of payment to any subordinated indebtedness of the Company. Each
Senior Note bears interest at the rate set forth on the cover page hereof from
May 10, 1996 or from the most recent interest payment date to which interest has
been paid, payable semiannually on May 15 and November 15, in each year,
commencing November 15, 1996, to the Person in whose name the Senior Note (or
any predecessor Senior Note) is registered at the close of business on the May
1st or November 1st next preceding such interest payment date.
Principal of, premium, if any, and interest on the Senior Notes are payable,
and the Senior Notes are 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 Trustee); PROVIDED, HOWEVER, that payment of interest may
be made at the option of the Company by check mailed to the Person entitled
thereto as shown on the security register. The Senior Notes were issued only in
fully registered form without coupons, in denominations of $1,000 and any
integral multiple thereof. (Section 302) No service charge will be made for any
registration of transfer, exchange or redemption of Senior Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith. (Section 305)
OPTIONAL REDEMPTION
The Senior Notes are subject to redemption at any time on or after May 15,
2000 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 15th of
the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
<S> <C>
2000................................................................... 105.938%
2001................................................................... 102.969%
2002 and thereafter.................................................... 100.000%
</TABLE>
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).
If less than all of the Senior Notes are to be redeemed, the Trustee shall
select the Senior Notes or portions thereof to be redeemed pro rata, by lot or
by any other method the Trustee shall deem fair and reasonable. (Sections 203,
1101, 1105 and 1107)
SINKING FUND
The Senior Notes are not entitled to the benefit of any sinking fund.
6
<PAGE>
FORM, DENOMINATION AND BOOK-ENTRY PROCEDURES
The Notes initially are represented by a global Note or Notes (collectively,
the "Book-Entry Notes") in definitive fully registered form without coupons,
which are deposited with, or on behalf of The Depository Trust Company ("DTC")
as depositary and registered in the name of DTC's nominee. Accordingly,
beneficial interests in the Notes are shown on, and transfers thereof will be
effected only through, records maintained by DTC and its participants. Except as
set forth below, owners of beneficial interests in the Book-Entry Notes are not
entitled to receive Notes in definitive form and are not considered Holders of
Notes under the Indenture.
The Depositary has advised the Company and DLJ as follows: The Depositary is
a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered under
the Exchange Act. The Depositary was created to hold securities of its
participants and to facilitate and settlement of securities transactions among
its participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The Depositary agrees with and
represents to its participants that it will administer its book-entry system in
accordance with its rules and by-laws and requirements of law.
In connection with the issuance of the Book-Entry Notes, DTC credited on its
book-entry registration and transfer system the respective principal amounts of
Book-Entry Notes represented by the global Note or Notes deposited with it to
the accounts of institutions that have accounts with DTC or its nominee
("participants") and that beneficially own (or hold for persons who beneficially
own) such Book-Entry Notes. Ownership of beneficial interests in Book-Entry
Notes is limited to participants or persons that may hold beneficial interests
through participants. Ownership of beneficial interests on Book-Entry Notes is
shown on, and the transfer of those ownership interests is effected only
through, records maintained by DTC (with respect to participants' interests) or
such participants (with respect to persons that may hold beneficial interests in
the Book-Entry Notes through such participants).
So long as DTC or its nominee is the registered holder and owner of a global
Note representing Book-Entry Notes, DTC or such nominee, as the case may be, is
considered the sole owner and Holder of the related Book-Entry Notes for all
purposes of such Book-Entry Notes and for all purposes under the Indenture.
Therefore, neither the Company, the Trustee nor any paying agent has any direct
responsibility or liability for the payment of principal or interest or premium,
if any, on the Notes to owners of beneficial interests in the Book-Entry Notes.
DTC has advised the Company and the Trustee that its current practice is, upon
receipt of any payment of principal or interest or premium, if any, to
immediately credit the accounts of the participants with such payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Book-Entry Notes as shown in the records of DTC. Payments by
participants and indirect participants to owners of beneficial interests in the
Book-Entry Notes are governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in "street name," and are the responsibility of the participants or indirect
participants.
Owners of beneficial interests in the Book-Entry Notes are not entitled to
have Notes registered in their names, have not received and will not be entitled
to receive physical delivery of certificated Notes in definitive form and will
not be considered to be the owners of holders of any Notes under the Indenture
or of such Book-Entry Notes, unless (a) DTC notifies the Company that it is
unwilling or unable to continue as depositary for such Book-Entry Notes, (b) DTC
ceases to be a clearing agency registered under the
7
<PAGE>
Securities Exchange Act of 1934, (c) the Company delivers to the Trustee a
written notice that all Book-Entry Notes shall be exchangeable for definitive
Notes or (d) an Event of Default or event that after notice or lapse of time, or
both, would become an Event of Default has occurred and is continuing with
respect to the Notes.
Payment of principal of and premium and interest, if any, on Book-Entry
Notes will be made to the depositary or its nominee, as the case may be, as the
registered owner and holder thereof.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INDEBTEDNESS. (a) The Company will not, and will not permit
any of its Subsidiaries to, create, issue, assume, guarantee, or otherwise in
any manner become directly or indirectly liable for or with respect to or
otherwise incur (collectively, "incur") any Indebtedness (including any Acquired
Indebtedness), except that the Company may incur Indebtedness (including any
Acquired Indebtedness) and any Subsidiary may incur Acquired Indebtedness if, in
each case, the Consolidated Fixed Charge Coverage Ratio for the Company for the
four full fiscal quarters immediately preceding the incurrence of such
Indebtedness taken as one period (and after giving PRO FORMA effect to (i) the
incurrence of such Indebtedness 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, at the
beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company and its Subsidiaries since
the first day of such four-quarter period as if such Indebtedness was incurred,
repaid or retired at the beginning of such four-quarter 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 four-quarter period); (iii) in the case of Acquired
Indebtedness, the related acquisition, as if such acquisition occurred at the
beginning of such four-quarter period; and (iv) any acquisition or disposition
by the Company and its 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 four-quarter period, assuming such acquisition
or disposition had been consummated on the first day of such four-quarter
period) is at least equal to 2.5:1.0 for any such incurrence from the date
hereof until January 31, 1998 and 3.0:1.0 for any such incurrence thereafter.
(b) The foregoing limitation will not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company under the Credit Facility in an
aggregate principal amount at any one time outstanding not to exceed (x) the
greater of $35 million or 60% of Eligible Inventory (as defined in the
Credit Facility as in effect on the date of the Indenture) under any
revolving credit facility thereunder and (y) $10.0 million under any letter
of credit facility thereunder;
(ii) Indebtedness of the Company pursuant to the Senior Notes;
(iii) Indebtedness of the Company and any Subsidiary outstanding on the
date of the Indenture and listed on a schedule thereto;
(iv) Indebtedness of the Company owing to a Subsidiary; PROVIDED that
any Indebtedness of the Company owing to a Subsidiary is made pursuant to an
intercompany note in the form attached to the Indenture and is subordinated
in right of payment from and after such time as the Senior 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 Senior Notes; PROVIDED, FURTHER, that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a disposition,
pledge
8
<PAGE>
or transfer to a Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (iv);
(v) Indebtedness of a Wholly Owned Subsidiary owing to the Company or
another Wholly Owned 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 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 Subsidiary,
which has Indebtedness owing to the Company or any other Wholly Owned
Subsidiary, ceases to be a Wholly Owned Subsidiary shall be deemed to be the
incurrence of Indebtedness by such Wholly Owned Subsidiary that is not
permitted by this clause (v);
(vi) guarantees of any Subsidiary made in accordance with the provisions
of "--LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS";
(vii) obligations of the Company entered into in the ordinary course of
business pursuant to Interest Rate Agreements designed to protect the
Company or any Subsidiary against fluctuations in interest rates in respect
of Indebtedness of the Company or any Subsidiary as long as such obligations
do not exceed the aggregate principal amount of such Indebtedness then
outstanding;
(viii) 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 (A) the
aggregate principal amount of Indebtedness represented thereby 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, (B) in the
case of Subordinated Indebtedness, such refinancing does not reduce the
Average Life to Stated Maturity or the Stated Maturity of such Indebtedness;
and
(ix) Indebtedness of the Company in addition to that described in
clauses (i) through (viii) 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. (Section 1008)
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not
permit any 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 its shares of Qualified Capital Stock or in
options, warrants or other rights to acquire shares of such Qualified
Capital Stock);
(ii) purchase, redeem 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 any Wholly Owned Subsidiary of the
Company) or options, warrants or other rights to acquire such Capital Stock;
PROVIDED, that the Company may redeem all outstanding shares of Series A
Preferred Stock in the manner contemplated under "Use of Proceeds";
(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;
PROVIDED, that the Company may redeem all outstanding 13 3/4% Senior
Subordinated Notes in the manner contemplated under "Use of Proceeds";
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(iv) declare or pay any dividend or distribution on any Capital Stock of
any Subsidiary to any Person (other than the Company or any of its Wholly
Owned Subsidiaries) or purchase, redeem or otherwise acquire or retire for
value any Capital Stock of any Subsidiary held by any Person (other than the
Company or any of its Wholly Owned Subsidiaries), other than any such
dividend, distribution, purchase, redemption, acquisition or retirement on a
pro rata basis to all holders of Capital Stock;
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than Indebtedness of a Wholly Owned Subsidiary of the
Company); or
(vi) make any Investment in any Person (other than any Permitted
Investments) (any of the foregoing payments described in clauses (i) through
(vi), other than any such action that is a Permitted Payment, collectively,
"Restricted Payments") (the amount of any such Restricted Payment, if other
than cash, 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
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 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 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 the first
day of the Company's fiscal quarter commencing after the date of the
Indenture and ending on the last day of the Company's last fiscal quarter
ending prior to the date of the Restricted Payment (or, 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 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);
(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 or warrants to purchase Qualified Capital
Stock of the Company; and
(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 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.
(b) Notwithstanding the foregoing, and in the case of clauses (ii) through
(iv) below, so long as there is no Default or Event of Default continuing, the
foregoing provisions shall not prohibit the following actions (clauses (i)
through (iv) being referred to as "Permitted Payments"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would be
permitted by the provisions of paragraph (a) of this Section and such
payment shall be deemed to have been paid on such date of declaration for
purposes of the calculation required by paragraph (a) of this Section;
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(ii) the repurchase, redemption, or other acquisition or retirement 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 therewith cash is paid in lieu of the issuance of
fractional shares or scrip), or out of the Net Cash Proceeds of a
substantially concurrent issue 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;
(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 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;
(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 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 Notes; (3) has a Stated
Maturity for its final scheduled principal payment later than the Stated
Maturity for the final scheduled principal payment of the Senior Notes; and
(4) is expressly subordinated in right of payment to the Senior Notes at
least to the same extent as the Indebtedness to be refinanced; and
(v) the redemption, repurchase or acquisition of Common Stock or other
equity interests from time to time under management equity subscription
agreements or stock option agreements or plans in existence on the date of
this Indenture, so long as such redemptions (x) do not exceed $5 million in
the aggregate and (y) do not otherwise result in an Event of Default or an
event that, after notice or lapse of time or both, would become an Event of
Default; PROVIDED that amounts expended pursuant to this clause (v) will be
subtracted from the amounts available for Restricted Payments pursuant to
paragraph (a) hereof.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (other than the Company or a Wholly
Owned Subsidiary) unless (a) such transaction or series of transactions is in
writing on terms that are no less favorable to the Company or such Subsidiary,
as the case may be, than would be available in a comparable transaction in
arm's-length dealings with an unrelated third party and (b) with respect to any
transaction or series of transactions involving aggregate value in excess of
$1,000,000, the Company delivers an officers' certificate to the Trustee
certifying that such transaction or series of related transactions complies with
clause (a) above and such transaction or series of related transactions has been
approved by the board of directors of the Company (and approved by a majority of
the Independent Directors of the Company, or in the event there is only one
Independent Director, by such Independent Director); PROVIDED, HOWEVER, that
this provision shall not apply to (A) any transaction with an officer or
director of the Company entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any
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officer or director of the Company) and (B) transactions pursuant to agreements
in existence on the date of the Indenture. This limitation shall not apply to
(i) transactions among the Company and its wholly owned Subsidiaries or among
wholly owned Subsidiaries of the Company, (ii) the provision of directors and
officers insurance for the benefit of the directors and officers of the Company,
(iii) indemnification payments to directors and officers of the Company in
accordance with applicable state law and (iv) payments to all holders of Capital
Stock of the Company on a pro rata basis. (Section 1010)
LIMITATION ON LIENS. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, affirm or suffer to exist
any Lien of any kind upon any of its property or assets (including any
intercompany notes), owned at the date of the Indenture or acquired after the
date of the Indenture, or any income or profits therefrom, except if the Senior
Notes are directly secured equally and ratably with (or prior or senior thereto
in the case of Liens with respect to Subordinated Indebtedness) the obligation
or liability secured by such Lien, excluding, however, from the operation of the
foregoing any of the following:
(a) any Lien existing as of the date of the Indenture and listed on a
schedule thereto;
(b) any Lien arising by reason of (1) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired; (2) taxes, assessments, govermental charges or claims not yet
delinquent or which are being contested in good faith; (3) security for
payment of workers' compensation or other insurance related obligations; (4)
deposits made in the ordinary course of business in connection with tenders,
leases, contracts (other than contracts for the payment of money); (5)
zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests, mortgages,
obligations, liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee), none of which
materially impairs the use of any parcel of property material to the
operation of the business of the Company or any Subsidiary or the value of
such property for the purpose of such business; (6) deposits to secure
public or statutory obligations, or in lieu of surety or appeal bonds; (7)
certain surveys, exceptions, title defects, encumbrances, easements,
reservations of, or rights of others for, rights of way, sewer, electric
lines, telegraph or telephone lines and other similar purposes or zoning or
other restrictions as to the use of real property not interfering with the
ordinary conduct of the business of the Company or any of its Subsidiaries;
(8) operation of law in favor of mechanics, material men, laborers,
employees or suppliers, incurred in the ordinary course of business for sums
which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof or (9) contracts to sell assets that are not otherwise prohibited
hereunder;
(c) any Lien now or hereafter existing on property of the Company or any
Subsidiary pursuant to the Credit Facility, PROVIDED that any Indebtedness
so secured by any Lien created after the date hereof is permitted to be
incurred under clause (b)(i) of the provisions described under "--LIMITATION
ON INDEBTEDNESS";
(d) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Subsidiary, in each case which
Indebtedness is permitted under the provisions of "--LIMITATION ON
INDEBTEDNESS"; PROVIDED that any such Lien only extends to the assets that
were subject to such Lien securing such Acquired Indebtedness prior to the
related transaction by the Company or its Subsidiaries; and
(e) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (d) so long
as the amount of security is not increased thereby. (Section 1012)
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LIMITATION ON SALE OF ASSETS. (a) The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, consummate an Asset Sale
unless (i) at least 85% of the Net Cash Proceeds from such Asset Sale are
received in cash and (ii) the Company or such Subsidiary receives consideration
at the time of such Asset Sale at least equal to the Fair Market Value of the
shares or assets sold (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 portion of the Credit Facility
then outstanding as required by the terms thereof, or the Company determines not
to apply such Net Cash Proceeds to the permanent prepayment of any portion of
the Credit Facility or if the Credit Facility is not then outstanding, then the
Company or a Subsidiary may within twelve months 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 Subsidiaries existing on the date of the
Indenture or in businesses reasonably related thereto. The amount of such Net
Cash Proceeds neither used to permanently repay or prepay any portion of the
Credit Facility nor used or invested as set forth in this paragraph constitutes
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $5 million or more,
the Company will apply the Excess Proceeds to the repayment of the Senior Notes
and any Pari Passu Indebtedness required to be repurchased under the instrument
governing such Pari Passu Indebtedness as follows: (a) the Company will make an
offer to purchase (an "Offer") from all holders of the Senior Notes in
accordance with the procedures set forth in the Indenture in the maximum
principal amount (expressed as a multiple of $1,000) of Senior Notes that may be
purchased out of an amount (the "Senior 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 Senior Notes, and the denominator of which
is the sum of the outstanding principal amount of the Senior 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 Senior Notes tendered)
and (b) to the extent required by such Pari Passu Indebtedness to permanently
reduce the principal amount of such Pari Passu Indebtedness, 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 Senior 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 of such Pari Passu
Indebtedness plus the amount of any premium required to be paid to repurchase
such Pari Passu Indebtedness. The offer price will be payable in cash in an
amount equal to 100% of the principal amount of the Senior 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 Senior
Notes tendered pursuant to the Offer is less than the Senior Note Amount
relating thereto or the aggregate amount of Pari Passu Indebtedness that is
purchased is less than the Pari Passu Debt Amount (the amount of such shortfall,
if any, constituting a "Deficiency"), the Company will use such Deficiency in
the business of the Company and its Subsidiaries for general corporate purposes.
Upon completion of the purchase of all the Senior Notes tendered pursuant to an
Offer and repurchase of the Pari Passu Indebtedness pursuant to a Pari Passu
Offer, the amount of Excess Proceeds, if any, shall be reset at zero.
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(d) Whenever the Excess Proceeds received by the Company exceed $5 million,
such Excess Proceeds will, prior to any purchase of Senior Notes or Pari Passu
Indebtedness described in paragraph (c) above, be set aside by the Company in a
separate account pending (i) deposit with the depository or a paying agent of
the amount required to purchase the Senior Notes or Pari Passu Indebtedness
tendered in an Offer or a Pari Passu Offer, (ii) delivery by the Company of the
Offered Price to the holders of the Senior Notes or Pari Passu Indebtedness
tendered in an Offer or a Pari Passu Offer and (iii) application, as set forth
above, of Excess Proceeds in the business of the Company and its Subsidiaries
for general corporate purposes. Such Excess Proceeds may be invested in
Temporary Cash Investments, PROVIDED that the maturity date of any such
investment made after the amount of Excess Proceeds exceeds $5 million shall not
be later than the Offer Date. The Company shall be entitled to any interest or
dividends accrued, earned or paid on such Temporary Cash Investments, PROVIDED
that the Company shall not withdraw such interest from the separate account if
an Event of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to clause (c)
above, the Senior Notes shall be purchased by the Company, at the option of the
holder thereof, in whole or in part in integral multiples of $1,000, on a date
that is not earlier than 45 days and not later than 60 days from the date the
notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the Senior Note Amount is less than the aggregate Offered
Price of all Senior Notes tendered.
(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) The Company will not, and will not permit any Subsidiary to, create or
permit to exist or become effective any restriction (other than restrictions
existing under Indebtedness as in effect on the date of the Indenture and listed
on a schedule thereto as such Indebtedness may be refinanced from time to time,
PROVIDED that such restrictions are no less favorable to the holders of Senior
Notes than those existing on the date of the Indenture), that would materially
impair the ability of the Company to make an Offer to purchase the Senior Notes
or, if such Offer is made, to pay for the Senior Notes tendered for purchase.
(Section 1013)
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company will not, and
will not permit any Subsidiary of the Company to, enter into any Sale and
Leaseback Transaction with respect to any property or assets (whether now owned
or hereafter acquired) unless (i) the sale or transfer of such property or
assets to be leased complies with the provisions of "--Certain
Covenants--LIMITATION ON SALE OF ASSETS", provided that the Net Cash Proceeds
therefrom, to the extent not applied to the permanent repayment or prepayment of
any portion of the Credit Facility or used to purchase Senior Notes pursuant to
an Offer (whether or not such Offer is accepted), will be used to invest in
properties and assets that will be used in the businesses of the Company or its
Subsidiaries existing on the date of this Indenture or reasonably related
thereto and (ii) the Company or such Subsidiary would be entitled under the
provisions of "--Certain Covenants--LIMITATION ON INDEBTEDNESS" to incur any
Capital Lease Obligations in respect of such Sale and Leaseback Transaction.
(Section 1011)
LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS. (a) The Company will
not permit any Subsidiary, directly or indirectly, to guarantee, assume or in
any other manner become liable with respect to any Indebtedness of the Company
(i) unless such Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a guarantee of the Senior 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," and (B)
if such Indebtedness is by its terms expressly subordinated to the Senior Notes,
any such assumption, guarantee or other liability of such Subsidiary with
respect to such Indebtedness shall be subordinated to such Subsidiary's
assumption, guarantee or other liability with respect to the Senior Notes to the
same extent as such Indebtedness is subordinated to the Senior Notes
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and (ii) such Subsidiary waives and will not in any manner whatsoever claim or
take the benefit or advantage of any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Subsidiary as a
result of any payment by such Subsidiary under its guarantee.
(b) Notwithstanding the foregoing, any guarantee by a Subsidiary of the
Senior Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of the Company, of all of the Company's Capital
Stock in, or all or substantially all the assets of, such Subsidiary, which is
in compliance with the terms of the Indenture. (Section 1014)
PURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL. If a Change of Control
shall occur at any time, then each holder of Senior Notes shall have the right
to require that the Company purchase such holder's Senior Notes in whole or in
part in integral multiples of $1,000, at a purchase price (the "Change of
Control Purchase Price") in cash in an amount equal to 101% of the principal
amount of such Senior Notes, plus accrued and unpaid interest, if any, to the
date of purchase (the "Change of Control Purchase Date"), pursuant to the offer
described below (the "Change of Control Offer") and in accordance with the other
procedures set forth in the Indenture.
Within 15 days following any Change of Control, the Company shall notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Senior Notes, by first-class mail, postage prepaid, at his address appearing
in the security register, stating, among other things, the purchase price and
that the purchase date shall be 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; that any Senior
Note not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the purchase price, any Senior Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Purchase Date; and certain other procedures that a
holder of Senior Notes must follow to accept a Change of Control Offer or to
withdraw such acceptance. (Section 1015)
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Senior Notes that might be delivered by holders of
the Senior 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
Senior Notes the rights described under "--Events of Default."
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. As a consequence,
in the event the holders of the Senior Notes elected to exercise their rights
under the Indenture and the Company elected to contest such election, there
could be no assurance as to 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 Senior 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 Senior Notes the
right to require the Company to repurchase the Senior 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 Senior Notes, if such transaction is not a
transaction defined as a Change of Control. A transaction involving the
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Company's management or its Affiliates, or a transaction involving a
recapitalization of the Company, will result in a Change of Control only 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, and will not permit any Subsidiary to, create or
permit to exist or become effective any restriction (other than restrictions
existing under Indebtedness as in effect on the date of the Indenture or under
any refinancings thereof no more onerous than the restrictions as in effect on
the date of the Indenture) that would materially impair the ability of the
Company to make a Change of Control Offer to purchase the Senior Notes or, if
such Change of Control Offer is made, to pay for the Senior Notes tendered for
purchase. (Section 1015)
LIMITATION ON SUBSIDIARY CAPITAL STOCK. The Company will not, and will not
permit any Subsidiary of the Company to, issue, sell or otherwise transfer any
Capital Stock of any Subsidiary, except for (i) Capital Stock issued to and held
by the Company or a Wholly Owned Subsidiary, and (ii) Capital Stock issued by a
Person prior to the time (A) such Person becomes a Subsidiary, (B) such Person
merges with or into a Subsidiary or (C) a 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). (Section 1016)
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of any
Subsidiary to (i) pay dividends or make any other distribution on its Capital
Stock, (ii) pay any Indebtedness owed to the Company or any other Subsidiary,
(iii) make any Investment in the Company or any other Subsidiary or (iv)
transfer any of its properties or assets to the Company or any other Subsidiary,
except (a) any encumbrance or restriction, with respect to a Subsidiary that is
not a Subsidiary of the Company on the date of the Indenture, in existence at
the time such Person becomes a Subsidiary of the Company and not incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary; and
(b) any encumbrance or restriction existing under any agreement that extends,
renews, refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clause (a) or in this clause (b), 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)
PROVISION OF FINANCIAL STATEMENTS. The Indenture provides that, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the
Company will, to the extent permitted under the Exchange Act, file with the
Commission the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to such
Sections 13(a) or 15(d) if the Company were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject. The Company will also in any event (x)
within 15 days of each Required Filing Date (i) transmit by mail to all holders,
as their names and addresses appear in the security register, without cost to
such holders and (ii) file with the Trustee copies of the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act if the Company were subject to such Sections and (y) if filing such
documents by the Company 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. (Section 1018)
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ADDITIONAL COVENANTS. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in the City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) 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 affiliated Persons, or
permit any of its Subsidiaries to enter into any such transaction or
transactions if such transaction or 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
Subsidiaries on a Consolidated basis to any other Person or group of affiliated
Persons, unless (i) 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 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 satisfactory to the
Trustee, all the obligations of the Company under the Senior Notes and the
Indenture, and the Indenture will remain in full force and effect; (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; (iii) except in the case of the consolidation or merger of any
Wholly Owned Subsidiary with or into the Company, immediately after giving
effect to such transaction on a PRO FORMA basis, the Consolidated Net Worth of
the Company (or the Surviving Entity if the Company is not the continuing
obligor under the Indenture) is equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction; (iv) except in the
case of the consolidation or merger of any Wholly Owned Subsidiary with or into
the Company, 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 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"; (v) at the time of the transaction if any of the property or
assets of the Company or any of its Subsidiaries would thereupon become subject
to any Lien, the provisions of "--Certain Covenants--LIMITATION ON LIENS" 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 the Indenture and that all conditions precedent herein provided for
relating to such transaction have been complied with. (Section 801)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any
Senior Note when it becomes due and payable, and such default shall continue
for a period of 30 days;
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(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Senior Note at its Maturity (upon acceleration,
optional or mandatory redemption, required repurchase or otherwise);
(iii) (a) there shall be a default in the performance, or breach of any
covenant or agreement of the Company under the Indenture (other than a
default in the performance, or breach, of a covenant or agreement which is
specifically dealt with in clause (i) or (ii) or in clause (b), (c) or (d)
of this clause (iii)) 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
Senior 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 Company shall have failed to make or consummate a Change of
Control Offer in accordance with the provisions of "--Certain
Covenants--PURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL";
(iv) one or more defaults in the payment of the principal, premium, if
any, or interest on any Indebtedness shall have occurred under any
agreements, indentures or instruments under which the Company or any
Subsidiary then has outstanding Indebtedness which aggregates in excess of
$5 million when the same shall become due and payable and continuation of
such default for any applicable grace period and, if such Indebtedness has
not already matured at its final maturity in accordance with its terms, the
holder of such Indebtedness shall have the right to accelerate such
Indebtedness;
(v) one or more events of default as defined in any of the agreements,
indentures or instruments described in clause (iv) of this section shall
have occurred and the Indebtedness thereunder, if not already matured at its
final maturity in accordance with its terms, shall have been accelerated;
(vi) one or more judgments, orders or decrees for the payment of money
in excess of $5 million, either individually or in the aggregate (net of
amounts paid by insurance, bond or similar instrument), shall be rendered
against the Company or any 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;
(vii) any holder or holders of at least $2 million in aggregate
principal amount of Indebtedness of the Company or any Subsidiary after a
default under such Indebtedness shall notify the Trustee of the intended
sale or disposition of any assets of the Company or any 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 or any Subsidiary (including funds on deposit or held
pursuant to lock-box and other similar arrangements);
(viii) 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
or any Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or (b) a decree or order adjudging the Company or any
Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Subsidiary
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any 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
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in effect, or any such other decree or order shall be unstayed and in
effect, for a period of 60 consecutive days; or
(ix) (a) the Company or any 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 or any
Subsidiary consents to the entry of a decree or order for relief in respect
of the Company or such 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, (c) the Company or any Subsidiary
files a petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, (d) the Company or any Subsidiary (x)
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 or such Subsidiary or of any
substantial part of their respective properties, (y) makes an assignment for
the benefit of creditors or (z) admits in writing its inability to pay its
debts generally as they become due or (e) the Company or any Subsidiary
takes any corporate action in furtherance of any such actions in this
paragraph (ix). (Section 501)
If an Event of Default (other than as specified in clauses (viii) and (ix)
of the prior paragraph) shall occur and be continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of the Senior 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
the Senior 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 Senior Notes) and
upon any such declaration, such principal, premium, if any, and interest shall
become immediately due and payable. If an Event of Default specified in clause
(viii) or (ix) of the prior paragraph occurs and is continuing, then all the
Senior Notes shall IPSO FACTO become and be immediately due and payable, in an
amount equal to the principal amount of the Senior Notes, together with premium,
if any, and accrued and unpaid interest, if any, to the date the Senior 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 Senior 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 Senior 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 (i) 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, (ii) all overdue interest on all Senior
Notes, (iii) the principal of and premium, if any, on any Senior Notes which
have become due otherwise than by such declaration of acceleration and interest
thereon at a rate borne by the Senior Notes and (iv) to the extent that payment
of such interest is lawful, interest upon overdue interest at the rate borne by
the Senior Notes; and (b) all Events of Default, other than the nonpayment of
principal of the Senior Notes which have become due solely by such declaration
of acceleration, have been cured or waived. (Section 502)
The holders of not less than a majority in aggregate principal amount of the
Senior Notes outstanding may on behalf of the holders of all the Senior Notes
waive any past default under the Indenture and its consequences, except a
default in the payment of the principal of, premium, if any, or interest on any
Senior Note, or in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each Senior
Note outstanding affected by such modification or amendment. (Section 513)
The Company is also required to notify the Trustee within 30 calendar days
of the occurrence of any Default. (Section 501) The Company is required to
deliver to the Trustee, on or before a date not more
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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 1019) 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
Senior 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, 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, provided that 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 and any other obligor upon the Senior Notes
discharged with respect to the outstanding Senior Notes ("defeasance"). Such
defeasance means that the Company and any other obligor under the Indenture
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Senior Notes, except for (i) the rights of holders of
outstanding Senior Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Senior Notes when such payments are due,
(ii) the Company's obligations with respect to the Senior Notes concerning
issuing temporary Senior Notes, registration of Senior Notes, mutilated,
destroyed, lost or stolen Senior Notes, and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee and (iv) 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 released
with respect to certain covenants that are described in the Indenture ("covenant
defeasance") and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Senior Notes. In
the event covenant defeasance occurs, certain events (not including non-payment,
bankruptcy and insolvency events) described under "Events of Default" will no
longer constitute an Event of Default with respect to the Senior Notes.
(Sections 401, 402 and 403)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Senior 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 Senior Notes on the Stated Maturity (or on any date after May
15, 2000 (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 Senior Notes on the Defeasance Redemption Date); (ii) 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 Senior 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; (iii) 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 Senior Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on
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the same amounts, in the same manner and at the same times as would have been
the case if such covenant defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit or
insofar as clause (viii) or (ix) 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; (v) such defeasance or covenant defeasance shall not
cause the Trustee for the Senior 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; (vi) 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, or any
Subsidiary is a party or by which it is bound; (vii) 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; (viii) 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; (ix) 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 Senior Notes over
the other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; (x) 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 Senior Notes on the date of
such deposit or at any time ending on the 9lst day after the date of such
deposit; and (xi) 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 cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Senior Notes, as expressly
provided for in the Indenture) as to all outstanding Senior Notes when (a)
either (i) all the Senior Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Senior Notes which have been replaced or paid or
Senior 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 (ii) all Senior Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable at their Stated Maturity within one year, or (z) 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; and the Company 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 Senior
Notes not therefore delivered to the Trustee for cancellation, including
principal of, premium, if any, and accrued interest at such Maturity, Stated
Maturity or Redemption; (b) the Company has paid or caused to be paid all other
sums payable under the Indenture by the Company; and (c) the Company has
delivered to the Trustee an officers' certificate and an opinion of independent
counsel each stating that (i) all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with and (ii) 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 or any Subsidiary is a party or by
which the Company or any Subsidiary is bound. (Section 1201)
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MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of at least a majority of aggregate
principal amount of the Senior Notes then outstanding, provided, however, that
no such modification or amendment may, without the consent of the holder of each
outstanding Senior Note affected thereby, (i) change the Stated Maturity of the
principal of, or any installment of interest on, any Senior 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 Senior 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); (ii) 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 "--Certain
Covenants--PURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL," including
amending, changing or modifying any definitions with respect thereto; (iii)
reduce the percentage in principal amount of outstanding Senior 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; (iv) 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 outstanding Senior 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 Senior Note affected
thereby; (v) except as otherwise permitted under "-- Consolidation, Merger, Sale
of Assets," consent to the assignment or transfer by the Company of any of its
rights and obligations under the Indenture; or (vi) amend or modify any of the
provisions of the Indenture relating to the subordination of the Senior Notes in
any manner adverse to the holders of the Senior Notes. (Section 902)
Notwithstanding the foregoing, without the consent of any holders of the
Senior Notes, the Company and the Trustee may modify or amend the Indenture (a)
to evidence the succession of another Person to the Company, and the assumption
by any such successor of the covenants of the Company in the Indenture and in
the Senior Notes in accordance with "--Consolidation, Merger, Sale of Assets,"
(b) to add to the covenants of the Company or any other obligor upon the Senior
Notes for the benefit of the holders of the Senior Notes, or to surrender any
right or power conferred upon the Company or any other obligor upon the Senior
Notes, as applicable, in the Indenture, in the Senior Notes; (c) to cure any
ambiguity, or to correct or supplement any provision in the Indenture or the
Senior Notes which may be defective or inconsistent with any other provision in
the Indenture or the Senior Notes or make any other provisions with respect to
matters or questions arising under the Indenture or the Senior Notes; PROVIDED
that, in each case, such provisions shall not adversely affect the interest of
the holders of the Senior Notes; (d) to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act; (e) to evidence and provide the acceptance of the
appointment of a successor Trustee under the Indenture; or (f) to mortgage,
pledge, hypothecate or grant a security interest in favor of the Trustee for the
benefit of the holder of the Senior Notes as additional security for the payment
and performance of the Company'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)
The holders of a majority in aggregate principal amount of the Senior Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1020)
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GOVERNING LAW
The Indenture and the Senior Notes are governed by, and shall be construed
in accordance with, the laws of the State of New York, without giving effect to
the conflicts of law principles thereof.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) 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
Subsidiary or such acquisition. 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 Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any executive 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 (iii) 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 (i) any Capital Stock
of any Subsidiary; (ii) all or substantially all of the properties and assets of
any division or line of business of the Company or its Subsidiaries; or (iii)
any other properties or assets of the Company or any 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 that (A) is
governed by the provisions described under "-- Consolidation, Merger, Sale of
Assets," (B) is by the Company to any Wholly Owned Subsidiary, or of any
Subsidiary to the Company or any Wholly Owned Subsidiary in accordance with the
terms of the Indenture, or (C) is of obsolete equipment in the ordinary course
of business.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) 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 (ii)
the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state 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 Subsidiaries on a Consolidated basis under any capital lease of real or
personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or other equity interests.
"Change of Control" means the occurrence of either of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted
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Holders, 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 50% of the total outstanding Voting
Stock of the Company; (ii) 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; (iii) the Company
consolidates with or merges with or into any Person or conveys, transfers or
leases all or substantially all of its assets to any Person, or any corporation
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 changed
into or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company is not changed or
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company) or where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock of
the surviving corporation which is not Redeemable Capital Stock or (y) 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) no "person" or "group" owns immediately after
such transaction, directly or indirectly, more than 50% of the total outstanding
Voting Stock of the surviving corporation; or (iv) 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."
"Code" means the Internal Revenue Code of 1986, as amended.
"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 Trust Indenture Act then the body performing
such duties at such time.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company.
"Company" means Loehmann's, Inc., a corporation incorporated under the laws
of Delaware, 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) EBITDA to (b) the sum of Consolidated Interest Expense
for such period and cash and non-cash dividends paid on any Preferred Stock of
the Company during such period; PROVIDED that (i) 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 the Company, a fixed or floating rate of interest, shall be computed
by applying at the option of the Company, either the fixed or floating rate and
(ii) in making such computation, the Consolidated Interest Expense of the
Company 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.
24
<PAGE>
"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 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
Subsidiaries for such period, on a Consolidated basis, including, without
limitation, (i) amortization of debt discount, (ii) the net cost under Interest
Rate Agreements and Currency Hedging Agreements (including amortization of
discounts), (iii) the interest portion of any deferred payment obligation and
(iv) accrued interest, plus (b)(i) the interest component of the Capital Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Subsidiaries during such period and (ii) all capitalized interest of
such Person and its Subsidiaries, in each case as determined in accordance with
GAAP.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of the Company and its 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, (i) all extraordinary gains or losses (less all fees and
expenses relating thereto), (ii) the portion of net income (or loss) of the
Company and its Subsidiaries on a Consolidated basis allocable to minority
interests in unconsolidated Persons to the extent that cash dividends or
distributions have not actually been received by the Company or one of its
Consolidated Subsidiaries, (iii) net income (or loss) of any Person combined
with the Company or any of its Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) net gains (but not losses) (less all fees and expenses
relating thereto) in respect of dispositions of assets other than in the
ordinary course of business, (vi) the net income of any Subsidiary to the extent
that the declaration of dividends or similar distributions by that 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 Subsidiary or
its stockholders, (vii) any restoration to 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 (viii) any gain arising from
the acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness of such Person.
"Consolidated Net Worth" of any Person, as of a date, means the Consolidated
stockholders' equity (excluding Redeemable Capital Stock) of such Person and its
Subsidiaries, as of such date, as determined 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 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).
"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 Facility, dated as of May 6, 1996, among
the Company, the lenders parties thereto, and BankAmerica Business Credit, Inc.,
as agent, as such agreement 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).
"Currency Hedging Arrangements" 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
25
<PAGE>
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 any time
or both would be, an Event of Default.
"EBITDA" means the sum of Consolidated Net Income (Loss), Consolidated
Interest Expense, Consolidated Income Tax Expense and Consolidated Non-cash
Charges deducted in computing Consolidated Net Income (Loss) in each case, for
such period, of the Company and its Subsidiaries on a Consolidated basis, all
determined in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"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.
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness
of any other Person referred to in the definition of Indebtedness guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (ii) 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, (iii) 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), (iv) 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 (v) 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.
"Indebtedness" means, with respect to any Person, without duplication, (i)
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 and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Capital Stock, now or hereafter outstanding, (ii) all obligations of such
Person evidenced by bonds, notes, debentures or other similar instruments, (iii)
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, (iv) all
obligations under Interest Rate Agreements and Currency Hedging Agreements of
such Person, (v) all Capital Lease Obligations of such Person, (vi) all
Indebtedness referred to in clauses (i) through (v) 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,
(vii) all Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock
valued at the greater of its voluntary or involuntary maximum fixed repurchase
price plus accrued and unpaid dividends, and (ix) any amendment, supplement,
modification, deferral, renewal, extension, refunding or refinancing of any
liability of
26
<PAGE>
the types referred to in clauses (i) through (viii) 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 Senior Notes, 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 Senior Notes and
the performance of all other obligations to the Trustee and the holders under
the Indenture and the Senior Notes, according to the terms thereof.
"Independent Director" means a director of the Company other than a director
(i) who (apart from being a director of the Company or any Subsidiary) is an
employee, insider, associate or Affiliate of the Company or a Subsidiary or has
held any such position during the previous five years or (ii) who is a director,
an employee, insider, associate or Affiliate of another party to the transaction
in question.
"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.
"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, other
than Senior Debt, and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"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.
"Maturity" means, when used with respect to any Senior Note, the date on
which the principal of such Senior Note 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 Subsidiary) net of (i) brokerage commissions and other reasonable fees
and expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes payable as a result of
such Asset Sale, (iii) payments made to retire Indebtedness where payment of
such Indebtedness is secured by the assets or properties the subject of such
Asset Sale, (iv) amounts required to be paid to any Person (other than the
Company or any Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a
27
<PAGE>
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any 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
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 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 any Indebtedness of the Company that is PARI
PASSU in right of payment to the Senior Notes.
"Permitted Holders" means as of the date of determination: (i) any of
Sefinco Ltd., Donaldson, Lufkin & Jenrette, Inc., and Desai Capital Management,
Incorporated; (ii) general partners, officers, directors or Affiliates of any of
the Persons described in clause (i); (iii) family members or relatives of the
Persons described in clause (ii); (iv) any trusts created for the benefit of the
Persons described in clause (ii) or (iii); (v) in the event of incompetence or
death of any of the Persons described in clause (ii) or (iii), such Person's
estate, executor, administrator, committee or other personal representative or
beneficiaries.
"Permitted Investment" means (i) Investments in any Wholly Owned Subsidiary
or any Person which, as a result of such Investment, (a) becomes a Wholly Owned
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 Subsidiary; (ii) Indebtedness of the Company or a Subsidiary
described under clauses (iv) and (v) of the definition of "Permitted
Indebtedness"; (iii) Temporary Cash Investments; (iv) Investments acquired by
the Company or any 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; and (v)
Investments in existence on the date of the Indenture.
"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.
"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 any Stated Maturity of the principal of the
Senior Notes or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity at the option of
the holder thereof.
28
<PAGE>
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which the Company or a Subsidiary sells or transfers
any property or asset in connection with the leasing, or the resale against
installment payments, of such property or asset to the seller or transferor.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Senior Debt" means all Indebtedness of the Company other than Subordinated
Indebtedness.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means 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 subordinated
in right of payment to the Senior Notes.
"Subsidiary" means any Person, a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.
"Temporary Cash Investments" means (i) 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 United States of
America or that are subject to a repurchase agreement with an institution
described in clause (ii) below exercisable within 270 days, (ii) 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" according to Moody's
Investors Service, Inc. ("Moody's") or any successor rating agency or "A-1"
according to Standard & Poor's Corporation ("S&P") or any successor rating
agency, (iii) 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 with a rating, at the time as of which any investment therein is made,
of "P-1" according to Moody's or "A-1" according to S&P and (iv) 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, as amended, or
any successor statute.
"Voting Stock" means Capital Stock 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
a corporation (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 Subsidiary" means a Subsidiary all the Capital Stock of which
is owned by the Company or another Wholly Owned Subsidiary.
29
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus has been prepared for use by DLJ in connection with offers
and sales of the Senior Notes in market-making transactions at negotiated prices
related to prevailing market prices at the time of the sale. DLJ may act as
principal or agent in such transactions. DLJ has advised the Company that it
currently makes a market in the Senior Notes, but it is not obligated to do so
and may discontinue any such market-making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of, or the trading
market for, the Senior Notes.
DLJ has served as an underwriter in the initial public offering of the
Senior Notes in May 1996 (the "Notes Offering") and received total underwriting
discounts and commissions of $3,000,000 in connection therewith.
DLJ and certain of its affiliates own an aggregate of 608,799 shares of
Common Stock, par value $0.01 per share, of the Company (the "Common Stock").
DLJ sold certain of its shares of Common Stock in the Company's initial public
offering of Common Stock in May 1996 (the "Stock Offering"), and a portion of
the proceeds of the Notes Offering and the Stock Offering were used to redeem
all of the outstanding shares of the Company's Series A Preferred Stock, certain
of which shares were owned by DLJ and other significant holders of the Company's
Common Stock. Affiliates of DLJ also sold an aggregate of 594,726 shares of
Common Stock in a registered public offering in October 1996. Prior to the
October 1996 Common Stock offering, certain affiliates of DLJ were parties to a
shareholders agreement under which such affiliates had the right to appoint two
members of the Company's Board of Directors. Janet Hickey and Richard E. Kroon
initially were appointed to the Board of Directors pursuant to this agreement.
This agreement expired upon the completion of the October 1996 Common Stock
offering. In addition, DLJ was paid $50,000 for financial advisory services
rendered to the Company during fiscal 1996.
LEGAL MATTERS
The validity of the Senior Notes has been passed upon for the Company by
Paul, Weiss, Riffind, Wharton & Garrison, New York, New York.
EXPERTS
The consolidated financial statements of Loehmann's, Inc., incorporated by
reference in Loehmann's, Inc.'s Annual Report (Form 10-K) for the year ended
February 1, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH ANY OFFERING CONTEMPLATED HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY AGENT OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF
WHICH INFORMATION IS FURNISHED. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, NOR AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THESE SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information..................... 2
Incorporation of Certain Information by
Reference............................... 2
Use of Proceeds........................... 3
Ratios of Earnings to Fixed Charges....... 3
The Company............................... 4
Description of the Senior Notes........... 6
Plan of Distribution...................... 30
Legal Matters............................. 30
Experts................................... 30
</TABLE>
$100,000,000
[LOGO]
11 7/8% SENIOR NOTES
DUE 2003
--------------
PROSPECTUS
-----------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by Loehmann's, Inc. (the
"Registrant"), in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts. All the amounts
shown are estimates except the Securities and Exchange Commission registration
fee, the National Association of Securities Dealers, Inc. filing fee and the
Nasdaq listing fee. None of such expenses are being borne by Donaldson Lufkin
Jenrette Securities Corporation ("DLJ"), except that DLJ has agreed to pay the
Registrant $15,000 per year until the earliest of (i) such time as either the
Registrant or DLJ shall terminate such agreement between them, (ii) the
securities being registered are no longer outstanding, and (iii) DLJ, in DLJ's
reasonable judgment, is no longer required to deliver a market-making prospectus
in connection with its market-making activities with respect to the securities
being registered.
<TABLE>
<CAPTION>
TO BE PAID
BY THE
REGISTRANT
------------
<S> <C>
Registration Fee--Securities and Exchange Commission...................................... $ 55,859
Filing Fee--National Association of Securities Dealers, Inc............................... 16,699
NASDAQ Listing Fee........................................................................ 38,243
Accounting Fees and Expenses.............................................................. 300,000
Legal Fees and Expenses (other than Blue Sky)............................................. 500,000
Blue Sky Fees and Expenses, including Legal Fees.......................................... 29,000
Printing, including Registration Statement, Prospectus, etc............................... 325,000
Transfer Agent and Registrar Fees......................................................... 15,000
Miscellaneous Expenses.................................................................... 216,501
------------
Total............................................................................... $ 1,496,302
------------
------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145(a) of the General Corporation Law of the State of Delaware
provides that a Delaware corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect of any
criminal action or proceeding, had no cause to believe his conduct was unlawful.
Section 145(b) provides that a Delaware corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted under similar standards, except that no indemnification may be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the court in which
II-1
<PAGE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (CONTINUED)
such action or suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses actually and reasonably
incurred by him in connection therewith; that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and that the corporation may purchase and
maintain insurance on behalf of a director or officer of the corporation against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under such Section 145.
The Company's Restated Certificate of Incorporation provides for
indemnification of the Company's directors and officers to the fullest extent
permitted by law. The Company's Restated Certificate of Incorporation also
permits the Board of Directors to authorize the Company to purchase and maintain
insurance against any liability asserted against any director, officer, employee
or agent of the Company arising out of his capacity as such. Insofar as
indemnification for liabilities under the Securities Act may be permitted to
directors, officers, or controlling persons of the Company pursuant to the
Company's Restated Certificate of Incorporation, its By-laws and the Delaware
General Corporation Law, the Company has been informed that in the opinion of
the Commission such indemnification is against public policy as expressed in
such Act and is therefore unenforceable.
As permitted by the Delaware General Corporation Law, the Company's Restated
Certificate of Incorporation provides that directors of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the Delaware General
Corporation Law, relating to prohibited dividends or distributions or the
repurchase or redemption of stock or (iv) for any transaction from which the
director derives an improper personal benefit. As a result of this provision,
the Company and its stockholders may be unable to obtain monetary damages from a
director for breach of his or her duty of care.
ITEM 16. EXHIBITS
See index to exhibits at E-1
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment in this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission
II-2
<PAGE>
ITEM 17. UNDERTAKINGS (CONTINUED)
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that the undertakings set forth in paragraph (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrants pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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.
(3) To remove from the registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
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 Section 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 this
registration statement shall be deemed to be a new registration statement
relating to the securities offering herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceedings) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Loehmann's, Inc.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this post-effective
amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, New York, on
the 9th day of June 1997.
LOEHMANN'S, INC.
By: /s/ PHILIP KAPLAN
-----------------------------------------
Philip Kaplan, PRESIDENT,
CHIEF OPERATING OFFICER AND DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to the registration statement has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
*
- ------------------------------ Chairman of the Board and June 9, 1997
Norman S. Matthews Director
*
- ------------------------------ Chairman, Chief Executive June 9, 1997
Robert N. Friedman Officer and Director
/s/ PHILIP KAPLAN President, Chief Operating
- ------------------------------ Officer, Secretary and June 9, 1997
Philip Kaplan Director
* Senior Vice President,
- ------------------------------ Chief Financial Officer June 9, 1997
Robert Glass and Assistant Secretary
*
- ------------------------------ Director June 9, 1997
Janet A. Hickey
*
- ------------------------------ Director June 9, 1997
Richard E. Kroon
*
- ------------------------------ Director June 9, 1997
Christina A. Mohr
- ------------------------------ Director June 9, 1997
Arthur E. Reiner
*
- ------------------------------ Director June 9, 1997
Cynthia R. Cohen
*By /s/ PHILIP
KAPLAN
- ------------------------------
(Attorney-in-Fact)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
1.1 Form of Underwriting Agreement(1)...........................................................
4.1 Senior Notes Indenture dated as of May 10, 1996 between the Company and United States Trust
Company, as Trustee(2)......................................................................
4.2 Form of Senior Note(1)......................................................................
5.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding the validity of the Securities
being registered(1).........................................................................
23.1 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5.1)...............
23.2 Consent of Ernst & Young LLP................................................................
24.1 Power of Attorney(1)........................................................................
25.1 Statement of Eligibility of Trustee on Form T-1(1) (separately bound).......................
</TABLE>
- ------------------------
(1) Previously filed.
(2) Incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly
Report on Form 10-Q filed on May 4, 1996.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Post-Effective Amendment No. 1 on Form S-3 to Form S-1 Registration Statement
(No. 33-97100) and related Prospectus of Loehmann's, Inc. dated June 9, 1997 for
the registration of Senior Notes and to the incorporation by reference therein
of our report dated February 24, 1997, with respect to the consolidated
financial statements and schedules of Loehmann's, Inc. incorporated by reference
in its Annual Report (Form 10-K) for the year ended February 1, 1997, filed with
the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
New York, New York
June 9, 1997
