As filed with the Securities and Exchange Commission on July 31, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPECIALTY RETAILERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
5311
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
TEXAS 04-3034294
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
STAGE STORES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
5311
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
DELAWARE 76-0407711
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
SPECIALTY RETAILERS, INC. (NV)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
5311
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
NEVADA 91-1826900
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
10201 Main Street
Houston, TX 77025
Telephone: (713) 667-5601
(Address, including zip code, and
telephone number, including
area code, of registrant's
principal executive offices)
---------------------
MR. CARL TOOKER
STAGE STORES, INC.
10201 MAIN STREET
HOUSTON, TX 77025
TELEPHONE: (713) 667-5601
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
<PAGE>
COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED
PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE(2)
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<S> <C> <C> <C> <C>
Series B 8 1/2% Senior Notes $1,000 principal
due 2005.................................. $200,000,000 amount $200,000,000 $60,606.06
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Guarantees of the Series B 8 1/2%
Senior Notes due 2005..................... $200,000,000 None(2) None(2) None(2)
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Series B 9% Senior Subordinated $1,000 principal
Notes due 2007............................ $100,000,000 amount $100,000,000 $30,303.03
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Guarantees of the Series B 9%
Senior Subordinated Notes
due 2007.................................. $100,000,000 None(2) None(2) None(2)
====================================================================================================================================
Totals $300,000,000 $1,000 $300,000,000 $90,909.09
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
in accordance with rule 457(f)(2) based upon the book value of the
securities as of __________, 1997.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate
fee is payable for the Guarantees.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- 2 -
<PAGE>
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* *
* 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. *
* *
******************************************************************************
SUBJECT TO COMPLETION, DATED JULY 31, 1997
PROSPECTUS
SPECIALTY RETAILERS, INC.
OFFER TO EXCHANGE ITS SERIES B 8 1/2% SENIOR NOTES DUE 2005
FOR ANY AND ALL OF ITS OUTSTANDING 8 1/2% SENIOR NOTES DUE 2005
AND TO EXCHANGE ITS SERIES B 9% SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING 9% SENIOR SUBORDINATED NOTES DUE 2007
UNCONDITIONALLY GUARANTEED BY STAGE STORES, INC. AND SPECIALTY RETAILERS, INC.
(NV)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
___________, 1997, UNLESS EXTENDED.
Specialty Retailers, Inc. ("SRI"), a wholly owned subsidiary of Stages Stores,
Inc. ("Stage" and, together with SRI, "the Company") hereby offers (the
"Exchange Offer"), upon the terms and conditions set forth in this Prospectus
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange (i) $1,000 principal amount of its Series B 8 1/2%
Senior Notes due 2005 (the "Senior Exchange Notes"), which will have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
pursuant to a Registration Statement of which this Prospectus is a part, for
each $1,000 principal amount of its outstanding 8 1/2 % Senior Notes due 2005
(the "Senior Notes"), of which $200,000,000 principal amount is outstanding; and
(ii) $1,000 principal amount of its Series B 9% Senior Subordinated Notes due
2007 (the "Senior Subordinated Exchange Notes" and, together with the Senior
Exchange Notes, the "Exchange Notes"), which will have been registered under the
Securities Act pursuant to a Registration Statement of which this Prospectus is
a part, for each $1,000 principal amount of its outstanding 9% Senior
Subordinated Notes due 2007 (the "Senior Subordinated Notes" and, together with
the Senior Notes, the "Notes"), of which $100,000,000 principal amount is
outstanding. The form and terms of the Exchange Notes are the same as the form
and terms of the Notes (which they replace) except that the Exchange Notes will
bear a Series B designation and will have been registered under the Securities
Act and, therefore, will not bear legends restricting their transfer and will
not contain certain provisions relating to an increase in the interest rate
which were included in the terms of the Notes in certain circumstances relating
to the timing of the Exchange Offer. The Senior Exchange Notes will evidence the
same debt as the Senior Notes (which they replace) and will be issued under and
be entitled to the benefits of the Indenture governing the Senior Notes dated
June 17, 1997 (the "Senior Notes Indenture") among SRI, Stage and State Street
Bank and Trust Company, as Trustee (the "Trustee"). The Senior Subordinated
Exchange Notes will evidence the same debt as the Senior Subordinated Notes
(which they replace) and will be issued under and entitled to the benefits of
the Indenture governing the Senior Subordinated Notes dated June 17, 1997 (the
"Senior Subordinated Notes Indenture" and, together with the Senior Notes
Indenture, the "Indentures") among SRI, Stage and the Trustee. See "The Exchange
Offer" and "Description of the Exchange Notes."
The Company has not issued, and does not have any current firm arrangements to
issue, any significant indebtedness to which the Exchange Notes would rank
Senior or PARI PASSU in right of payment.
The Senior Exchange Notes will be unsecured senior obligations of SRI, ranking
PARI PASSU in right of payment to all existing and future Senior Debt (as
defined) of SRI, including all obligations under the New Credit Agreement (as
defined). The Senior Exchange Notes will be guaranteed on a senior basis by
Stage, Specialty Retailers, Inc. (NV) ("Specialty NV"), a wholly owned
subsidiary of Stage, and certain future subsidiaries of Stage. The Senior
Subordinated Exchange Notes will be unsecured senior subordinated obligations of
SRI, ranking subordinate in right of payment to all existing and future Senior
Debt of SRI, including the Senior Exchange Notes and all obligations under the
New Credit Agreement, and ranking PARI PASSU in right of payment with all
existing and future Senior Subordinated Debt of SRI and senior in right of
payment to all existing and future subordinated debt of SRI. The Senior
Subordinated Exchange Notes will be guaranteed on a senior subordinated basis by
Stage, Specialty NV and certain future subsidiaries of Stage. As of May 3, 1997,
after giving pro forma effect to the Acquisition (as defined) and the
Refinancing (as defined), Senior Debt of the Company (including the Senior
Exchange Notes and amounts outstanding under the New Credit Agreement) would
have been approximately $201.7 million in principal amount and Senior
Subordinated Debt of the Company (including the Senior Subordinated Exchange
Notes) would have been approximately $100.0 million in principal amount. The
Exchange Notes will be effectively subordinated to all liabilities of the
subsidiaries of the Company that are not guarantors of the Exchange Notes. As of
May 3, 1997, after giving pro forma effect to the Acquisition and the
Refinancing, the amount of liabilities of such subsidiaries (consisting of Debt
and payables) would have been approximately $34.1 million. See "Description of
the New Credit Agreement" and "Description of the Exchange Notes."
SRI will accept for exchange any and all Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on ________, 1997, unless
extended by SRI in its sole discretion (the "Expiration Date"). Notwithstanding
the foregoing, SRI will not extend the Expiration Date beyond ________ __, 1997.
Tenders of Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
The Notes were sold by SRI on June 17, 1997 to the Initial Purchasers (as
defined) in a transaction not registered under the Securities Act in reliance
upon an exemption under the Securities Act. The Initial Purchasers subsequently
placed the Notes with qualified institutional buyers in reliance upon Rule 144A
under the Securities Act. Accordingly, the Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of SRI under the
Registration Rights Agreement (as defined) entered into by SRI in connection
with the offering of the Notes. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, SRI believes the Exchange Notes
issued pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by any holder thereof (other than any such holder that is
an "affiliate" of SRI or Stage within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
<PAGE>
in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer--Purpose and Effect of the
Exchange Offer" and "The Exchange Offer--Resale of the Exchange Notes." Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. SRI has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Notes not tendered and accepted in the Exchange Offer will continue
to hold such Notes and will be entitled to all the rights and benefits and will
be subject to the limitations applicable thereto under the Indentures and with
respect to transfer under the Securities Act. SRI will pay all the expenses
incurred by it incident to the Exchange Offer. See "The Exchange Offer."
SEE "RISK FACTORS" ON PAGE 18 FOR A DESCRIPTION OF CERTAIN RISKS TO BE
CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _________, 1997
2
<PAGE>
There has not previously been any public market for the Notes or the Exchange
Notes. SRI does not intend to list the Exchange Notes on any securities exchange
or to seek approval for quotation through any automated quotation system. There
can be no assurance that an active market for the Exchange Notes will develop.
See "Risk Factors--Absence of a Public Market." Moreover, to the extent that
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Notes could be adversely affected.
The Exchange Notes will be available initially only in book-entry form. SRI
expects that the Exchange Notes issued pursuant to this Exchange Offer will be
issued in the form of a Global Certificate (as defined), which will be deposited
with, or on behalf of, The Depository Trust Company (the "Depositary") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Certificate representing the Exchange Notes will be
shown on, and transfers thereof to qualified institutional buyers will be
effected through, records maintained by the Depositary and its participants.
After the initial issuance of the Global Certificate, Exchange Notes in
certified form will be issued in exchange for the Global Certificate only on the
terms set forth in the Indentures. See "Description of the Exchange
Notes--Book-Entry, Delivery and Form."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL
STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS
PROSPECTUS, INCLUDING WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER THE
"PROSPECTUS SUMMARY," "THE COMPANY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AND LOCATED
ELSEWHERE HEREIN REGARDING THE COMPANY'S FINANCIAL POSITION AND BUSINESS
STRATEGY, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE
BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE
DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION IN CONJUNCTION WITH
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS AND UNDER "RISK
FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN THIS PROSPECTUS TO THE COMPANY
SHALL, AS THE CONTEXT REQUIRES, REFER TO STAGE STORES, INC. ("STAGE"), TOGETHER
WITH ITS WHOLLY OWNED SUBSIDIARIES, SPECIALTY RETAILERS, INC. ("SRI") AND
SPECIALTY RETAILERS, INC. (NV) ("SPECIALTY NV"). UNLESS OTHERWISE SPECIFIED,
REFERENCES IN THIS PROSPECTUS TO THE COMPANY, STAGE, SRI OR SPECIALTY NV DO NOT
GIVE EFFECT TO THE ACQUISITION OF C.R. ANTHONY COMPANY. REFERENCES TO A
PARTICULAR YEAR ARE TO THE COMPANY'S FISCAL YEAR WHICH IS THE 52 OR 53 WEEK
PERIOD ENDING ON THE SATURDAY CLOSEST TO JANUARY 31 OF THE FOLLOWING CALENDAR
YEAR (E.G., A REFERENCE TO "1996" IS A REFERENCE TO THE FISCAL YEAR ENDED
FEBRUARY 1, 1997).
THE COMPANY
The Company operates the store of choice for well known, national brand
name family apparel in over 200 small towns and communities across the central
United States. The Company has recognized the high level of brand awareness and
demand for fashionable, quality apparel by consumers in small markets and has
identified these markets as a profitable and underserved niche. The Company has
developed a unique franchise focused on small markets, differentiating itself
from the competition by offering a broad range of branded merchandise with a
high level of customer service in convenient locations.
As of July 28, 1997, the Company operated 577 stores in 24 states
throughout the central United States, 329 of which operated under the Company's
"Stage," "Bealls" and "Palais Royal" trade names. The remaining 248 stores were
acquired through the acquisition of C.R. Anthony Company ("CR Anthony") which
was completed on June 26, 1997 (the "Acquisition") and are operated under the
"Anthonys" and "Anthonys Limited" trade names. See "The Acquisition."
Approximately 78% of the "Stage," "Bealls" and "Palais Royal" stores are located
in small markets and communities with populations generally below 30,000 people,
some with as few as 4,000 people. The Company's store format (averaging
approximately 18,000 selling square feet) and merchandising capabilities enable
the Company to operate profitably in small markets. The remainder of the
Company's stores operate in metropolitan areas, primarily in suburban Houston.
For 1996, after giving effect to the Refinancing, the Acquisition and the
acquisition of Uhlmans Inc. ("Uhlmans") in June 1996 as if each had occurred at
the beginning of the year, sales and EBITDA would have been $1.1 billion and
$108.9 million, respectively.
The Company's merchandise offerings include a carefully edited but broad
selection of brand name, moderately priced, fashion apparel, accessories,
fragrances and cosmetics and footwear for women, men and children. Over 85% of
1996 sales consisted of brand name merchandise, including nationally recognized
brands such as Calvin Klein, Chaps/Ralph Lauren, Guess, Haggar Apparel, Hanes,
Levi Strauss, Liz Claiborne, Nike and Reebok. The Company intends to convert the
"Anthonys" and "Anthonys Limited" stores to the Company's format under its
"Stage" and "Bealls" trade names during the remainder of 1997 and 1998.
The Company generally faces less competition for brand name apparel as a
result of its small market focus. In those markets, competition generally comes
from local retailers or small regional chains as most national department stores
do not operate in small markets, and access to brand name merchandise generally
requires travel to distant regional malls with national department stores. In
those small markets where the Company does compete for brand name apparel sales,
the Company believes it has a competitive advantage over local retailers and
smaller regional chains due to its: (i) economies of scale; (ii) strong vendor
relationships; (iii) proprietary credit card program; and (iv) sophisticated
operating systems. The Company believes it has a competitive advantage in small
markets over national department stores due to its: (i) experience with smaller
markets; (ii) ability to effectively manage merchandise assortments in a small
store format; and (iii) established operating systems designed for efficient
management within small markets. In addition, due to minimal merchandise
overlap, the Company generally does not directly compete for brand name apparel
sales with national discounters such as Wal-Mart.
The Company has begun to realize the full potential of its unique
franchise in small markets as a result of several initiatives undertaken in
recent years, including: (i) recruiting a new senior management team; (ii)
embarking on an accelerated store expansion program to capitalize on
opportunities in new markets through new store openings and strategic
acquisitions; and (iii) continuing to refine the Company's retailing concept
through new merchandising and operating programs. As a result of these
initiatives, as well as the lower operating costs of small market stores, the
Company has among the highest operating income and EBITDA margins in the apparel
retailing industry.
4
<PAGE>
KEY STRENGTHS
The following factors serve as the Company's key strengths and
distinguishing characteristics:
ABILITY TO OPERATE PROFITABLY IN SMALLER MARKETS. In targeting small
markets, the Company has developed a store format, generally ranging in size
from 12,000 to 30,000 selling square feet, which is smaller than typical
department stores yet large enough to offer a well edited, but broad selection
of merchandise. In 1996, the Company's small market stores open for at least one
year generated a store contribution (operating profit before allocation of
corporate overhead) as a percentage of sales of 17%, as compared to 12% for its
larger market stores.
BENEFITS OF STRONG VENDOR RELATIONSHIPS. The Company's extensive store
base offers major vendors a unique vehicle for accessing many small markets in a
cost effective manner. The proliferation of media combined with the significant
marketing efforts of these vendors has created significant demand for branded
merchandise. The financial and other limitations of many local retailers have,
however, left vendors of large national brands with limited access to such
markets. Further, these vendors, in order to preserve brand image, generally do
not sell to national discounters. As a result, the Company is able to carry
branded merchandise frequently not carried by local competitors. Additionally,
the Company continuously seeks to expand its vendor base and has recently added
nationally recognized brand names such as Dockers for Women, Oshkosh and Polo,
and fragrances by Elizabeth Arden, Liz Claiborne and Perry Ellis. In addition,
the Company has successfully increased the participation by key vendors in joint
marketing programs to a level that the Company believes exceeds the standard
programs provided to its smaller, regional competitors.
EFFECTIVE MERCHANDISING STRATEGY. The Company's merchandising strategy is
based on an in-depth understanding of its customers and is designed to
accommodate the particular demographic profile of each store. Store layouts and
visual merchandising displays are designed to create a friendly, modern,
department store environment, which is frequently not found in small markets.
The Company's strategy focuses on moderately-priced, brand name merchandise
categories of women's, men's and children's apparel, accessories, fragrances,
cosmetics and footwear, which have traditionally experienced attractive margins.
The Company utilizes a sophisticated merchandise allocation and transfer system
which is designed to maximize in-stock positions, increase sales and reduce
markdowns. The Company believes that the combination of the size and experience
of its buyer group, strong vendor relationships, effective merchandising systems
and participation in the Associated Merchandising Corporation ("AMC")
cooperative buying service enable it to compete effectively on both price and
selection in its markets.
FOCUSED MARKETING STRATEGY. The Company's primary target customers are
women between the ages of 20 and 55 with household incomes over $25,000 who are
the primary decision makers for family clothing purchases. The Company uses a
multi-media advertising approach to position its stores as the local destination
for fashionable, brand name merchandise. In addition, the Company heavily
promotes its proprietary credit card in order to create customer loyalty and to
effectively identify its core customers. The Company believes it has a high
level of customer awareness due to the small size of its markets, its aggressive
advertising strategy and well developed programs designed to encourage a high
level of customer interaction and employee participation in local community
activities.
BENEFITS OF PROPRIETARY CREDIT CARD PROGRAM. The Company aggressively
promotes its proprietary credit card and, as a result, the Company believes it
experiences a higher percentage of proprietary credit card sales (approximately
53% of net sales in 1996) than most apparel retailers. The Company considers its
credit card program to be a critical component of its retailing concept because
it: (i) enhances customer loyalty by providing a service that few local and
regional competitors or discounters offer; (ii) allows the Company to identify
and regularly contact its best customers; and (iii) creates a comprehensive
database that enables the Company to implement detailed, segmented marketing and
merchandising strategies for each store.
EMPHASIS ON CUSTOMER SERVICE. A primary corporate objective is to provide
excellent customer service through stores staffed with highly trained and
motivated sales associates. Each sales associate is evaluated and compensated
based upon the attainment of specific customer service standards such as
offering prompt assistance, suggesting complementary items, sending thank-you
notes to credit card customers and establishing consistent contact with
customers in order to create the associate's own customer base. The Company
continuously monitors the quality of its service by making over 4,500 calls each
month to credit card customers who have recently made a purchase. The results of
these surveys are used to determine a portion of each store manager's bonus. The
Company further extends its service philosophy to the design of the store,
including installing call buttons in its fitting rooms and, in many of its small
market stores, locating the store manager on the selling floor to increase
accessibility to customers.
5
<PAGE>
SOPHISTICATED OPERATING AND INFORMATION SYSTEMS. The Company supports its
retail concept with highly automated and integrated systems in areas such as
merchandising, distribution, sales promotions, credit, personnel management,
store design and accounting. These systems have enabled the Company to
effectively manage its inventory, improve sales productivity and reduce costs,
and have contributed to its relatively high operating income margins.
GROWTH STRATEGY
In order to fully realize the potential of its unique market position and
proven ability to operate profitably in small markets, the Company has initiated
an aggressive growth strategy to capitalize on available opportunities in new
markets through new store openings and strategic acquisitions. The Company
opened 23 new stores and acquired 45 stores in 1995, and opened 35 new stores
and acquired 34 stores in 1996. The Company expects to open at least 55 new
stores in 1997 in addition to those stores acquired pursuant to the Acquisition.
See "The Acquisition."
The following are the primary elements of the Company's strategy for
profitable growth:
NEW STORE OPENINGS IN SMALL MARKETS. As part of its ongoing expansion
program, the Company has identified over 600 additional markets in the central
United States and contiguous states which meet its demographic and competitive
criteria. All of these target markets are smaller communities with populations
from 12,000 to 30,000 where the Company has historically experienced its highest
profit margins.
STRATEGIC ACQUISITIONS. The Company believes that it can benefit from
strategic acquisitions by: (i) applying its buying and merchandising
capabilities, sales promotion techniques and customer service methods; (ii)
introducing its proven management systems; and (iii) consolidating overhead
functions. This strategy has been successfully demonstrated by the Company's
acquisition of 45 stores from Beall-Ladymon, Inc. ("Beall-Ladymon") in 1994 and
the subsequent reopening of the stores in the first quarter of 1995 under the
Stage name. In 1993, the year prior to their acquisition, the Beall-Ladymon
stores generated sales of approximately $53.4 million, whereas during the first
four full quarters operated by Stage (the 12 months ended August 3, 1996), the
newly opened Stage stores in the same locations generated sales of $95.0
million, an increase of 78%. Over the same period, store contribution more than
doubled.
In June 1996, the Company acquired Uhlmans, a privately held retailer with
34 locations in Ohio, Indiana and Michigan, where the Company previously had no
stores (the "Uhlmans Acquisition"). These stores were of similar size and
merchandise content to the Company's existing stores and were compatible with
the Company's retailing concept and growth strategy. For 1995, Uhlmans had net
sales of $59.7 million and operating income of $2.2 million. For the five full
months since the merchandising function of Uhlmans was completely integrated
(December 1996 through April 1997), sales at Uhlmans stores have increased 10.4%
over the comparable period in the prior year. The Company believes that certain
changes to the merchandise mix and an increase in proprietary credit card-based
sales will provide further improvement over Uhlmans historical results.
On June 26, 1997, the Company acquired CR Anthony by merging CR Anthony
with and into SRI. CR Anthony operated 248 brand name family apparel stores in
small markets throughout the central and midwestern United States as of June 25,
1997 under the names "Anthonys" and "Anthonys Limited." The Company intends to
convert the "Anthonys" and "Anthonys Limited" stores to the Company's format
under its "Stage" and "Bealls" trade names during the remainder of 1997 and
1998. See "The Acquisition."
EXPANSION TO MICROMARKETS. The Company believes that there is significant
growth potential targeting communities with populations from 4,000 to 12,000
("micromarkets") using a scaled-down, further edited version of the Company's
small market format. This avenue for growth would be designed to capitalize on
the Company's historically favorable operating experience in markets of this
size. The Company believes that it can successfully operate in micromarkets
because: (i) the Company can tailor its existing successful small market store
model to the appropriate size for these micromarkets (approximately 10,000
selling square feet and smaller); and (ii) micromarkets are generally
characterized by lower levels of competition and lower labor and occupancy costs
compared to small markets. The Company has identified approximately 1,200
potential micromarkets in the central United States and contiguous states which
meet these criteria.
6
<PAGE>
THE ACQUISITION
On June 26, 1997, the Company acquired CR Anthony by merging CR Anthony
with and into SRI. CR Anthony operated 248 brand name family apparel stores in
small markets as of June 25, 1997 under the names "Anthonys" and "Anthonys
Limited." The Acquisition is expected to strengthen the Company's position as a
leading retailer of national brand name apparel in small markets throughout the
central and midwestern United States where CR Anthony had been operating for
over 70 years. For the fiscal year ended February 1, 1997, CR Anthony's net
sales and EBITDA were $288.4 million and $14.0 million, respectively. See "CR
Anthony's Consolidated Financial Statements."
Similar to the Company, CR Anthony's operating strategy was to offer
national brand name apparel and footwear for the entire family at competitive
prices. The stores acquired are located in 16 states, with the highest
concentrations in Texas, Oklahoma, Kansas and New Mexico. The majority of CR
Anthony's stores are located in rural communities with populations under 30,000
and are between 8,000 and 23,100 selling square feet in size, with 92 stores
that are less than 10,000 selling square feet.
The Company believes that the Acquisition is consistent with its growth
strategy to expand as a retailer of moderately priced, national brand name
apparel into underserved, small markets through both organic store development
and strategic acquisitions. The Acquisition provides an opportunity for the
Company to accelerate its expansion program in existing markets and expand its
presence in new markets. The Company believes that the Acquisition is attractive
because: (i) the stores acquired are located in states which are the same as or
are contiguous to states in which the Company currently operates; (ii) there are
a relatively small number of markets in which the two companies directly
overlapped; (iii) a majority of the stores acquired are in markets which fit the
Company's demographic profile; and (iv) a majority of the stores acquired are
comparable in size to the Company's stores in similar markets.
The addition of the CR Anthony stores not only expanded the geographic
reach of the Company, but it is expected that there will be meaningful synergies
between the Company and CR Anthony including: (i) central overhead cost savings;
(ii) CR Anthony revenue enhancement opportunities; and (iii) CR Anthony gross
margin improvement opportunities. The Company intends to convert the "Anthonys"
and "Anthonys Limited" stores to the Company's format under its "Stage" and
"Bealls" trade names during the remainder of 1997 and 1998. The Company expects
to realize the aforementioned synergies once the integration and conversion
process is substantially complete.
THE REFINANCING
On June 17, 1997, the Company completed the offering of the Notes (the
"Offering"). The Offering was made in connection with the offers (the "Tender
Offers") to purchase for cash up to all (but not less than a majority in
principal amount outstanding) of each of SRI's 10% Senior Notes due 2000 (the
"Existing Senior Notes") and SRI's 11% Senior Subordinated Notes due 2003 (the
"Existing Senior Subordinated Notes" and, together with the Existing Senior
Notes, the "Existing Notes") and related solicitations (the "Consent
Solicitations") of consents to modify certain terms of the indentures under
which the Existing Notes were issued. The gross proceeds from the Offering of
$299.7 million were used to fund the Tender Offers, to pay fees and expenses
related to the Offering and the Tender Offers and related Consent Solicitations,
and for general corporate purposes.
Concurrently with the Offering, the Company entered into a new credit
facility with a group of lenders (the "New Credit Agreement"). The New Credit
Agreement provides for a $100.0 million working capital and letter of credit
facility (the "Working Capital Facility") and a $100.0 million expansion
revolving credit facility (the "Expansion Facility"). See "Description of New
Credit Agreement." The Offering, the Tender Offers and Consent Solicitations,
and the New Credit Agreement are collectively referred to herein as the
"Refinancing."
The Company believes the Refinancing provides a more flexible permanent
capital structure which: (i) increases the Company's working capital facilities
to support its operations; (ii) extends the average maturities of the Company's
debt; (iii) lowers the Company's weighted average cost of borrowing; and (iv)
provides increased financial flexibility to allow the Company to continue to
implement its growth strategy.
7
<PAGE>
THE OFFERING
Notes............................The Notes were sold by the Company on June 17,
1997 to Credit Suisse First Boston, Bear,
Stearns & Co. Inc., and Donaldson, Lufkin &
Jenrette Securities Corporation (the "Initial
Purchasers") pursuant to a Purchase Agreement
dated June 11, 1997 (the "Purchase Agreement").
The Initial Purchasers subsequently resold the
Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act.
Registration Rights Agreement....Pursuant to the Purchase Agreement, the Company
and the Initial Purchasers entered into a
Registration Rights Agreement dated June 11,
1997 (the "Registration Rights Agreement"),
which grants the holder of the Notes certain
exchange and registration rights. The Exchange
Offer is intended to satisfy such exchange
rights which terminate as a general matter upon
the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered...............$200,000,000 aggregate principal amount of
Series B 8 1/2% Senior Notes due 2005 (the
"Senior Exchange Notes").
$100,000,000 aggregate principal amount of
Series B 9% Senior Subordinated Notes due 2007
(the "Senior Subordinated Exchange Notes" and,
together with the Senior Exchange Notes, the
"Exchange Notes").
The Exchange Offer...............$1,000 principal amount of the Senior Exchange
Notes in exchange for each $1,000 principal
amount of Senior Notes. As of the date hereof,
$200,000,000 aggregate principal amount of
Senior Notes are outstanding.
$1,000 principal amount of the Senior
Subordinated Exchange Notes in exchange for
each $1,000 principal amount of Senior
Subordinated Notes. As of the date hereof,
$100,000,000 aggregate principal amount of
Senior Subordinated Notes are outstanding.
The Company will issue the Exchange Notes to
holders on or promptly after the Expiration
Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that Exchange Notes issued pursuant to the
Exchange Offer in exchange for Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than
any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and that such
holder does not intend to participate and has
no arrangement or understanding with any person
to participate in the distribution of such
Exchange Notes. See "The Exchange
Offer--Purpose and Effect of the Exchange
Offer."
8
<PAGE>
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with
any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging
and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may
be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in
connection with resales of Exchange Notes
received in exchange for Notes where such Notes
were acquired by such Participating Broker-
Dealer as a result of market-making activities
or other trading activities. The Company has
agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer
for use in connection with any such resale. See
"Plan of Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the Exchange Notes could not rely on the
position of the staff of the Commission
enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Company.
Expiration Date..................5:00 p.m., New York City time, on , 1997 unless
the Exchange Offer is extended, in which case
the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Accrued Interest on the Exchange
Notes and the Notes........Each Exchange Note will bear interest from its
issuance date. Holders of Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the Exchange Notes. Such
interest will be paid with the first interest
payment on the Exchange Notes. Interest on the
Notes accepted for exchange will cease to
accrue upon issuance of the Exchange Notes.
Conditions to the Exchange Offer.The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange
Offer--Conditions."
9
<PAGE>
Procedures for Tendering Notes...Each holder of Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the Notes and any other required documentation
to the Exchange Agent (as defined) at the
address set forth herein. By executing the
Letter of Transmittal, each holder will
represent to the Company that, among other
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, that neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act,
of the Company. See "The Exchange
Offer--Purpose and Effect of the Exchange
Offer" and "--Procedures for Tendering."
Untendered Notes.................Following the consummation of the Exchange
Offer, holders of Notes eligible to participate
but who do not tender their Notes will not have
any further exchange rights and such Notes will
continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Notes could be adversely
affected.
Consequences of Failure to
Exchange...................The Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Notes may be
resold only (i) to the Company, (ii) pursuant
to Rule 144A or Rule 144 under the Securities
Act or pursuant to some other exemption under
the Securities Act, (iii) outside the United
States to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer--Consequences of
Failure to Exchange."
Shelf Registration Statement.....If any holder of the Notes (other than any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act) is not eligible under
applicable securities laws to participate in
the Exchange Offer, and such holder has
provided information regarding such holder and
the distribution of such holder's Notes to the
Company for use therein, the Company has agreed
to register the Notes on a shelf registration
statement (the "Shelf Registration Statement")
and use its best efforts to cause it to be
declared effective by the Commission as
promptly as practical on or after the
consummation of the Exchange Offer. The Company
has agreed to maintain the effectiveness of the
Shelf Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Notes held by any such holders.
10
<PAGE>
Special Procedures for Beneficial
Owners.....................Any beneficial owner whose Notes are registered
in the name of a broker, dealer, commercial
bank, trust company or other nominee and
who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Notes, either make appropriate arrangements to
register ownership of the Notes in such owner's
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable
time. The Company will keep the Exchange Offer
open for not less than twenty days in order to
provide for the transfer of registered
ownership.
Guaranteed Delivery Procedures...Holders of Notes who wish to tender their Notes
and whose Notes are not immediately available
or who cannot deliver their Notes, the Letter
of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange
Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration
Date must tender their Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights................Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
Acceptance of Notes and Delivery
of Exchange Notes..........The Company will accept for exchange any and
all Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Use of Proceeds..................There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent...................State Street Bank and Trust Company, 2
International Place (4th Floor), Boston, MA
02110, Telephone: 617-664-5419, Facsimile:
617-664-5371.
11
<PAGE>
THE EXCHANGE NOTES
General..........................The form and terms of the Exchange Notes are
the same as the form and terms of the Notes
(which they replace) except that (i) the
Exchange Notes bear a Series B designation,
(ii) the Exchange Notes have been registered
under the Securities Act and, therefore, will
not bear legends restricting the transfer
thereof and (iii) the holders of Exchange Notes
will not be entitled to certain rights under
the Registration Rights Agreement, including
the provisions providing for an increase in the
interest rate on the Notes in certain
circumstances relating to the timing of the
Exchange Offer, which rights will terminate as
a general matter when the Exchange Offer is
consummated. See "The Exchange Offer--Purpose
and Effect of the Exchange Offer." The Exchange
Notes will evidence the same debt as the Notes
and will be entitled to the benefits of the
Indentures. See "Description of the Exchange
Notes."
Securities Offered...............$200,000,000 aggregate principal amount of
Series B 8 1/2% Senior Notes due 2005.
$100,000,000 aggregate principal amount of
Series B 9% Senior Subordinated Notes due 2007.
Maturity Dates
Senior Exchange Notes......July 15, 2005.
Senior Subordinated
Exchange Notes........July 15, 2007.
Interest Payment Dates
Senior Exchange Notes......January 15 and July 15 of each year, commencing
January 15, 1998.
Senior Subordinated Exchange
Notes.................January 15 and July 15 of each year, commencing
January 15, 1998.
Optional Redemption
Senior Exchange Notes......The Senior Exchange Notes will not be
redeemable at the option of SRI prior to July
15, 2001. Thereafter, the Senior Exchange Notes
will be redeemable, at SRI's option, in whole
or in part from time to time, at the redemption
prices set forth herein, plus accrued and
unpaid interest, if any, to the applicable
redemption date. In addition, at any time and
from time to time prior to July 15, 2000, SRI
may redeem in the aggregate, with the net cash
proceeds of one or more Public Equity Offerings
(as defined), up to 35% of the original
principal amount of the Senior Exchange Notes
at a redemption price of 108.50% of the
principal amount thereof, plus accrued and
unpaid interest, if any, to the applicable
redemption date. See "Description of the
Exchange Notes-Optional Redemption."
12
<PAGE>
Senior Subordinated Exchange
Notes.................The Senior Subordinated Exchange Notes will not
be redeemable at the option of SRI prior to
July 15, 2002. Thereafter, the Senior
Subordinated Exchange Notes will be redeemable,
at SRI's option, in whole or in part from time
to time, at the redemption prices set forth
herein, plus accrued and unpaid interest, if
any, to the applicable redemption date. In
addition, at any time and from time to time
prior to July 15, 2000, SRI may redeem in the
aggregate, with the net cash proceeds of one or
more Public Equity Offerings, up to 35% of the
original principal amount of the Senior
Subordinated Exchange Notes, at a redemption
price of 109.00% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the applicable redemption date. See
"Description of the Exchange Notes-Optional
Redemption."
Ranking
Senior Exchange Notes......The Senior Exchange Notes will constitute
senior unsecured obligations of SRI, will rank
PARI PASSU in right of payment with all
existing and future Senior Debt of SRI
(including borrowings under the New Credit
Agreement) and will be senior in right of
payment to all existing and future subordinated
indebtedness of SRI, including the Senior
Subordinated Exchange Notes.
Senior Subordinated Exchange
Notes.................The Senior Subordinated Exchange Notes will
constitute senior subordinated unsecured
obligations of SRI, will be subordinate in
right ofpayment to all existing and future
Senior Debt of SRI to the extent set forth in
the Senior Subordinated Notes Indenture (as
defined), including the Senior Exchange Notes
and borrowings under the New Credit Agreement,
will rank PARI PASSU in right of payment with
all existing and future Senior Subordinated
Debt of SRI and will be senior in all respects
to all existing and future subordinated
indebtedness of SRI.
As of May 3, 1997, on a pro forma basis after
giving effect to the Acquisition and the
Refinancing, Senior Debt of SRI, including the
Senior Exchange Notes and the obligations of
SRI under the New Credit Agreement, would have
been approximately $201.7 million in principal
amount and Senior Subordinated Debt of SRI,
including the Senior Subordinated Exchange
Notes, would have been approximately $100.0
million in principal amount. The Exchange Notes
will be effectively subordinated to all
liabilities of the subsidiaries of the Company
that are not guarantors of the Exchange Notes.
As of May 3, 1997, after giving pro forma
effect to the Acquisition and the Refinancing,
the amount of liabilities of such subsidiaries
(consisting of Debt and payables) would have
been approximately $34.1 million. See
"Description of the Exchange Notes-Ranking."
Guaranties
Senior Exchange Notes......SRI's obligations under the Senior Exchange
Notes will be unconditionally guaranteed (the
"Senior Exchange Notes Guaranties") by Stage,
Specialty NV and any Person that shall become a
Restricted Subsidiary of SRI or Stage after the
Issue Date (the "Guarantors"). The Senior
Exchange Notes Guaranties will constitute
senior unsecured obligations of the Guarantors
and will rank PARI PASSU in right of payment
with all existing and future Senior Debt of the
Guarantors. See "Description of the Exchange
Notes -- Guaranties."
13
<PAGE>
Senior Subordinated Exchange
Notes.................SRI's obligations under the Senior Subordinated
Exchange Notes will be unconditionally
guaranteed by the Guarantors (the "Senior
Subordinated Exchange Notes Guaranties"). The
Senior Subordinated Exchange Notes Guaranties
will constitute senior subordinated unsecured
obligations of the Guarantors and will rank
PARI PASSU with all existing and future Senior
Subordinated Debt of the Guarantors. The Senior
Subordinated Exchange Notes Guaranties will, to
the extent set forth in the Senior Subordinated
Notes Indenture (as defined), be subordinated
in right of payment to the prior payment in
full of all Senior Debt of the Guarantors and
will be subject to the rights of holders of
Designated Senior Debt (as defined) of the
Guarantors. See "Description of the Exchange
Notes -- Guaranties."
Change of Control................Upon the occurrence of a Change of Control (as
defined), each holder of the Exchange Notes
will have the right to require SRI to
repurchase such holder's Exchange Notes, in
whole or in part, at a purchase price equal to
101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
date of repurchase. See "Description of the
Exchange Notes-Change of Control."
Certain Covenants................The Indentures (as defined) under which the
Exchange Notes will be issued contain certain
covenants that, among other things, limit the
ability of Stage and its Restricted
Subsidiaries (as defined) to incur additional
indebtedness, pay dividends or make certain
other restricted payments, engage in
transactions with affiliates, incur liens and
engage in asset sales. The Indentures will also
restrict the ability of Stage, SRI and the
Guarantors to consolidate or merge with, or
transfer all or substantially all of their
assets to, another person. See "Description of
the Exchange Notes-Certain Covenants."
For additional information regarding the Exchange Notes,
see "Description of the Exchange Notes."
RISK FACTORS
Holders of the Notes should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data included in
this Prospectus prior to tendering their Notes in the Exchange Offer.
14
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL AND
PRO FORMA COMBINED FINANCIAL AND OPERATING DATA
The following table sets forth summary consolidated historical and pro
forma combined financial and operating data of the Company for the periods
indicated. The Company's summary consolidated historical financial data were
derived from the Company's Consolidated Financial Statements. The summary pro
forma combined financial and operating data were derived from the Unaudited Pro
Forma Combined Financial Data of the Company and give effect to the Acquisition,
the Refinancing, the Uhlmans Acquisition and the retirement of the Company's 12
3/4% Senior Discount Debentures due 2000 (the "Senior Discount Debentures") with
the proceeds of the Company's initial public offering completed during the third
quarter of 1996 (the "IPO"), as if they had occurred at the beginning of the
period. The pro forma combined financial and operating data reflects the Stage
Average Closing Price (as defined) of $20.04 which resulted in approximately
3,607,000 shares of Common Stock being issued in exchange for 9,035,645 shares
of CR Anthony common stock (0.399 shares of Common Stock for each share of CR
Anthony common stock). The information in the table should be read in
conjunction with "Selected Consolidated Historical Financial and Operating
Data", "Unaudited Pro Forma Combined Financial Data", "Management's Discussion
and Analysis of Financial Condition and Results of Operations", the Company's
Consolidated Financial Statements and CR Anthony's Consolidated Financial
Statements, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------------------------
PRO FORMA
1992 1993(1) 1994 1995(2) 1996(3) 1996
--------- -------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT STORE DATA AND RATIOS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C>
Net sales ................................... $ 504,401 $557,422 $581,463 $682,624 $776,550 $1,081,458
Gross profit ................................ 154,265 172,579 182,804 214,277 243,987 321,970
Selling, general and administrative
expenses ............................... 99,523 115,008 126,200 149,102 172,579 228,950(4)
Store opening and closure costs ............. 120 199 5,647 3,689 2,838 2,838
Operating income(5) ......................... 54,622 57,372 50,957 61,486 68,570 90,182
Interest, net ............................... 31,771 36,377 40,010 43,989 45,954 38,685
Income before extraordinary item ............ 12,235 13,426 6,630 10,730 14,022 31,590
MARGIN AND OTHER DATA:
Gross profit margin ......................... 30.6% 31.0% 31.4% 31.4% 31.4% 29.8%
Operating income margin(5) .................. 10.8% 10.3% 8.8% 9.0% 8.8% 8.3%
Adjusted operating income margin(6) ......... 8.7% 8.4% 9.2% 9.4% 9.2% --
Adjusted operating income(6) ................ $ 43,680 $ 46,828 $ 53,677 $ 63,996 $ 71,628 $ --
EBITDA(7) ................................... 64,300 67,861 62,638 75,083 83,279 108,948
Depreciation and amortization ............... 9,065 9,259 9,997 12,816 14,181 18,238
Capital expenditures ........................ 7,631 8,503 19,706 28,638 26,096 31,964
Ratio of EBITDA to interest expense ......... 2.0x 1.8x 1.5x 1.7x 1.8x 2.8x
Ratio of total debt to EBITDA ............... 4.8x 5.1x 5.6x 5.1x 3.6x 3.2x
Ratio of earnings to fixed charges(8) ....... 1.5x 1.4x 1.2x 1.3x 1.4x 1.9x
STORE DATA:(9)
Comparable store sales growth:
Bealls/Stage(10) ....................... 5.1% 7.2% 4.8% 3.3% 5.1% --
Palais Royal ........................... (9.8)% 0.8% 1.7% 1.4% 0.7% --
Total Company(11) ...................... 1.8% 6.3% 4.1% 0.8%(12) 3.3% --
Net sales per selling square foot:
Bealls/Stage(10) ....................... $ 118 $ 129 $ 138 $ 142 $ 141 $ --
Palais Royal ........................... 191 200 205 203 202 --
Total Company(11) ...................... 138 149 157 157 151 --
Total selling square footage (in
thousands)(13) ..................... 3,418 3,472 3,516 4,581 5,677 8,653
Number of stores open at end of
period(13) .......................... 175 180 188 256 315 539
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital......................................................................................................
Total assets.........................................................................................................
Long-term debt.......................................................................................................
Stockholders' equity.................................................................................................
<CAPTION>
THREE MONTHS ENDED
--------------------------------
PRO
FORMA
May 4, May 3, May 3,
1996 1997 1997
-------- --------- --------
(IN THOUSANDS, EXCEPT STORE DATA AND RATIOS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C>
Net sales ................................... $163,177 $ 191,512 $255,799
Gross profit ................................ 52,081 61,925 75,063
Selling, general and administrative
expenses ............................... 35,965 41,258 52,848(4)
Store opening and closure costs ............. 71 143 143
Operating income(5) ......................... 16,045 20,524 22,072
Interest, net ............................... 11,588 8,942 9,479
Income before extraordinary item ............ 2,652 7,094 7,669
MARGIN AND OTHER DATA:
Gross profit margin ......................... 31.9% 32.3% 29.3%
Operating income margin(5) .................. 9.8% 10.7% 8.6%
Adjusted operating income margin(6) ......... 8.6% 10.0% --
Adjusted operating income(6) ................ $ 14,033 $ 19,221 $ --
EBITDA(7) ................................... 19,320 24,303 26,637
Depreciation and amortization ............... 3,149 3,620 4,406
Capital expenditures ........................ 6,449 9,097 10,611
Ratio of EBITDA to interest expense ......... 1.6x 2.7x 2.8x
Ratio of total debt to EBITDA ............... -- -- --
Ratio of earnings to fixed charges(8) ....... 1.3x 2.0x 1.9x
STORE DATA:(9) Comparable store sales growth:
Bealls/Stage(10) ....................... 7.4% 7.1% --
Palais Royal ........................... 7.7% (3.1)% --
Total Company(11) ...................... 7.4% 5.0% --
Net sales per selling square foot:
Bealls/Stage(10) ....................... $ -- $ -- $ --
Palais Royal ........................... -- -- --
Total Company(11) ...................... -- -- --
Total selling square footage (in
thousands)(13) ..................... 4,753 5,814 8,877
Number of stores open at end of
period(13) .......................... 267 327 565
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital................................ $ 238,050 $288,310
Total assets................................... 515,193 661,288
Long-term debt................................. 298,599 351,530
Stockholders' equity........................... 99,384 154,907
</TABLE>
- 15 -
<PAGE>
NOTES TO SUMMARY CONSOLIDATED
HISTORICAL AND PRO FORMA COMBINED FINANCIAL AND OPERATING DATA
(1) During 1993, the Company completed: (i) the refinancing of its existing
debt and preferred stock (the "1993 Financing"); and (ii) a cash
distribution (the "Distribution") to the Company's stockholders. As a
result of the 1993 Financing, the Company recorded an after-tax
extraordinary charge of $16.2 million. Pursuant to the Distribution, the
Company issued the Senior Discount Debentures which were sold at a
discount of approximately $69.1 million. Substantially all of the $80.0
million in proceeds from the issuance of the Senior Discount Debentures
were used to make the Distribution.
(2) 1995 includes 53 weeks. Comparable store sales growth and net sales per
selling square foot for 1995 have been determined based on a comparable
fifty-two week period.
(3) The net proceeds of the IPO were used primarily to retire the Senior
Discount Debentures. In addition, the Company replaced its working
capital facility during January 1997. As a result of these transactions,
the Company recorded an extraordinary charge of $16.1 million, net of
applicable income taxes of $9.8 million.
(4) Includes store opening and closure costs for CR Anthony.
(5) Operating income and operating income margin decreased during 1994
compared to 1993 due primarily to the impact of the implementation of an
accounts receivable securitization program (the "Accounts Receivable
Program") (see Note 3 to the Company's Consolidated Financial Statements
and Note 6 below), combined with a $5.2 million provision associated
with the closure of a majority of the stores operated under the Fashion
Bar name (the "Store Closure Plan"). See Note 5 to the Company's
Consolidated Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
(6) Adjusted operating income represents operating income adjusted to
eliminate store opening and closure costs, and the impact on operating
income of the Company's proprietary credit card program (including the
Accounts Receivable Program).
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED
----------------------------------------------------------- ----------------------
MAY 4, MAY 3,
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income .......................... $ 54,622 $ 57,372 $ 50,957 $ 61,486 $68,570 $ 16,045 $ 20,524
Store opening and closure costs ........... 120 199 5,647 3,689 2,838 71 143
(Income)/expense related to the
proprietary credit card program ........... (11,062) (10,743) (2,927) (1,179) 220 (2,083) (1,446)
-------- -------- -------- -------- ------- -------- --------
Adjusted operating income ................. $ 43,680 $ 46,828 $ 53,677 $ 63,996 $71,628 $ 14,033 $ 19,221
-------- -------- -------- -------- ------- -------- --------
</TABLE>
The impact of the Company's proprietary credit card program (including
the Accounts Receivable Program) is reflected in the Company's selling,
general and administrative expenses and is calculated as: (i) service
charge income less (ii) servicing costs, bad debt costs and return to
certificateholders less (iii) the increase (or plus a decrease) in the
fair value of the Retained Certificates (see Note 1 to the Company's
Consolidated Financial Statements).
Although adjusted operating income and adjusted operating income margin
do not represent operating income or any other measure of financial
performance under generally accepted accounting principles, the Company
believes they are helpful in understanding the profitability of the
Company's retailing operations prior to the impact of its credit card
program, the Accounts Receivable Program and store opening and closure
costs.
(7) EBITDA represents income before extraordinary loss plus income tax
expenses, interest expense, depreciation and amortization. The Company
believes that EBITDA provides useful information regarding the Company's
ability to service its debt; however, EBITDA does not represent cash
flow from operations as defined by generally accepted accounting
principles and should not be considered as a substitute for net income
as an indicator of the Company's operating performance or cash flow as a
measure of liquidity. Similarly to operating income, EBITDA decreased
during 1994 compared to 1993 due primarily to the impact of the
implementation of the Accounts Receivable Program. See Note 5 above.
- 16 -
<PAGE>
(8) For purposes of computing the ratio of earnings to fixed charges,
earnings include income before income taxes and extraordinary loss, plus
fixed charges. Fixed charges consist of interest expense and one-third
of rental expense (deemed by management to be representative of the
interest factor of rental payments).
(9) Sales are considered comparable after a store has been in operation
fourteen months. Net sales per selling square foot are calculated for
stores open the entire year. Store data exclude the Fashion Bar stores
included in the Store Closure Plan.
(10) Excludes for all the periods presented the six Bealls stores located on
the border of Mexico which were adversely affected by the peso
devaluation in 1994. Comparable stores sales growth and net sales per
selling square foot for Bealls/Stage including these stores were:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED
------------------------------------------------------ -----------------
MAY 4, MAY 3,
BEALLS/STAGE 1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable store sales growth ...................... 6.7% 7.7% 4.6% 0.2% 5.1% 7.2% 7.3%
Net sales per selling square foot .................. $ 125 $ 137 $ 146 $ 145 $ 141 $ -- $ --
</TABLE>
(11) Total Company comparable store sales growth and net sales per selling
square foot including the stores which were part of the Store Closure
Plan were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED
------------------------------------------------------ -----------------
MAY 4, MAY 3,
TOTAL COMPANY 1992 1993 1994 1995 1996 1996 1997
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable store sales growth ...................... 1.8% 5.4% 3.2% 0.5% 3.3% 6.5% 5.0%
Net sales per selling square foot .................. $ 138 $ 143 $ 151 $ 150 $ 151 $ -- $ --
</TABLE>
(12) Excluding the six Bealls stores located on the border of Mexico which
were adversely affected by the peso devaluation in 1994, total Company
comparable store sales growth for 1995 would have been 3.0%.
(13) Excludes data related to the stores which were included in the Store
Closure Plan. Data are as of the end of the period.
- 17 -
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION AND DATA INCLUDED IN THIS
PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY PRIOR TO MAKING
AN INVESTMENT IN THE EXCHANGE NOTES OFFERED HEREBY.
SUBSTANTIAL LEVERAGE
The Company incurred significant debt in connection with the
Refinancing. As of May 3, 1997, after giving pro forma effect to the Acquisition
and the Refinancing and the application of the net proceeds thereof, the Company
would have had outstanding indebtedness of $354.2 million in principal amount
(including the Exchange Notes and excluding trade payables, accrued liabilities
and unused commitments under the New Credit Agreement). The Company's leveraged
financial position poses substantial consequences to holders of the Exchange
Notes, including the risks that: (i) a substantial portion of the Company's cash
flow from operations will be dedicated to the payment of the interest of the
Exchange Notes and the payment of principal and interest under the indebtedness
of the Company; (ii) the Company's highly leveraged position may impede its
ability to obtain financing in the future for working capital, capital
expenditures and general corporate purposes, including acquisitions; (iii) the
Company's highly leveraged financial position may make it more vulnerable to
economic downturns and may limit its ability to withstand competitive pressures;
(iv) to the extent that the Company incurs any indebtedness under the New Credit
Agreement, which indebtedness will be at variable rates, the Company will be
vulnerable to increases in interest rates; (v) the certificates outstanding
under the Accounts Receivable Program bear interest at floating rates which
results in the Company being vulnerable to higher interest rates; and (vi) the
Company's flexibility in planning for or reacting to changes in market
conditions may be limited. The Company believes that, based on its current level
of operations, it will have sufficient capital to carry on its business and will
be able to meet its scheduled debt service requirements. There can be no
assurance, however, that the future cash flow of the Company will be sufficient
to meet the Company's obligations and commitments. If the Company is unable to
generate sufficient cash flow from operations in the future to service its
indebtedness and to meet its other commitments, the Company will be required to
adopt one or more alternatives, such as refinancing or restructuring its
indebtedness, selling material assets or operations or seeking to raise
additional debt or equity capital. There can be no assurance that any of these
actions could be effected on a timely basis or on satisfactory terms or that
these actions would enable the Company to continue to satisfy its capital
requirements. In addition, the terms of existing or future debt agreements,
including the Indentures and the New Credit Agreement, may prohibit the Company
from adopting any of these alternatives. See "The Refinancing,"
"Capitalization," "Unaudited Pro Forma Combined Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Description of New Credit
Agreement" and "Description of the Exchange Notes."
SUBORDINATION OF SENIOR SUBORDINATED EXCHANGE NOTES; UNSECURED EXCHANGE NOTES;
GUARANTIES
The Senior Subordinated Exchange Notes are subordinated in right of
payment to all present and future Senior Debt of the Company, including
principal, premium (if any) and interest with respect to the Senior Debt of the
Company under the New Credit Agreement. The Senior Subordinated Exchange Notes
rank PARI PASSU with all present and future senior subordinated indebtedness of
the Company and will rank senior to all other subordinated indebtedness of the
Company. As of May 3, 1997, after giving pro forma effect to the Acquisition and
the Refinancing, Senior Debt of the Company (including the Senior Exchange Notes
and amounts outstanding under the New Credit Agreement) would have been
approximately $201.7 million in principal amount and Senior Subordinated Debt of
the Company (including the Senior Subordinated Exchange Notes) would have been
approximately $100.0 million in principal amount. Consequently, in the event of
a bankruptcy, liquidation, dissolution, reorganization or similar proceeding
with respect to the Company, assets of the Company will be available to pay
obligations of the Senior Subordinated Exchange Notes only after all Senior Debt
of the Company has been paid in full. In addition, no payment may be made with
respect to the Senior Subordinated Exchange Notes during the continuance of a
payment default under any Designated Senior Debt (as defined). Furthermore, if
certain non-payment defaults exist with respect to Designated Senior Debt, the
holders of such debt will be able to prevent payments on the Senior Subordinated
Exchange Notes for certain periods of time. There can be no assurance that there
will be sufficient assets to pay amounts due on all or any of the Senior
Subordinated Exchange Notes. See "Description of the Exchange Notes--Ranking."
Stage and Specialty NV unconditionally guarantee the Senior Exchange
Notes on a senior basis and unconditionally guarantee the Senior Subordinated
Exchange Notes on a senior subordinated basis. Stage is a holding company that
derives substantially all of its operating income and cash flow from SRI and
whose only material asset is the outstanding shares of common stock of SRI.
Accordingly, Stage is dependent upon the earnings and cash flow of, and
dividends and distributions from, SRI to perform on its guarantees of the
Exchange Notes. Specialty NV's only material asset is an intercompany note
payable from SRI to Specialty NV in the amount of $136.7 million as of June 26,
1997. Specialty NV has no material liabilities other than its
- 18 -
<PAGE>
guarantees of the Exchange Notes. In addition, the Indentures provide that any
entity that becomes a Restricted Subsidiary of Stage or SRI after the Exchange
Notes are issued will guarantee the Exchange Notes jointly and severally with
Stage and Specialty NV. The claims of creditors (including trade creditors) of
any subsidiaries of the Company that are not guarantors of the Exchange Notes
will generally have priority as to the assets of such subsidiaries over the
claims of holders of the Exchange Notes. As of May 3, 1997, after giving pro
forma effect to the Acquisition and the Refinancing, the amount of liabilities
of such subsidiaries (consisting of Debt and payables) would have been
approximately $34.1 million.
The Exchange Notes are also unsecured and are effectively subordinated
to any secured indebtedness of the Company. The indebtedness outstanding under
the New Credit Agreement is secured by liens on certain assets of the Company
and the pledge of SRPC's common stock and the stock of all existing future
material subsidiaries of Stage and SRI. The ability of the Company to comply
with the provisions of the New Credit Agreement may be affected by events beyond
the Company's control. The breach of any such provisions could result in a
default under the New Credit Agreement, in which case, depending on the actions
taken by the lenders thereunder or their successors or assignees, such lenders
could elect to declare all amounts borrowed under the New Credit Agreement,
together with accrued interest, to be due and payable, and the Company could be
prohibited from making payments of interest and principal on the Exchange Notes
until the default is cured or all Senior Debt is paid or satisfied in full. If
the Company were unable to repay such borrowings, such lenders could proceed
against the collateral. If the indebtedness under the New Credit Agreement were
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company, including the Exchange Notes. See "Description of New Credit Agreement"
and "Description of the Exchange Notes--Ranking."
RESTRICTIONS IMPOSED BY THE NEW CREDIT AGREEMENT AND THE INDENTURES
The New Credit Agreement requires the Company to maintain specified
financial ratios and tests, among other obligations, including a minimum
interest coverage ratio, a minimum fixed charge coverage ratio, a maximum
leverage ratio and maximum amounts of capital expenditures (excluding
expenditures for acquisitions). In addition, the New Credit Agreement restricts,
among other things, the Company's ability to incur additional indebtedness and
make acquisitions and capital expenditures beyond a certain level. A failure to
comply with the restrictions contained in the New Credit Agreement could lead to
an event of default thereunder which could result in an acceleration of such
indebtedness. Such an acceleration would constitute an event of default under
the Indentures relating to the Exchange Notes. In addition, the Indentures
restrict, among other things, the Company's ability to incur additional
indebtedness, sell assets, make certain payments and dividends or merge or
consolidate. A failure to comply with the restrictions in the Indentures could
result in an event of default under the Indentures. If the indebtedness under
the New Credit Agreement or the Exchange Notes were to be accelerated, there can
be no assurance that the assets of the Company would be sufficient to repay such
indebtedness in full. See "Description of New Credit Agreement" and "Description
of the Exchange Notes."
FUTURE GROWTH STRATEGY
Key components of the Company's growth strategy are to: (i) continue to
identify and acquire new store locations where the Company believes it can
operate profitably; and (ii) identify and consummate strategic acquisitions
(including the Acquisition). Such expansions and acquisitions could be material
in size and cost. The Company's ability to achieve its expansion plans is
dependent upon many factors, including the availability and permissibility under
restrictive covenants of financing, general and market specific economic
conditions, the identification of suitable markets, the availability and leasing
of suitable sites on acceptable terms, the hiring, training and retention of
qualified management and other store personnel, the integration of new stores
and inventory procedures into the Company's management information systems and
operations and the capability of the Company's existing distribution system to
accommodate newly acquired stores. As a result, there can be no assurance that
the Company will be able to achieve its targets for opening new stores
(including acquisitions) or that such new stores will operate profitably when
opened or acquired. The Company's growth strategy may significantly expand the
Company's capital expenditure and working capital requirements, and the
Company's ability to meet such requirements may be adversely affected by the
Company's level of indebtedness and the restrictive covenants contained therein,
especially in periods of economic downturn. See "Business."
ACQUISITION OF CR ANTHONY
The integration and consolidation of CR Anthony will require
substantial management, financial and other resources and may pose risks with
respect to sales, customer service and market share. For example, the Company
will need to sell a substantial amount of existing inventory in CR Anthony
stores at discounted prices, expend capital to remodel the stores in a manner
more consistent with the Company's existing format and integrate the CR Anthony
stores' operating procedures into the Company's
- 19 -
<PAGE>
management information systems process and operations. The Acquisition is
significantly larger than any acquisition the Company has previously made and,
while the Company believes that it has sufficient financial and management
resources to accomplish the integration of CR Anthony, there can be no assurance
in this regard that the Company will not experience difficulties with customers,
personnel, assignments of leases or obtaining other required consents, or other
factors. Although the Company believes that the Acquisition will enhance the
competitive position and business prospects of the Company, there can be no
assurance that such benefits, including, without limitation, expected cost
savings, revenue enhancement and margin improvement, will be realized or that
the combination of the Company and CR Anthony will be successful. See "The
Acquisition."
ECONOMIC AND MARKET CONDITIONS; SEASONALITY
Substantially all of the Company's operations are located in the
central United States. In addition, many of the Company's stores are situated in
small towns and rural environments that are substantially dependent upon the
local economy. The retail apparel business is dependent upon the level of
consumer spending, which may be adversely affected by an economic downturn or a
decline in consumer confidence. An economic downturn, particularly in the
central United States and any state (such as Texas) from which the Company
derives a significant portion of its net sales, could have a material adverse
effect on the Company's business and financial condition. The Company currently
has sixteen stores located near the Texas-Mexico border and has plans to open
several additional stores in that region. Economic conditions in Mexico,
particularly the significant devaluation of the Mexican peso, adversely affected
sales during 1995. Deterioration of the economic conditions in Mexico in the
future could adversely affect the Company's sales.
The Company's success depends in part upon its ability to anticipate
and respond to changing consumer preferences and fashion trends in a timely
manner. Although the Company attempts to stay abreast of emerging lifestyle and
consumer preferences affecting its merchandise, any sustained failure by the
Company to identify and respond to such trends could have a material adverse
effect on the Company's business and financial condition.
The Company's business is seasonal and its quarterly sales and profits
traditionally have been lower during the first three fiscal quarters of the year
(February through October) and higher during the fourth fiscal quarter (November
through January). In addition, working capital requirements fluctuate throughout
the year, increasing substantially in October and November in anticipation of
the holiday season due to requirements for significantly higher inventory
levels. Any substantial decrease in sales or profitability for the last three
months of the year could have a material adverse effect on the Company's
business and financial condition.
COMPETITION
The retail apparel business is highly competitive. Although competition
varies widely from market to market, the Company faces substantial competition
from national, regional and local department and specialty stores, particularly
in higher populated markets (such as Houston) where approximately 19% of the
Company's sales are generated. Some of the Company's competitors are
considerably larger than the Company and have substantially greater financial
and other resources. Although the Company currently offers branded merchandise
not available at certain other retailers (including large national discounters)
in its small market stores, there can be no assurance that existing or new
competitors will not begin to carry similar branded merchandise, which could
have a material adverse effect on the Company's business and financial
condition. In addition, there can be no assurance that new competitors will not
enter the Company's existing markets.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a large extent on its executive
management team, including the Company's Chairman, President and Chief Executive
Officer, Carl Tooker. Although the Company has entered into employment
agreements with each of the Company's executive officers, it is possible that
members of executive management may leave the Company, and such departures could
have a material adverse effect on the Company's business and financial
condition. The Company does not maintain key-man life insurance on any of its
executive officers. See "Management--Directors and Executive Officers."
CONSUMER CREDIT RISKS
PRIVATE LABEL CREDIT CARD PORTFOLIO. Sales under the Company's private
label credit card program represent a significant portion of the Company's
business. In recent years, there have been substantial increases in the rate of
charge-offs on the Company's accounts receivable. To date, aggregate increases
in finance and service charges have offset a significant portion of
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<PAGE>
the increases in charge-offs. However, further deterioration in the quality of
the Company's accounts receivable portfolio or any adverse changes in laws
regulating the granting or servicing of credit (including late fees and the
finance charges applied to outstanding balances), could have a material adverse
effect on the Company's business and financial condition. There can be no
assurance that the rate of charge-offs on the Company's accounts receivable
portfolio will not increase further or that increases in finance charges and
late fee collections will continue to offset any such increases in charge-offs.
ACCOUNTS RECEIVABLE PROGRAM. The Company currently securitizes
substantially all of the receivables derived from its proprietary credit card
accounts through the Accounts Receivable Program. Under this program, the
Company causes such receivables to be transferred to the Trust, which from time
to time issues certificates to investors backed by such receivables. The
Accounts Receivable Program has provided the Company with substantially more
liquidity (through the issuance and sale of such certificates) than it would
have had without this program. There can be no assurance that the Company will
be able to continue to securitize its receivables in this manner. There can be
no assurance that receivables will continue to be generated by credit card
holders, or that new credit card accounts will continue to be established at the
rate historically experienced by the Company. Any decline in the generation of
receivables or in the rate or pattern of cardholder payments on accounts could
have a material adverse effect on the Company's business and financial
condition. In addition, significant increases in the floating rates paid on
investor certificates and/or significant deterioration in the performance of the
Company's receivables portfolio could trigger an early repayment requirement,
which could materially adversely affect liquidity. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
INTEREST RATE RISK. Although the Company is protected to a certain
extent by interest rate caps, investors in the receivables-backed certificates
of the Trust receive interest payments on such certificates based on a floating
rate. If the interest rate on these certificates increases, the Company's
operating results could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operation --
Liquidity and Capital Resources."
INTEGRATION OF CR ANTHONY PRIVATE LABEL CREDIT CARD PROGRAM. Prior to
the Acquisition, CR Anthony sold all its private label credit card accounts
receivable to Citicorp Retail Services, Inc. ("Citicorp") pursuant to a Retail
Credit Services Agreement. Pursuant to this agreement, Citicorp has the right to
purchase all sales under the CR Anthony private label credit card program. The
Company and Citicorp have reached an agreement in principle to terminate this
agreement effective September 11, 1997. Under the pending termination agreement,
the Company will pay Citicorp a termination fee. Additionally, the Company will
repurchase any outstanding accounts receivable on the termination date at their
face value. The Company intends to incorporate the accounts receivable into the
Accounts Receivable Program. There can be no assurance that the Company will be
successful in incorporating the accounts receivable purchased from Citicorp into
the Accounts Receivable Program on a timely basis. CR Anthony had historically
been less successful than the Company in generating sales on its private label
credit card and there can be no assurance that the Company will be successful in
increasing the penetration of its private label credit card usage in the stores
acquired, or that such customers will be of acceptable credit risk to the
Company.
LIMITATIONS ON CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to
make an offer for cash to repurchase the Exchange Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
repurchase date. A Change of Control will result in an event of default under
the New Credit Agreement and may result in a default under other indebtedness of
the Company that may be incurred in the future. The New Credit Agreement will
prohibit the purchase of outstanding Exchange Notes prior to repayment of the
borrowings under the New Credit Agreement and any exercise by the holders of the
Exchange Notes of their right to require the Company to repurchase the Exchange
Notes will cause an event of default under the New Credit Agreement. Finally,
there can be no assurance that the Company will have the financial resources
necessary to repurchase the Exchange Notes upon a Change of Control. See
"Description of the Exchange Notes--Change of Control."
ABSENCE OF PUBLIC MARKET
Prior to the Exchange Offer, there has not been any public market for
the Notes. The Notes have not been registered under the Securities Act and will
be subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in this
Exchange Offer. The holders of Notes (other than any such holder that is an
"affiliate" of the company within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Company is required to file a Shelf
Registration Statement with respect to such Notes. The Exchange Notes will
constitute a new issue of securities with no established trading market. SRI
does not intend to list the Exchange Notes on any national securities exchange
or to seek the admission thereof to trading in the National
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<PAGE>
Association of Securities Dealers Automated Quotation System. In addition, such
market making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act and may be limited during the Exchange Offer and the
pendency of the Shelf Registration Statements. Accordingly, no assurance can be
given that an active public or other market will develop for the Exchange Notes
or as to the liquidity of the trading market for the Exchange Notes. If a
trading market does not develop or is not maintained, holders of the Exchange
Notes may experience difficulty in reselling the Exchange Notes or may be unable
to sell them at all. If a market for the Exchange Notes develops, any such
market may be discontinued at any time.
If a public trading market develops for the Exchange Notes, future
trading prices of the Exchange Notes will depend on many factors, including,
among other things, prevailing interest rates, SRI's operating results and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors including the financial
condition of SRI, the Exchange Notes may trade at a discount from their
principal amount.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Notes pursuant to
the Exchange Offer will be made only after a timely receipt by SRI of such
Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Notes desiring to tender
such Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. SRI is under no duty to give notification of defects or
irregularities with respect to the tenders of Notes for exchange. Notes that are
not tendered or are tendered but not accepted will, following the consummation
of the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, certain
registration rights under the Registration Rights Agreement will terminate. In
addition, any holder of Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transactions. Each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Notes, where such
Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
See "Plan of Distribution" and "The Exchange Offer."
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Notes as set forth in the legend thereon as a consequence of
the issuance of the Notes pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. In general, the Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Notes
under the Securities Act. In addition, upon the consummation of the Exchange
Offer holders of Notes which remain outstanding will not be entitled to any
rights to have such Notes registered under the Securities Act or to any similar
rights under the Registration Rights Agreement. To the extent that Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered, or tendered but unaccepted, Notes could be adversely affected.
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<PAGE>
THE ACQUISITION
On June 26, 1997, the Company acquired CR Anthony by merging CR Anthony
with and into SRI. CR Anthony operated 248 brand name family apparel stores in
small markets as of June 25, 1997 under the names "Anthonys" and "Anthonys
Limited." The Company intends to convert the "Anthonys" and "Anthonys Limited"
stores to the Company's format under the "Stage" and "Bealls" trade names during
the remainder of 1997 and 1998. The Acquisition is expected to strengthen the
Company's position as a leading retailer of national brand name apparel in small
markets throughout the central and midwestern United States where CR Anthony had
been operating for over 70 years. For the fiscal year ended February 1, 1997, CR
Anthony's net sales and EBITDA were $288.4 million and $14.0 million,
respectively. See CR Anthony's Consolidated Financial Statements.
Similar to the Company, CR Anthony's operating strategy was to offer
brand name apparel and footwear for the entire family at competitive prices. The
stores acquired are located in 16 states, with the highest concentrations in
Texas, Oklahoma, Kansas and New Mexico. The majority of the stores acquired are
located in rural communities with populations under 30,000 and are between 8,000
and 23,100 selling square feet in size, with 92 stores that are less than 10,000
selling square feet.
The Company believes that the Acquisition is consistent with its growth
strategy to expand as a retailer of moderately priced, national brand name
apparel into underserved, small markets through both organic store development
and strategic acquisitions. The Acquisition provides an opportunity for the
Company to accelerate its expansion program in existing markets and expand its
presence in new markets. The Company believes that the Acquisition is attractive
because: (i) the stores acquired are located in states which are the same as or
are contiguous to states in which the Company currently operates; (ii) there are
a relatively small number of markets in which the two companies directly
overlapped; (iii) a majority of the stores acquired are in markets which fit the
Company's demographic profile; and (iv) a majority of the stores acquired are
comparable in size to the Company's stores in similar markets.
The addition of the CR Anthony stores not only expanded the geographic
reach of the Company, but the Company believes there will be meaningful
synergies between the Company and CR Anthony including: (i) central overhead
cost savings; (ii) CR Anthony revenue enhancement opportunities; and (iii) CR
Anthony gross margin improvement opportunities. The Company intends to convert
the "Anthonys" and "Anthonys Limited" stores to the Company's format under the
"Stage" and "Bealls" trade names during the remainder of 1997 and 1998. The
Company expects to realize the aforementioned synergies once the integration and
conversion process is substantially complete.
COST SAVINGS. The Company has formally adopted a detailed integration
plan to absorb CR Anthony's general office functions, including accounting, data
processing, merchandising, personnel and distribution into similar functions
provided by the Company (the "CR Anthony Integration Plan"). The Company
believes that the central overhead cost savings from the CR Anthony Integration
Plan should be approximately $10 million per year once the operations are fully
integrated.
REVENUE ENHANCEMENTS. The Company generates significantly greater sales
productivity than CR Anthony. In 1996, on a sales per square foot basis, the
Company's stores generated sales of $151 per square foot ($141 per square foot
for its small market stores) versus sales of $99 per square foot for all CR
Anthony stores. The Company expects to increase sales per square foot in CR
Anthony stores through a variety of measures including: (i) increasing sales of
women's apparel, an area in which CR Anthony was historically less focused; (ii)
introducing and expanding cosmetics, fragrance and accessories departments which
CR Anthony did not offer in many of its stores; (iii) improving the acquired
stores' overall merchandise selection based on the Company's experience and
strong vendor relationships; (iv) emphasizing sales on the Company's private
label credit card, which was underutilized by CR Anthony; and (v) extending
store hours of operation in certain markets to conform with the Company's
standard practice.
GROSS MARGIN IMPROVEMENTS. The Company expects to improve the gross
margin in the stores acquired (which was 24.5% for CR Anthony in 1996,
calculated on a basis comparable to Stage, versus 31.4% for the Company in 1996)
by: (i) adjusting the merchandise mix to emphasize higher margin categories
within women's, men's and children's; (ii) introducing and expanding high margin
areas such as fragrances, cosmetics and accessories; and (iii) improving upon
the prices at which CR Anthony was able to buy merchandise from certain vendors.
Based on the Stage Average Closing Price of $20.04, the total value of
the Acquisition, net of cash acquired, was approximately $95.8 million,
including the retirement of approximately $22.4 million of CR Anthony debt.
Under the terms of the agreement, the Company acquired the common stock of CR
Anthony for a value of $8.00 per share. The form of consideration was 100%
Common Stock with Stage issuing approximately 3,607,000 shares of Common Stock
in exchange for 9,035,645 shares
- 23 -
<PAGE>
of CR Anthony common stock (0.399 shares of Common Stock in exchange for each
issued and outstanding share of common stock of CR Anthony, other than shares
held by persons exercising dissenter's rights in accordance with Section 1091 of
the Oklahoma General Corporation Act, subject to the adjustment provided for
under the agreement). The Acquisition was structured as a merger with CR Anthony
merging with and into SRI and SRI surviving with all its rights, privileges,
powers and franchises unaffected by the merger. The separate corporate existence
of CR Anthony ceased to exist. The "Stage Average Closing Price" was the average
closing price expressed in dollars per share of Common Stock quoted on the
NASDAQ National Market System for the ten trading days selected by lot by CR
Anthony and Stage out of the twenty consecutive trading days prior to and
including the fifth day preceding the closing of the Acquisition.
- 24 -
<PAGE>
THE REFINANCING
The Offering was made in connection with the Tender Offers, completed
June 17, 1997, to purchase for cash up to all (but not less than a majority in
principal amount outstanding) of each of the Existing Senior Notes and Existing
Senior Subordinated Notes, and the related Consent Solicitations of consents to
modify certain terms under which the Existing Notes were issued. The gross
proceeds from the Offering of $299.7 million were used to fund the Tender Offers
and Consent Solicitations, to pay fees and expenses related to the Offering, the
Tender Offers and related Consent Solicitations, and for general corporate
purposes. Concurrently with the Offering, the Company entered into the New
Credit Agreement. The New Credit Agreement provides for the $100.0 million
Working Capital Facility and the $100.0 million Expansion Facility. See
"Description of New Credit Agreement."
The Company believes the Refinancing provides it with a more flexible
permanent capital structure which: (i) increases the Company's working capital
facilities to support its operations; (ii) extends the average maturities of the
Company's debt; (iii) lowers the Company's weighted average cost of borrowing;
and (iv) provides increased financial flexibility to allow the Company to
continue to implement its growth strategy. As of May 3, 1997, on a pro forma
basis after giving effect to the Refinancing, indebtedness of the Company
(including the Notes and amounts outstanding under the New Credit Agreement)
would have been $354.2 million in principal amount.
The Company's existing revolving credit facilities (the "Existing
Credit Agreements") were terminated in connection with the Offering. The
Existing Credit Agreements provided for a base borrowing (the "Base Facility")
level of $50.0 million (at an interest rate of 9.5%), additional seasonal
borrowings (the "Seasonal Facility") of $10.0 million (at a current interest
rate of 9.5%) and a letter of credit facility of an additional $15.0 million for
a total commitment of $75.0 million. As of May 3, 1997, no borrowings were
outstanding under the Base Facility or the Seasonal Facility and $12.4 million
of the letter of credit facility in the Existing Credit Agreements was used to
collateralize letters of credit, which were replaced with letters of credit
under the New Credit Agreement.
The Exchange Offer results in no sources or uses of cash to the
Company.
- 25 -
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer.
- 26 -
<PAGE>
CAPITALIZATION
The following table sets forth the historical consolidated
capitalization of the Company at May 3, 1997 and adjusted to give pro forma
effect to the Acquisition and the Refinancing. This presentation should be read
in conjunction with the Company's "Selected Consolidated Historical Financial
and Operating Data," the "Unaudited Pro Forma Combined Financial Data" and the
Company's Consolidated Financial Statements and accompanying notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MAY 3, 1997
---------------------------
STAGE
STORES ACQUISITION REFINANCING
HISTORICAL ADJUSTMENTS (1) ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term debt, including current portion:
Existing Credit Agreements ......................... $ -- $ -- $ -- $ --
New Credit Agreement ............................... -- -- -- --
Existing Senior Notes .............................. 130,000 -- (130,000) --
Existing Senior Subordinated Notes,
net of discount of $1,564 ........................ 116,729 -- (116,729) --
Senior Notes ....................................... -- -- 200,000 200,000
Senior Subordinated Notes, net of
discount of $340 ................................... -- -- 99,660 99,660
SRPC Notes ........................................... 30,000 -- -- 30,000
Other debt ........................................... 24,517 -- -- 24,517
-------- ------- --------- --------
Total long-term debt ........................ 301,246 -- 52,931 354,177
Stockholders' equity ............................... 99,384 72,285 (16,762)(2) 154,907
-------- ------- --------- --------
Total capitalization ........................ $400,630 $72,285 $ 36,169 $509,084
======== ======= ========= ========
</TABLE>
- --------------------
(1) Reflects the Stage Average Closing Price of $20.04, which resulted in
approximately 3,607,000 shares of Common Stock being issued in exchange for
9,035,645 shares of CR Anthony common stock (0.399 shares of Common Stock
for each share of CR Anthony common stock).
(2) Reflects non-recurring charges, net of tax, in connection with the early
retirement of the Existing Notes, the replacement of the Existing Credit
Agreements and the write-off of related debt issue costs.
- 27 -
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth selected consolidated historical
financial and operating data of the Company for the periods indicated. The
Company's selected consolidated historical financial data were derived from the
Company's Consolidated Financial Statements. The data for the unaudited
three-month periods ending May 4, 1996 and May 3, 1997, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of the interim
periods. The Company's business is seasonal and the results of operations for
these three-month periods are not necessarily indicative of the results expected
for a complete fiscal year or any other interim period. The information in the
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
--------------------------------------------------------- ------------------------
1992 1993(1) 1994 1995(2) 1996(3) MAY 4, 1996 MAY 3, 1997
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT STORE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ................................... $ 504,401 $ 557,422 $ 581,463 $ 682,624 $ 776,550 $ 163,177 $ 191,512
Cost of sales and related buying, occupancy
and distribution expenses .............. 350,136 384,843 398,659 468,347 532,563 111,096 129,587
--------- --------- --------- --------- --------- --------- ---------
Gross profit ................................ 154,265 172,579 182,804 214,277 243,987 52,081 61,925
Selling, general and administrative expenses 99,523 115,008 126,200 149,102 172,579 35,965 41,258
Store opening and closure costs ............. 120 199 5,647 3,689 2,838 71 143
--------- --------- --------- --------- --------- --------- ---------
Operating income(4) ......................... 54,622 57,372 50,957 61,486 68,570 16,045 20,524
Interest, net ............................... 31,771 36,377 40,010 43,989 45,954 11,588 8,942
Other non-operating expense ................. 2,276 -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Income before income tax and
extraordinary item .......................... 20,575 20,995 10,947 17,497 22,616 4,457 11,582
Income tax expense .......................... 8,340 7,569 4,317 6,767 8,594 1,805 4,488
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item ............ 12,235 13,426 6,630 10,730 14,022 2,652 7,094
Extraordinary item .......................... -- (16,208) (308) -- (16,081) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income .................................. $ 12,235 $ (2,782) $ 6,322 $ 10,730 $ (2,059) $ 2,652 $ 7,094
========= ========= ========= ========= ========= ========= =========
Earnings (loss) per common share ............ $ 0.82 $ (0.41) $ 0.51 $ 0.84 $ (0.13) $ 0.21 $ 0.30
========= ========= ========= ========= ========= ========= =========
MARGIN AND OTHER DATA:
Gross profit margin ......................... 30.6% 31.0% 31.4% 31.4% 31.4% 31.9% 32.3%
Operating income margin(4) .................. 10.8% 10.3% 8.8% 9.0% 8.8% 9.8% 10.7%
Adjusted operating income margin(5) ......... 8.7% 8.4% 9.2% 9.4% 9.2% 8.6% 10.0%
Adjusted operating income(5) ................ $ 43,680 $ 46,828 $ 53,677 $ 63,996 $ 71,628 $ 14,033 $ 19,221
EBITDA(6) ................................... 64,300 67,861 62,638 75,083 83,279 19,320 24,303
Depreciation and amortization ............... 9,065 9,259 9,997 12,816 14,181 3,149 3,620
Capital expenditures ........................ 7,631 8,503 19,706 28,638 26,096 6,449 9,097
Ratio of EBITDA to interest expense ......... 2.0x 1.8x 1.5x 1.7x 1.8x 1.6x 2.7x
Ratio of total debt to EBITDA ............... 4.8x 5.1x 5.6x 5.1x 3.6x -- --
Ratio of earnings to fixed charges(7) ....... 1.5x 1.4x 1.2x 1.3x 1.4x 1.3x 2.0x
STORE DATA:(8)
Comparable store sales growth:
Bealls/Stage(9) ......................... 5.1% 7.2% 4.8% 3.3% 5.1% 7.4% 7.1%
Palais Royal ............................ (9.8)% 0.8% 1.7% 1.4% 0.7% 7.7% (3.1)%
Total Company(10) ....................... 1.8% 6.3% 4.1% 0.8%(11) 3.3% 7.4% 5.0%
Net sales per selling square foot:
Bealls/Stage(9) ......................... $ 118 $ 129 $ 138 $ 142 $ 141 $ -- $ --
Palais Royal ............................ 191 200 205 203 202 -- --
Total Company(10) ....................... 138 149 157 157 151 -- --
Total selling square footage(12) ............ 3,418 3,472 3,516 4,581 5,677 4,753 5,814
Number of stores open at end of period ...... 175 180 188 256 315 267 327
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital ......................... $ 214,430 $ 156,782 $ 148,229 $ 170,108 $ 235,219 $ 171,666 $ 238,050
Total assets ............................ 403,824 343,406 366,243 408,254 509,283 403,339 515,193
Long-term debt .......................... 296,587 347,468 349,775 380,039 298,453 383,667 298,599
Redeemable preferred stock .............. 17,500 -- -- -- -- -- --
Stockholders' equity (deficit) .......... (9,605) (87,727) (81,193) (72,314) 92,266 (69,638) 99,384
</TABLE>
- 28 -
<PAGE>
NOTES TO SELECTED CONSOLIDATED
HISTORICAL FINANCIAL AND OPERATING DATA
(1) During 1993, the Company completed the 1993 Financing and the
Distribution to the Company's stockholders. As a result of the 1993
Financing, the Company recorded an after-tax extraordinary charge of
$16.2 million. Pursuant to the Distribution, the Company issued the
Senior Discount Debentures which were sold at a discount of
approximately $69.1 million. Substantially all of the $80.0 million in
proceeds from the issuance of the Senior Discount Debentures were used
to make the Distribution.
(2) 1995 includes 53 weeks. Comparable store sales growth and net sales per
selling square foot for 1995 have been determined based upon a
comparable fifty-two week period.
(3) The net proceeds of the IPO were used primarily to retire the Senior
Discount Debentures. In addition, the Company replaced its working
capital facility during January 1997. As a result of these
transactions, the Company recorded an extraordinary charge of $16.1
million, net of applicable income taxes of $9.8 million.
(4) Operating income and operating income margin decreased during 1994
compared to 1993 due primarily to the impact of the implementation of
the Accounts Receivable Program (see Note 3 to the Company's
Consolidated Financial Statements and Note 5 below), combined with a
$5.2 million provision associated with the Store Closure Plan. See Note
5 to the Company's Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Historical earnings (loss) per common share reflects the impact of a
.94727 for 1 reverse stock split of the common stock consummated
concurrently with the IPO. Loss per common share for 1993 and 1996
includes the impact of the extraordinary items associated with the 1993
Financing and the IPO, respectively, which reduced earnings per common
share by $1.31 and $1.01, respectively.
(5) Adjusted operating income represents operating income adjusted to
eliminate store opening and closure costs, and the impact on operating
income of the Company's proprietary credit card program (including the
Accounts Receivable Program).
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
----------------------------------------------------------- ----------------------
MAY 4, MAY 3
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating income .......................... $ 54,622 $ 57,372 $ 50,957 $ 61,486 $68,570 $ 16,045 $ 20,524
Store opening and closure
costs ..................................... 120 199 5,647 3,689 2,838 71 143
(Income)/Expense related to
proprietary credit card program ....... (11,062) (10,743) (2,927) (1,179) 220 (2,083) (1,446)
-------- -------- -------- -------- ------- -------- --------
Adjusted operating income ................. $ 43,680 $ 46,828 $ 53,677 $ 63,996 $71,628 $ 14,033 $ 19,221
======== ======== ======== ======== ======= ======== ========
</TABLE>
The impact of the Company's proprietary credit card program (including
the Accounts Receivable Program) is reflected in the Company's selling,
general and administrative expenses and is calculated as: (i) service
charge income less; (ii) servicing costs, bad debt costs and return to
certificateholders less; (iii) the increase (or plus a decrease) in the
fair value of the Retained Certificates (see Note 1 to the Company's
Consolidated Financial Statements).
Although adjusted operating income and adjusted operating income margin
do not represent operating income or any other measure of financial
performance under generally accepted accounting principles, the Company
believes they are helpful in understanding the profitability of the
Company's retailing operations prior to the impact of its credit card
program, the Accounts Receivable Program and store opening and closure
costs.
(6) EBITDA represents income before extraordinary loss plus income tax
expenses, interest expense, depreciation and amortization. The Company
believes that EBITDA provides useful information regarding the Company's
ability to service its debt; however, EBITDA does not represent cash
flow from operations as defined by generally accepted accounting
- 29 -
<PAGE>
principles and should not be considered as a substitute for net income
as an indicator of the Company's operating performance or cash flow as a
measure of liquidity. Similarly to operating income, EBITDA decreased
during 1994 compared to 1993 due primarily to the impact of the
implementation of the Accounts Receivable Program. See Note 4 above.
(7) For purposes of computing the ratio of earnings to fixed charges,
earnings include income before income taxes and extraordinary loss, plus
fixed charges. Fixed charges consist of interest expense and one-third
of rental expense (deemed by management to be representative of the
interest factor of rental payments).
(8) Sales are considered comparable after a store has been in operation
fourteen months. Net sales per selling square foot are calculated for
stores open the entire year. Store data exclude the Fashion Bar stores
included in the Store Closure Plan.
(9) Excludes for all the periods presented the six Bealls stores located on
the border of Mexico which were adversely affected by the peso
devaluation in 1994. Comparable stores sales growth and net sales per
selling square foot for Bealls/Stage including these stores were:
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
------------------------------------------------------ ---------------------
MAY 4, MAY 3,
1992 1993 1994 1995 1996 1996 1997
----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BEALLS/STAGE
Comparable store sales growth ............... 6.7% 7.7% 4.6% 0.2% 5.1% 7.2% 7.3%
Net sales per selling square
foot .................................... $ 125 $ 137 $ 146 $ 145 $ 141 $ -- $ --
</TABLE>
(10) Total Company comparable store sales growth and net sales per selling
square foot including the stores which were part of the Store Closure
Plan were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
------------------------------------------------------ ---------------------
MAY 4, MAY 3,
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL COMPANY
Comparable store sales
growth .................................. 1.8% 5.4% 3.2% 0.5% 3.3% 6.5% 5.0%
Net sales per selling square
foot .................................... $ 138 $ 143 $ 151 $ 150 $ 151 $ -- $ --
</TABLE>
(11) Excluding the six Bealls stores located on the border of Mexico which
were adversely affected by the peso devaluation in 1994, total Company
comparable store sales growth for 1995 would have been 3.0%.
(12) Excludes data related to the stores which were included in the Store
Closure Plan. Data are as of the end of the period.
- 30 -
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data give effect
to the Acquisition, the Refinancing, the Uhlmans Acquisition and the retirement
of the Senior Discount Debentures with the proceeds from the IPO. The unaudited
pro forma financial data are based on the historical consolidated financial
statements of the Company, the historical consolidated financial statements for
CR Anthony and the assumptions and adjustments described in the accompanying
notes. The unaudited pro forma combined income statements have been prepared as
if the Acquisition, the Refinancing, the Uhlmans Acquisition and the retirement
of the Senior Discount Debentures with the proceeds from the IPO had occurred at
the beginning of each period presented and do not purport to represent what the
Company's results of operations actually would have been if each of the
aforementioned events had occurred as of the dates indicated or will be for any
future periods. The unaudited pro forma combined condensed balance sheet was
prepared as if the Acquisition and the Refinancing had occurred on the balance
sheet date. The unaudited pro forma financial data are based upon assumptions
deemed appropriate by the management of the Company and do not reflect: (i)
certain cost savings or improvements in sales volume or gross margin related to
the Acquisition which the Company believes could be realized as a result of
implementing Stage's merchandising, distribution, credit card and other
operational programs; and (ii) certain capital investments required as a result
of the Acquisition. The unaudited pro forma combined financial data should be
read in conjunction with "Selected Consolidated Historical Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" shown elsewhere in this Prospectus. This pro forma presentation
reflects the Stage Average Closing Price of $20.04, which resulted in
approximately 3,607,000 shares of Common Stock being issued in exchange for
9,035,645 shares of CR Anthony common stock (0.399 shares of Common Stock for
each share of CR Anthony common stock).
- 31 -
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
YEAR ENDED FEBRUARY 1, 1997
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL DATA
------------------------ IPO AND UHLMANS
CR ACQUISITION ACQUISITION REFINANCING PRO FORMA
STAGE ANTHONY(1) ADJUSTMENTS(2) ADJUSTMENTS(3) ADJUSTMENTS(4) COMBINED
-------- ---------- -------------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales ...................................... $776,550 $288,392 $ 16,516 (a) $ -- $-- $1,081,458
Cost of sales and related buying, occupancy
and distribution expenses ............. 532,563 217,719 12,523(b) (3,317)(e) -- 759,488
-------- -------- -------- ------- ----- ----------
Gross profit ................................... 243,987 70,673 3,993 3,317 -- 321,970
Selling, general and administrative
expenses .............................. 175,417 60,944 1,821 (c) (6,394) (f) -- 231,788
-------- -------- -------- ------- ----- ----------
Operating income ............................... 68,570 9,729 2,172 9,711 -- 90,182
Interest, net .................................. 45,954 1,806 (10,071)(d) -- 996(g) 38,685
-------- -------- -------- ------- ----- ----------
Income before income tax and extraordinary
item .................................. 22,616 7,923 12,243 9,711 (996) 51,497
Income tax expense (benefit)(5) ................ 8,594 3,090 4,652 3,950 (379) 19,907
-------- -------- -------- ------- ----- ----------
Income before extraordinary item(6) ............ $ 14,022 $ 4,833 $ 7,591 $ 5,761 $(617) $ 31,590
-------- -------- -------- ------- ----- ----------
EBITDA ......................................... $ 83,279 $ 14,044 $ 2,612 $ 9,013 $-- $ 108,948
-------- -------- -------- ------- ----- ----------
Ratio of earnings to fixed charges ............. 1.4x 1.9x
-------- ----------
Earnings per common share before
extraordinary item .................... $ 0.88 $ 1.16
-------- ----------
Weighted average common shares outstanding ..... 15,927 27,331
-------- ----------
</TABLE>
- 32 -
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
THREE MONTHS ENDED MAY 3, 1997
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL FINANCIAL DATA
-----------------------
CR ACQUISITION REFINANCING PRO FORMA
STAGE ANTHONY(1) ADJUSTMENTS(3) ADJUSTMENTS(4) COMBINED
-------- -------- -------- ----- -----------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $191,512 $ 64,287 $ -- $ -- $ 255,799
Cost of sales and related buying, occupancy and
distribution expenses.......................... 129,587 51,966 (817)(e) -- 180,736
-------- -------- -------- ------- ----------
Gross profit...................................... 61,925 12,321 817 -- 75,063
Selling, general and administrative
expenses........................... 41,401 13,459 (1,869)(f) -- 52,991
-------- -------- -------- ------- ----------
Operating income.................................. 20,524 (1,138) 2,686 -- 22,072
Interest, net..................................... 8,942 363 -- 174 (g) 9,479
-------- -------- -------- ------- ----------
Income (loss) before income tax and
extraordinary items................ 11,582 (1,501) 2,686 (174) 12,593
Income tax expense (benefit)(5)................... 4,488 (586) 1,088 (66) 4,924
-------- -------- -------- ------- ----------
Income (loss) before extraordinary item(6) $ 7,094 $ (915) $ 1,598 $ (108) $ 7,669
======== ======== ======== ======= ==========
EBITDA............................................ $ 24,303 $ (172) $ 2,506 $ -- $ 26,637
======== ======== ======== ======= ==========
Ratio of earnings to fixed charges................ 2.0x 1.9x
======== ==========
Earnings per common share before extraordinary item $ 0.30 $ 0.28
======== ==========
Weighted average common shares outstanding........ 23,904 27,511
======== ==========
</TABLE>
- 33 -
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED INCOME STATEMENTS
NOTE 1--CR ANTHONY HISTORICAL FINANCIAL DATA
Reclassifications have been made to certain historical CR Anthony costs
and expenses to reflect a presentation similar to that of Stage. Certain store
occupancy expenses (including depreciation) and buying expenses have been
reclassified to "Cost of sales and related buying, occupancy and distribution
expenses." In its reported financial statements, CR Anthony includes these costs
and expenses as "Selling, general and administrative expenses" and as
"Depreciation and amortization." Additionally, advertising expenses and
depreciation and amortization (not otherwise reclassified to cost of sales) have
been included in "Selling, general and administrative expenses."
NOTE 2--IPO AND UHLMANS ACQUISITION
During 1996, Stage completed the IPO and the related retirement of the
Senior Discount Debentures, and the Uhlmans Acquisition. In connection with the
Uhlmans Acquisition, the Company completed a consolidation program which
absorbed the Uhlmans general office functions, including accounting, data
processing, merchandising, personnel, credit and distribution into similar
functions provided by the Company (the "Uhlmans Consolidation Program"). As a
part of the acquisition agreement with the former stockholders of Uhlmans, the
Company paid severance to each individual whose employment terminated as a
result of the Uhlmans Consolidation Program. In addition, all leases associated
with Uhlmans corporate offices and distribution center have been terminated.
Although the consolidation of the Uhlmans general office functions took
place over a period of three months, the unaudited pro forma combined income
statement reflects the elimination of the separate Uhlmans general office
expenses assuming the consolidation had been fully implemented at the beginning
of the period.
The accompanying pro forma adjustments for the Uhlmans Acquisition reflect
the historical operating results for Uhlmans from February 4, 1996 through June
2, 1996 (representing the period in 1996 prior to the closing of the Uhlmans
Acquisition) adjusted for the impact of the Uhlmans Consolidation Program and
related financing. The accompanying pro forma adjustments related to the IPO
reflect the issuance of 10.75 million shares of Common Stock as well as the
retirement of the Senior Discount Debentures.
(a) Uhlmans pre-acquisition net sales
(b) Adjustments to cost of sales and related buying, occupancy and
distribution expenses as follows:
Uhlmans pre-acquisition cost of sales and related buying,
occupancy and distribution expenses......................... $13,030
Incremental freight due to use of Stage's distribution center.. 99
Uhlmans pre-acquisition buying and merchandising personnel
costs eliminated in connection with the Uhlmans............. (606)
--------
Consolidation Program....................................... $12,523
========
- 34 -
<PAGE>
(c) Adjustments to selling, general and administrative expenses as follows:
Uhlmans pre-acquisition selling, general and administrative
expenses........................................................... $3,482
Amortization of goodwill resulting from the Uhlmans
Acquisition........................................................ 136
Uhlmans pre-acquisition personnel costs eliminated in connection
with the Uhlmans Consolidation Program............................. (1,547)
Elimination of a professional service agreement terminated in
connection with the IPO............................................ (250)
---------
$1,821
=========
(d) Adjustments to net interest as follows:
Incremental interest related to the SRPC Notes used to finance the
Uhlmans Acquisition.............................................. $1,250
Amortization of debt issue costs related to the SRPC Notes.......... 189
Elimination of the historical interest expense and amortization of
debt issue costs associated with the Senior Discount
Debentures retired in connection with the IPO.................... (10,956)
Elimination of the Uhlmans pre-acquisition interest expense and
amortization of debt issue costs................................. (554)
---------
$ (10,071)
=========
The components of the purchase price of the Uhlmans Acquisition, net of
cash acquired, were as follows:
Cash acquired.................................................... $ (887)
Cash paid to Uhlmans shareholders................................ 12,023
Uhlmans debt retired.............................................
16,210
---------
Total purchase price, net of cash acquired....................
$27,346
=========
The purchase price of the Uhlmans Acquisition for accounting purposes was
allocated as follows to the assets purchased and the liabilities assumed based
upon their fair values:
Current assets, other than cash................................. $13,923
Property, equipment and leasehold improvements............... 3,953
Goodwill..................................................... 17,014
Other assets................................................. 111
Liabilities assumed.......................................... (7,655)
---------
Total purchase price, net of cash acquired................... $27,346
==========
NOTE 3--THE ACQUISITION
The Company has formally adopted the CR Anthony Integration Plan to absorb
CR Anthony's general office functions, including accounting, data processing,
merchandising, personnel and distribution into similar functions provided by the
Company. Although the CR Anthony Integration Plan is expected to take place over
a period of twelve months, the pro forma combined income statement reflects the
elimination of the separate CR Anthony general office and distribution center
expenses assuming the consolidation had been fully implemented at the beginning
of each period presented.
- 35 -
<PAGE>
As a part of the CR Anthony Integration Plan, the Company has specifically
identified the general office employees of CR Anthony who will be terminated as
a result of the Acquisition. The Company has contractually agreed to a severance
schedule for each of these individuals whose employment will be terminated as a
result of the Acquisition.
The acquisition adjustments are based on estimates of the Company's
management and are not necessarily indicative of the level of permanent savings
for future periods. These pro forma adjustments only give effect to those
amounts that are directly related to the CR Anthony Integration Plan. The actual
application by the Company of the CR Anthony Integration Plan could result in
different levels of savings from the amounts presented in the pro forma combined
income statements.
The accompanying pro forma combined income statements do not reflect
certain cost savings or improvements in sales volume or gross margin related to
the Acquisition which the Company believes could be realized as a result of
implementing the Company's merchandising, distribution, credit card and other
operational programs nor does it reflect approximately $28.5 million of capital
expenditures anticipated in the CR Anthony Integration Plan. The Company expects
to finance this investment through operating cash flows and borrowings under the
New Credit Agreement. If such investment, along with the related financing, had
been reflected in the unaudited pro forma combined income statements the
incremental depreciation and interest expense would have the following impact:
1996 1Q 1997
----------- --------
Income before income tax and extraordinary item...... $ (3,818) $ (954)
========== ========
Income before extraordinary item..................... $ (2,367) $ (591)
========== ========
Earnings per common share before extraordinary item.. $ (0.09) $ (0.02)
========== ========
The application of purchase accounting to the Acquisition results in an
excess of the purchase price over the estimated fair value of the assets
acquired and liabilities assumed. This excess is treated as goodwill. Based upon
the strategic positioning of the CR Anthony stores in relation to the Company's
growth strategy, the long operating history and historical profitability of
these stores, management believes a 40-year amortization period for this
goodwill is appropriate.
The pro forma combined income statements reflect the impact of the CR
Anthony Integration Plan as follows (in thousands):
(e) Adjustments to cost of sales and related buying, occupancy and
distribution expenses as follows:
1996 1Q 1997
---- -------
Elimination of rental expense related to
the closure of CR Anthony's distribution
center ............................................ $ (477) $(123)
Elimination of payroll and costs associated
with the termination of CR Anthony's buying
staff ............................................. (2,840) (694)
------- -----
$(3,317) $(817)
======= =====
(f) Adjustment to selling, general and administrative expenses as
follows:
1996 1Q 1997
---- -------
Elimination of CR Anthony's payroll and
other expenses associated with employees
who work at the general office which is
being closed pursuant to the CR Anthony
Integration Program ............................. $(7,078) $(2,046)
Amortization of goodwill resulting from the
Acquisition ..................................... 684 177
------- -------
$(6,394) $(1,869)
======= =======
36
<PAGE>
NOTE 4--REFINANCING ADJUSTMENTS
(g) Adjustments to net interest as follows:
1996 1Q 1997
---- -------
Interest expense associated with
the Refinancing .............................. $ 27,019 $ 6,755
Amortization of debt issue costs
associated with the Refinancing .............. 1,617 404
Elimination of interest expense associated
with the Existing Notes ...................... (26,251) (6,614)
Elimination of debt issue costs associated
with the Existing Notes ...................... (1,389) (371)
-------- -------
$ 996 $ 174
======== =======
NOTE 5-- INCOME TAXES
Pro forma adjustments to record the provision or benefit for income taxes
have been made assuming a tax rate of 38%, based upon the statutory federal and
state income tax rates. These adjustments result in a pro forma combined
effective tax rate of 38.7% and 39.1% for 1996 and the three months ended May
3,1997, respectively.
NOTE 6--NON-RECURRING CHARGES
In the fiscal quarter in which the Refinancing was consummated (the second
quarter of 1997), the Company expects to incur non-recurring charges, net of
tax, totaling approximately $16.8 million in connection with the early
retirement of the Existing Notes, the replacement of the Existing Credit
Agreements and the write-off of related debt issue costs.
37
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MAY 3, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ACQUISITION
------------------- ADJUST- REFINANCING PRO FORMA
STAGE CR ANTHONY MENTS(1)(2) ADJUSTMENTS(3) COMBINED
----- ---------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ............................ $ 10,017 $ 3,649 $(27,121)(a) $ 14,575(h) $ 1,120
Undivided interest in accounts receivable trust ...... 65,382 5,286 -- -- 70,668
Merchandise inventories .............................. 222,762 86,103 -- -- 308,865
Prepaid assets and other current assets .............. 38,240 4,643 -- -- 42,883
--------- -------- -------- --------- ---------
Total current assets ................................. 336,401 99,681 (27,121) 14,575 423,536
Property, equipment and leasehold improvements, net .. 116,687 17,569 -- -- 134,256
Goodwill, net ........................................ 47,016 -- 28,255(b) -- 75,271
Other assets ......................................... 15,089 7,241 -- 5,895(i) 28,225
--------- -------- -------- --------- ---------
$ 515,193 $124,491 $ 1,134 $ 20,470 $ 661,288
========= ======== ======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ..................................... $ 57,620 $ 20,741 $ -- $ -- $ 78,361
Accrued expenses and other current liabilities ....... 40,731 15,776 16,057(c) (15,699)(j) 56,865
--------- -------- -------- --------- ---------
Total current liabilities ............................ 98,351 36,517 16,057 (15,699) 135,226
Long-term debt ....................................... 298,599 16,064 (16,064)(d) 52,931(k) 351,530
Other long-term liabilities .......................... 18,859 766 -- -- 19,625
--------- -------- -------- --------- ---------
Total liabilities ........................... 415,809 53,347 (7) 37,232 506,381
--------- -------- -------- --------- ---------
Common stock ......................................... 233 90 (54)(e) -- 269
Additional paid-in capital ........................... 169,835 57,307 14,942 (f) -- 242,084
Accumulated deficit .................................. (70,684) 13,747 (13,747)(g) (16,762)(l) (87,446)
--------- -------- -------- --------- ---------
Stockholders' equity ................................. 99,384 71,144 1,141 (16,762) 154,907
--------- -------- -------- --------- ---------
$ 515,193 $124,491 $ 1,134 $ 20,470 $ 661,288
========= ======== ======== ========= =========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED BALANCE SHEET
NOTE 1--CR ANTHONY ACQUISITION ADJUSTMENTS
The pro forma acquisition adjustments represent the estimated adjustments
necessary to state the historical assets and liabilities of CR Anthony at their
estimated fair values based upon information currently available to the Company
and the recognition of the excess of the purchase price over the estimated fair
value of the assets acquired and liabilities assumed as goodwill to the extent
any refinements to the purchase price allocation will be made based upon the
Company's ongoing calculation of the assets acquired and liabilities assumed.
Consideration for the Acquisition was 100% Common Stock. This pro forma
presentation reflects the Stage Average Closing Price of $20.04 which resulted
in approximately 3,607,000 shares of Common Stock being issued in exchange for
the 9,035,645 shares of CR Anthony common stock (0.399 shares of Common Stock
for each share of CR Anthony common stock).
The accompanying unaudited pro forma combined condensed balance sheet does
not reflect certain cost savings or improvements in sales volume or gross margin
related to the Acquisition which the Company believes could be realized as a
result of implementing the Company's merchandising, distribution, credit card,
and other operational programs, nor does it reflect approximately $28.5 million
of capital expenditures anticipated in the CR Anthony Integration Plan. The
Company expects to finance this investment through operating cash flows and
borrowings under the New Credit Agreement.
The acquisition adjustments shown on the unaudited pro forma combined
condensed balance sheet reflect (in thousands, except share and per share
amounts):
(a) Adjustments to cash as follows:
Cash paid to retire the outstanding CR Anthony
options.........................................$ (4,692)
Retirement of CR Anthony Indebtedness............. (22,429)
----------
$(27,121)
==========
In accordance with EITF 85-45, CR Anthony will
record a $4,692 charge in its historical
financial statements upon retirement of the
outstanding CR Anthony options. Such charge is
not reflected in the accompanying unaudited pro
forma combined income statements.
(b) Recognition of goodwill (see Note 2 below)
(c) Adjustments to accrued expenses and other current
liabilities as follows:
Severance due CR Anthony employees who work at
the general office terminated pursuant to the
CR Anthony Integration Plan...................... $ 4,300
Transaction fees................................... 3,000
One-time costs associated with closed or converted
facilities....................................... 15,122
Retirement of the current portion of CR Anthony
indebtedness..................................... (6,365)
--------
$16,057
========
(d) Retirement of CR Anthony indebtedness
(e) Adjustments to Common Stock as follows:
Issuance of Common Stock........................... $ 36
Retirement of CR Anthony common stock.............. (90)
--------
$(54)
========
- 39 -
<PAGE>
(f) Adjustments to additional paid-in capital as follows:
Recognition of Stage paid-in capital................ $72,249
Retirement of CR Anthony common stock............... (57,307)
--------
$14,942
========
(g) Elimination of CR Anthony's historical retained earnings.
NOTE 2--CR ANTHONY PURCHASE PRICE
The components of the purchase price, net of cash acquired, are as
follows:
Cash acquired............................................... $(3,649)
Cash paid to CR Anthony option holders...................... 4,692
Value of Common Stock issued................................ 72,285
CR Anthony debt retired..................................... 22,429
--------
Total purchase price, net of cash acquired.................. $95,757
========
The purchase price of CR Anthony for accounting purposes is allocated
as follows to the assets purchased and the liabilities assumed based upon the
estimated fair values.
Current assets, other than cash............................. $96,032
Property, equipment and leasehold improvements.............. 17,569
Goodwill.................................................... 28,255
Other assets................................................ 7,241
Liabilities assumed......................................... (53,340)
--------
Total purchase price, net of cash acquired.................. $95,757
========
NOTE 3--REFINANCING ADJUSTMENTS
The following assumes 100% of the Existing Notes are tendered pursuant to
the Tender Offers and 100% of the consent payments have been paid pursuant to
the Consent Solicitations.
(h) Sources and uses of cash as follows:
SOURCE OF FUNDS
Notes..................................................... $ 299,660
USES OF FUNDS
Retirement of Existing Senior Notes(1).................... (137,284)
Retirement of Existing Senior Subordinated Notes(1)....... (129,885)
Payments of costs associated with the Offering, the Tender
Offers and the Consent Solicitations, and the New Credit
Agreement............................................... (12,491)
Payment of accrued interest relating to debt retired...... (5,425)
---------
Net change in cash and cash equivalents................... $ 14,575
=========
--------------------------
(1) Includes premiums related to the Tender Offers and consent
fees related to the Consent Solicitations.
- 40 -
<PAGE>
(i) Adjustments to other assets as follows:
Debt issue costs associated with the
Refinancing.................................... $ 11,491
Write-off of debt issue costs related to the
retirement of the Existing Notes............... (5,596)
---------
$ 5,895
=========
(j) Adjustments to accrued expenses and other current liabilities
as follows:
Reduction of income taxes payable resulting from the
extraordinary charge for loss on early retirement
of debt........................................ $ (10,274)
Payment of accrued interest....................... (5,425)
---------
$ (15,699)
=========
(k) Adjustments to long-term debt as follows:
Retirement of Existing Senior
Notes.......................................... $ (130,000)
Retirement of Existing Senior Subordinated
Notes.......................................... (116,729)
Issuance of Notes to be issued in the
Offering....................................... 299,660
---------
$ 52,931
=========
(l) Extraordinary charge, net of tax, in connection with the early
retirement of the Existing Notes, the replacement of certain
existing credit agreements and the write-off of related debt
issue costs
- 41 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
OVERVIEW. The Company operates the store of choice for well-known national
brand name family apparel in over 200 small towns and communities across the
central United States. The Company has recognized the high level of brand
awareness and demand for fashionable, quality apparel by consumers in small
markets and has identified these markets as a profitable and underserved niche.
The Company has developed a unique franchise focused on small markets,
differentiating itself from the competition by offering a broad range of brand
name merchandise with a high level of customer service in convenient locations.
The Company has begun to realize the full potential of its unique
franchise in small markets as a result of several initiatives undertaken in
recent years, including: (i) recruiting a new senior management team; (ii)
embarking on a store expansion program to capitalize on available opportunities
in new markets through new store openings and strategic acquisitions; and (iii)
continuing to refine the Company's retailing concept through new merchandising
and operating programs. As a result of these initiatives, the lower operating
costs of small market stores and the competitive advantages outlined above, the
Company has among the highest operating income and EBITDA margins in the apparel
retailing industry.
RECENT ACQUISITIONS. The Company acquired 45 stores from Beall-Ladymon in
1994 and subsequently reopened the stores in the first quarter of 1995 under the
Stage name. In 1993, the year prior to their acquisition, the Beall-Ladymon
stores generated sales of approximately $53.4 million, whereas during the first
four full quarters operated by Stage (the 12 months ended August 3, 1996), the
newly opened Stage stores in the same locations generated sales of $95.0
million, an increase of 78%. Over the same period, store contribution more than
doubled.
On June 3, 1996 the Company acquired Uhlmans, a privately-held retailer
with 34 locations in Ohio, Indiana and Michigan, where the Company previously
had no stores. These stores were of similar size and merchandise content to the
Company's existing stores and were compatible with the Company's retaining
concept and growth strategy. For 1995, Uhlmans had net sales of $59.7 million
and operating income of $2.2 million. For the five full months since the
merchandising function of Uhlmans was completely integrated (December 1996
through April 1997), sales at Uhlmans' stores have increased 10.4% over the
comparative period in the prior year. The Company believes that certain changes
to the merchandise mix and an increase in proprietary credit card-based sales
will provide further improvement over Uhlmans' historical results.
On June 26, 1997, the Company acquired CR Anthony by merging CR Anthony
with and into SRI. CR Anthony operated 248 brand name family apparel stores in
small markets as of June 25, 1997 under the names "Anthonys" and "Anthonys
Limited." The Acquisition is expected to strengthen the Company's position as a
leading retailer of national brand name apparel in small markets throughout the
central and midwestern United States where CR Anthony had been operating for
over 70 years. For the fiscal year ended February 1, 1997, CR Anthony's net
sales and EBITDA were $288.4 million and $14.0 million, respectively. See
"--Liquidity and Capital Resources."
The Company believes that the following key strengths have contributed to
its successful expansion and acquisition plan: (i) ability to operate profitably
in smaller markets; (ii) benefits of strong vendor relationships; (iii)
effective merchandising strategy; (iv) focused marketing strategy; (v) benefits
of proprietary credit card program; (vi) emphasis on customer service; and (vii)
sophisticated operating and information systems.
STORE CLOSURE PLAN. During the fourth quarter of 1994, the Company
approved the Store Closure Plan which provided for the closure of 40
underperforming Fashion Bar stores. These stores were primarily located in major
regional malls within the Denver area. Management determined that the
merchandising strategy and market positions of such stores were not compatible
with the Company's overall strategy. Accordingly, the Company accrued $5.2
million for the expected costs associated with the Store Closure Plan during
1994. The Store Closure Plan was completed in 1996.
- 42 -
<PAGE>
The financial information, discussion and analysis that follow should be
read in conjunction with the Company's Consolidated Financial Statements
included elsewhere herein.
RESULTS OF OPERATIONS
The following sets forth the results of operations as a percentage of
sales for the periods indicated. Certain income statement reclassifications have
been made to conform to the 1996 format; accordingly, prior year percentages
differ slightly from those previously reported.
<TABLE>
<CAPTION>
Fiscal Year Three Months Ended
------------------------- -------------------------
1994 1995 1996 May 4, 1996 May 3, 1997
---- ---- ---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales ..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ................................. 68.6 68.6 68.6 68.1 67.7
----- ----- ----- ----- -----
Gross profit margin ........................... 31.4 31.4 31.4 31.9% 32.3%
Selling, general and administrative expenses .. 21.7 21.8 22.2 22.0% 21.5%
Store opening and closure costs ............... 0.9 0.6 0.4 0.1% 0.1%
----- ----- ----- ----- -----
Operating income margin ....................... 8.8 9.0 8.8 9.8% 10.7%
Net interest expense .......................... 6.9 6.4 5.9 7.1% 4.7%
----- ----- ----- ----- -----
Income before income tax and extraordinary
item ........................................ 1.9% 2.6% 2.9% 2.7% 6.0%
===== ===== ===== ===== =====
EBITDA margin ................................. 10.8% 11.0% 10.7% 11.8% 12.7%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MAY 3, 1997 COMPARED TO THREE MONTHS ENDED MAY 4, 1996
Sales for the first quarter of 1997 increased 17.3% to $191.5 million
from $163.2 million in the same period in 1996. The increase in first quarter
sales was primarily due to $24.1 million in incremental sales from stores opened
during 1997 and 1996 combined with a 5.0% increase in comparable store sales.
The increase in comparable store sales was the result of the strength in the
performance of the Company's small market stores.
Gross profit increased 18.8% to $61.9 million for the first quarter of
1997 from $52.1 million in the same period in 1996. Gross profit margin for the
first quarter of 1997 increased to 32.3% compared to 31.9% for the same period
in 1996. Gross profit margin was favorably impacted by an increase in markup on
merchandise sold due to an improved mix of inventories coupled with additional
leverage of the fixed cost component of gross margin.
Selling, general and administrative expenses for the first quarter of
1997 increased 14.7% to $41.3 million from $36.0 million for the same period in
1996. As a percentage of sales, these expenses decreased to 21.5% for the first
quarter of 1997 from 22.0% in the same period of 1996 due to the effective
leveraging of the Company's central overhead function as well as an improvement
in store variable expenses.
Operating income for the first quarter of 1997 increased 28.1% to $20.5
million from $16.0 million for the first quarter of 1996 due to the factors
discussed above. Operating income as a percent of sales was 10.7% for the first
quarter of 1997 as compared to 9.8% for the same period in 1996.
Net interest expense for the first quarter of 1997 decreased 23.3% to
$8.9 million from $11.6 million for the same period in 1996. This decrease
reflects the retirement of the Senior Discount Debentures which were retired in
connection with the Offering. Excluding this interest from 1996, net interest
expense would have increased $0.9 million due to the issuance of SRPC Notes
during May 1996.
As a result of the foregoing, net income for the first quarter of 1997
increased by 163.0% to $7.1 million from $2.7 million for the same period in
1996.
- 43 -
<PAGE>
1996 COMPARED TO 1995
Sales for 1996 increased 13.8% to $776.5 million from $682.6 million in
1995. The increase in sales was due primarily to a 12.9% increase in sales from
stores opened during 1996 and 1995, combined with a 3.3% increase in
comparable store sales. Total sales for 1996 were not directly comparable to
1995 because 1995 had one additional selling week when compared to 1996.
Eliminating the extra selling week from 1995 (approximately $10.0 million in
sales), sales for 1996 increased 15.5%.
Gross profit increased 13.9% to $244.0 million in 1996 from $214.3
million in 1995. Gross profit for 1996 was favorably impacted by an increase in
markup on merchandise sold relating to an improved mix of inventories and a
lower markdown rate, the result of a continued focus and tight control over
inventories. These factors were offset by a $2.4 million decline in LIFO
credits. Gross profit margin was 31.4% in 1996 and 1995.
Selling, general and administrative expenses for 1996 increased 15.8%
to $172.6 million from $149.1 million in 1995. As a percentage of sales, these
expenses increased to 22.2% in 1996 from 21.8% in 1995 due to: (i) the extra
selling week in 1995 which had the impact of lowering the selling, general and
administrative expense rate for 1995; (ii) duplicative costs associated with the
acquisition of Uhlmans; and (iii) an increase in bad debt expense associated
with the Company's proprietary credit card program. These increases were
partially offset by the application of fixed costs to a greater volume of sales
and an increase in service charge income as a result of higher fees assessed on
delinquent accounts. Bad debt expense as a percent of sales in 1996 increased to
2.8% from 2.2% in 1995. The increase in bad debt expense was the result of a
general rise in the level of personal bankruptcies in the Company's accounts
receivable portfolio as well as the Company's adoption of higher late fees.
Advertising expenses as a percent of sales for 1996 and 1995 were 3.8% and 3.9%,
respectively.
Operating income for 1996 increased 11.5% to $68.6 million from $61.5
million for 1995 due to the factors discussed above. Operating income as a
percent of sales was 8.8% in 1996 as compared to 9.0% in 1995.
Net interest expense increased 4.5% to $46.0 million in 1996 from $44.0
million in 1995. Net interest expense increased due to the issuance of: (i)
$30.0 million in aggregate principal amount of 12.5% SRPC Notes during May 1996;
and (ii) $18.3 million in aggregate principal amount of Existing Senior
Subordinated Notes during August 1995. These increases were offset by decreased
accretion of discount on the Senior Discount Debentures which were retired in
October 1996 in connection with the IPO.
In connection with the IPO and the replacement of the Company's working
capital facility, the Company recorded an extraordinary charge of $16.1 million,
net of applicable income taxes of $9.8 million.
1995 COMPARED TO 1994
1995 was highlighted by the positive initial results of management's
growth strategy to expand into small markets. Sales increased 17.4% to $682.6
million in 1995 from $581.5 million in 1994. This increase was due to: (i) a
$112.5 million increase in sales from stores opened during 1994 and 1995; (ii) a
0.8% increase in comparable store sales in 1995; and (iii) $10.0 million in
sales due to the inclusion of one extra week in 1995 as a result of 1995 being a
53- week year. Such increases were partially offset by the effects of the Store
Closure Plan which was substantially completed in 1995. During 1995, the
devaluation of the Mexican peso, which resulted in extremely weak economic
conditions throughout Mexico, negatively impacted sales at the Company's six
stores located on the Texas/Mexico border. Excluding these stores, comparable
store sales growth for 1995 would have been 3.0%.
Gross profit increased 17.2% to $214.3 million in 1995 from $182.8
million in 1994. Gross margin was 31.4% for both 1995 and 1994. Gross profit for
1995 was favorably impacted by: (i) the opening of new stores, which
traditionally experience lower markdown activity during their first six months
of operations; (ii) vendor discount programs granted to the Company to support
new store openings; (iii) the application of buying, occupancy and distribution
costs over a larger sales base; and (iv) LIFO credits. These items were offset
by an increase in markdowns resulting from additional promotional events during
the Christmas season intended to increase sales and reduce inventories and an
increase in the level of shrinkage. Management believes that the increased
shrinkage was due
- 44 -
<PAGE>
primarily to the Company's focus on improving ticketing compliance on
merchandise in 1995 as well as the rapid expansion of stores during the same
year.
Selling, general and administrative expenses for 1995 increased 18.1%
to $149.1 million from $126.2 million in 1994. As a percentage of sales, these
expenses increased to 21.8% for 1995 from 21.7% in 1994. The increase resulted
from incremental costs associated with opening stores in new markets, increased
costs associated with the certificates issued under the Accounts Receivable
Program to third party investors and an increase in the bad debt expense to 2.2%
of sales in 1995 from 1.9% of sales in 1994 associated with the Company's credit
card program (including charge-offs resulting from sales of the Mexican border
stores). These increases were partially offset by the application of fixed costs
to a greater volume of sales and the reversal of a $0.8 million litigation
reserve as a result of a favorable court ruling. Advertising expenses as a
percent of sales for 1995 and 1994 were 3.9% and 3.8%, respectively; the
increase was primarily a result of the Company's expansion into new markets.
The 1995 store opening and closure costs of $3.7 million were comprised
of store opening costs related to 68 new stores. The 1994 store opening and
closure costs were comprised of a $5.2 million provision for the Store Closure
Plan and $0.4 million for store opening costs related to ten new stores.
Operating income for 1995 increased 20.6% to $61.5 million from $51.0
million for 1994 due to the factors discussed above. Operating income as a
percent of sales was 9.0% in 1995 as compared to 8.8% for 1994.
Net interest expense for 1995 increased 10.0% to $44.0 million from
$40.0 million for 1994. The increase in interest expense was due primarily to an
increase in the accretion on the Senior Discount Debentures combined with
interest related to the Series D Senior Subordinated Notes issued in August
1995.
As a result of the factors described above, the Company's net income
for 1995 increased 69.8% to $10.7 million from $6.3 million for 1994.
- 45 -
<PAGE>
SEASONALITY AND INFLATION
The Company's business is seasonal and its quarterly sales and profits
traditionally are lower during the first three quarters (February through
October) and higher during the fourth quarter (November through January). In
addition, working capital requirements fluctuate throughout the year, increasing
substantially in October and November in anticipation of the holiday season due
to requirements for significantly higher inventory levels.
<TABLE>
<CAPTION>
1995 1996
---------------------------------------------- ----------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................ $142,353 $154,578 $ 159,161 $226,532 $163,177 $182,750 $ 182,562 $248,061
Gross profit(1) .......... 46,283 46,555 48,659 72,780 52,081 56,623 56,208 79,075
Operating income ......... 14,835 11,074 9,724 25,853 16,045 13,925 12,342 26,258
Quarters' operating income
as a percent of annual
income ................. 24% 18% 16% 42% 24% 20% 18% 38%
Income (loss) before
extraordinary item ..... $ 2,438 $ 221 $ (899) $ 8,970 $ 2,652 $ 868 $ (265) $ 10,767
Net income ............... 2,438 221 (899) 8,970 2,652 868 (16,071) 10,492
Adjusted operating
income(2) .............. 13,797 11,337 10,364 28,498 14,033 13,095 12,053 32,447
</TABLE>
- -----------
(1) The Company states its inventories at the lower of cost or market, cost
being determined on the last-in first-out method. See Note 1 to the
Company's Consolidated Financial Statements.
(2) Adjusted operating income represents operating income adjusted to
eliminate the income and expense associated with the Company's
proprietary credit card program (including the Accounts Receivable
Program) and store opening and closure costs.
The Company does not believe that inflation had a material effect on its
results of operations during the past two years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
LIQUIDITY AND CAPITAL RESOURCES
During October 1996, the Company completed the IPO. The net proceeds from
the IPO were approximately $165.7 million after deducting underwriting discounts
and expenses related to the IPO. The net proceeds were used primarily to retire
the Senior Discount Debentures. The remaining proceeds of approximately $26.5
million were used for general corporate purposes. The Company's consolidated
long-term debt at May 3, 1997 included $130.0 million of Existing Senior Notes,
$116.7 million of Existing Senior Subordinated Notes, $30.0 million in aggregate
principal amount of SRPC notes (the "SRPC Notes") and certain other debt.
On June 3, 1996, the Company purchased Uhlmans for approximately $27.3
million, including acquisition costs and net of cash acquired. The Company,
through SRI Receivables Purchase Co., Inc. ("SRPC"), issued the SRPC Notes
during May 1996, the proceeds of which were used to fund the Uhlmans
Acquisition. The issuance of the SRPC Notes does not impact the ability of the
Company to issue additional certificates to third-party investors under the
Accounts Receivable Program.
Total working capital of $238.0 million at May 3, 1997 remained essentially
unchanged from February 1, 1997, although the components of working capital
including cash, inventory, accounts receivable and other current assets varied.
Merchandise inventories increased and cash decreased primarily due to the
seasonal build in inventories and the opening of 13 stores during the first
quarter of 1997. Accounts receivable increased $35.0 million during the first
quarter of 1997 as a result of the seasonal increase in accounts receivable
generated during the Christmas season. Other current assets decreased primarily
due to the collection of a federal tax refund during the first quarter of 1997.
On June 26, 1997, the Company acquired CR Anthony by merging CR Anthony
with and into SRI. CR Anthony operated 248 brand name family apparel stores in
small markets as of June 25, 1997 under the names "Anthonys" and "Anthonys
Limited." The Acquisition is expected to strengthen the Company's position as a
leading retailer of national
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brand name apparel in small markets throughout the central and midwestern United
States where CR Anthony had been operating for over 70 years. For the fiscal
year ended February 1, 1997, CR Anthony's net sales and EBITDA were $288.4
million and $14.0 million, respectively. Under the terms of the agreement, the
Company acquired the common stock of CR Anthony for a value of $8.00 per share.
The form of consideration was 100% Common Stock with Stage issuing 0.399 shares
of Common Stock in exchange for each issued and outstanding share of common
stock of CR Anthony, other than shares held by persons exercising dissenter's
rights in accordance with Section 1091 of the Oklahoma General Corporation Act,
subject to the adjustment provided for under the agreement. The Acquisition was
structured as a merger with CR Anthony merging with and into SRI and SRI
surviving with all its rights, privileges, powers and franchises unaffected by
the Merger. The separate corporate existence of CR Anthony ceased to exist.
The Company's primary capital requirements are for working capital, debt
service and capital expenditures. Based upon the Company's capital structure,
after giving pro forma effect to the Refinancing and the Acquisition, management
anticipates pro forma cash interest expense to be approximately $35.0 million
during each of 1997 and 1998. Capital expenditures are generally for new store
openings, remodeling of existing stores and facilities and customary store
maintenance. Capital expenditures in 1996 were $26.1 million as compared to
$28.6 million in 1995. Management expects capital expenditures (excluding any
capital expenditures resulting from the Acquisition) to be approximately $35.0
million during each of 1997 and 1998, consisting primarily of new store openings
and remodeling and maintenance of existing stores. In addition, the Company
expects capital expenditures of approximately $28.5 million in the aggregate
during the 12 month period immediately following the Acquisition to convert the
current CR Anthony stores to the Stage format following consummation of the
Acquisition. The Company also incurred approximately $18.0 million of one-time
costs in connection with the Acquisition, which consisted of, among other
things, costs associated with the termination of contracts (including the costs
to terminate CR Anthony's private label credit card portfolio with Citicorp),
lease terminations, severance payments to CR Anthony employees and transaction
fees. Required aggregate principal payments on debt of the Company are expected
to total $2.6 million for each of 1997 and 1998.
Concurrently with the Offering, the Company entered into the New Credit
Agreement. The New Credit Agreement provides for the $100.0 million Working
Capital Facility and the $100.0 million Expansion Facility. See "Description of
New Credit Agreement" and "Description of the Notes--Certain
Covenants--Limitation on Indebtedness."
The Company's short-term liquidity needs, including a portion of the
one-time costs associated with the Acquisition, are expected to be provided by:
(i) existing cash balances; (ii) operating cash flows; (iii) the Accounts
Receivable Program; and (iv) the New Credit Agreement. The Company expects to
fund its long-term liquidity needs from its operating cash flows, the issuance
of debt and/or equity securities, the securitization of its accounts receivable
and bank borrowings. The Company believes the Refinancing will provide it with a
more flexible capital structure which: (i) increases the Company's working
capital facilities to support its operations; (ii) extends the average
maturities of the Company's debt; (iii) lowers the Company's weighted average
cost of borrowing; and (iv) provides increased financial flexibility to allow
the Company to continue to implement its growth strategy. See "Description of
New Credit Agreement."
The Company securitizes all of its trade accounts receivable through its
wholly owned special purpose entity, SRPC. SRPC holds a retained interest in the
securitization vehicle, a special purpose trust (the "Trust") which is
represented by three certificates of beneficial ownership in the Trust (the
"Retained Certificates"). See Note 3 to the Company's Consolidated Financial
Statements. The Company transfers, on a daily basis, all of the accounts
receivable generated from purchases by the holders of the Company's proprietary
credit card to SRPC. SRPC is a separate limited-purpose subsidiary that is
operated in a manner intended to ensure that its assets and liabilities are
distinct from those of the Company and its other affiliates as SRPC's creditors
have a claim on its assets prior to such assets becoming available to any
creditor of the Company. SRPC transfers, on a daily basis, the accounts
receivable purchased from the Company to the Trust in exchange for cash or an
increase in the Retained Certificates. The remaining interest in the Trust is
held by third-party investors which are represented by the Trust Certificates
(as defined below). The Retained Certificates are effectively subordinated to
the interests of such third-party investors and are pledged to secure the SRPC
Notes which were issued to finance the Uhlmans Acquisition. The SRPC Notes are
secured by, and paid solely from, the Retained Certificates issued to SRPC by
the Trust. Interest on the SRPC Notes accrues at the rate per annum of 12.5% and
is payable semi-annually on June 15 and December 15 of each year, commencing
December 15, 1996. Amounts received by SRPC from the Retained Certificates are
expected to provide a source of cash flows to pay the interest on the SRPC
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Notes. The SRPC Notes have an expected maturity date of December 15, 2000 (the
"Expected Maturity Date"). Principal is expected to be paid on the SRPC Notes in
one payment on the Expected Maturity Date. If principal is not paid in full on
the Expected Maturity Date it will be paid monthly thereafter on each monthly
payment date, to the extent of available funds and subject to the collection
experience of the receivables underlying the Trust Certificates at that time.
Since its inception, the Trust has issued $165.0 million of term
certificates and a $40.0 million revolving certificate (collectively, the "Trust
Certificates") to third parties representing undivided interests in the Trust.
The holder of the revolving certificate agreed to purchase interests in the
Trust equal to the amount of accounts receivable in the Trust above the level
required to support the term certificates (aggregating $200.1 million at May 3,
1997), up to a maximum of $40.0 million. As of May 3, 1997, there was no
outstanding balance under the revolving certificate. The Retained Certificates
are effectively subordinated to the interests of third-party investors, and are
pledged to secure the SRPC Notes. If the amount of accounts receivable in the
Trust falls below the level required to support the Trust Certificates, certain
principal collections may be retained in the Trust until such time as the
accounts receivable balances exceed the amount of accounts receivable required
to support the Trust Certificates and any required transferor's interest. SRPC
receives distributions from the Trust of cash in excess of amounts required to
satisfy the Trust's obligations to third-party investors on the Trust
Certificates. Cash so received by SRPC may be used to purchase additional
accounts receivable from, or make distributions to, the Company after SRPC has
satisfied its obligations on the SRPC Notes. The Trust may issue additional
series of certificates from time to time on various terms. Terms of any future
series will be determined at the time of issuance. See "Risk Factors--Consumer
Credit Risks."
Prior to the Acquisition, CR Anthony sold all its private label credit
card accounts receivable to Citicorp pursuant to a Retail Credit Services
Agreement which expires August 1, 1998. The Company and Citicorp have reached an
agreement in principle to terminate this agreement in exchange for the payment
of a termination fee by the Company to Citicorp. Additionally, the Company will
repurchase any outstanding accounts receivable on the termination date at their
face value. The Company intends to incorporate the accounts receivable into the
Accounts Receivable Program. See "Risk Factors--Consumer Credit
Risks--Integration of CR Anthony Private Label Credit Card Program."
The Company believes that funds provided by operations, together with funds
provided by excess cash proceeds from the Offering, the New Credit Agreement and
the Accounts Receivable Program, will be adequate to meet the Company's
anticipated requirements for working capital, interest payments, planned capital
expenditures and principal payments on debt, including those requirements
associated with the Acquisition. Estimates as to working capital needs and other
expenditures may be materially affected if the foregoing sources are not
available or do not otherwise provide sufficient funds to meet the Company's
obligations.
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BUSINESS
GENERAL
The Company operates the store of choice for well-known national brand name
family apparel in over 240 small towns and communities across the central United
States. The Company has recognized the high level of brand awareness and demand
for fashionable, quality apparel by consumers in small markets and has
identified these markets as a profitable and underserved niche. The Company has
developed a unique franchise focused on small markets, differentiating itself
from the competition by offering a carefully edited, but broad range of brand
name merchandise with a high level of customer service in convenient locations.
Stage's product offerings include fashion apparel, accessories, fragrances and
cosmetics and footwear for women, men and children. Over 85% of 1996 sales
consisted of brand name merchandise, including nationally recognized names such
as Chaps/Ralph Lauren, Liz Claiborne, Guess, Haggar Apparel, Hanes, Calvin
Klein, Nike, Reebok and Levi Strauss.
As of July 28, 1997, the Company operated 577 stores in 24 states
throughout the central United States, 329 of which operated under the Company's
"Stage," "Bealls" and "Palais Royal" trade names. The remaining 248 stores were
acquired through the Acquisition and are operated under the "Anthony" and
"Anthonys Limited" trade names. Approximately 78% of the "Stage," "Bealls" and
"Palais Royal" stores are located in small markets and communities with
populations generally below 30,000 people, some with as few as 4,000 people. The
Company's store format (averaging approximately 18,000 selling square feet) and
merchandising capabilities enable the Company to operate profitably in small
markets. The remainder of the Company's stores operate in metropolitan areas,
primarily in suburban Houston. For 1996, after giving pro forma effect to the
Refinancing, the Acquisition and the Uhlmans Acquisition as if each had occurred
on the beginning of the year, the Company would have had pro forma sales and
EBITDA of $1.1 billion and $108.9 million, respectively. The Company intends to
convert the "Anthonys" and "Anthonys Limited" stores to the Company's format
under its "Stage" and "Bealls" trade names during the remainder of 1997 and
1998.
The Company generally faces less competition for brand name apparel as a
result of its small market focus. In those markets, competition generally comes
from local retailers or small regional chains as most national department stores
do not operate in small markets, and access to brand name merchandise generally
requires travel to distant regional malls with national department stores. In
those small markets where the Company does compete for brand name apparel sales,
the Company believes it has a competitive advantage over local retailers and
smaller regional chains due to its: (i) economies of scale of its large store
base; (ii) strong vendor relationships which provide it with a broad selection
of branded merchandise at a lower cost; (iii) proprietary credit card program,
which enables it to provide an independent source of credit and which generates
a significant customer database that supports the Company's promotion and
marketing efforts; and (iv) sophisticated operating systems for efficient
management. The Company believes it has a competitive advantage in small markets
over national department stores due to its: (i) experience with smaller markets;
(ii) ability to effectively manage merchandise assortments in a small store
format; and (iii) operating systems designed for efficient management within
small markets. In addition, due to minimal merchandise overlap, the Company
generally does not directly compete for branded apparel sales with national
discounters such as Wal-Mart.
In order to fully realize the potential of its unique market position and
proven ability to operate profitably in small markets, the Company recruited a
new senior management team commencing in 1993. This new management team has: (i)
initiated an accelerated store expansion program to capitalize on available
opportunities in new markets through new store openings and strategic
acquisitions; and (ii) refined the Company's retailing concept through new
merchandising and operating programs. As a result of these initiatives, as well
as the generally lower operating costs of small market stores and the
competitive advantages outlined above, the Company has among the highest
operating income and EBITDA margins in the apparel retailing industry. The
Company has made substantial progress in implementing its growth strategy by
opening or acquiring 68 stores in 1995 and 69 stores in 1996. In addition, the
Company expects to open at least 55 stores in 1997 in addition to the stores
acquired pursuant to the Acquisition.
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KEY STRENGTHS
The following factors serve as the Company's key strengths and
distinguishing characteristics:
ABILITY TO OPERATE PROFITABLY IN SMALL MARKETS. The Company has recognized
that customers in small markets are generally as aware of current fashion trends
and as sophisticated as consumers in larger urban centers due to the
proliferation of electronic, computer and print media. These consumers, however
have not traditionally had convenient access to broad assortments of quality,
brand name merchandise. The Company operates in small markets with populations
ranging from 4,000 to 30,000, and has developed a store format, generally
ranging in size from 12,000 to 30,000 selling square feet, which is smaller than
typical department stores yet large enough to offer a well edited, but broad
selection of merchandise. This format has enabled the Company to operate
profitably in small markets. Historically, the Company has achieved higher
profit margins in its small market stores. For 1996, store contribution
(operating profit before allocation of corporate overhead) as a percentage of
sales for small market stores open for at least one year was 17%, as compared to
12% for larger market stores. In addition, by operating more than 300 stores,
the Company benefits from economies of scale in buying and merchandising,
management information systems, distribution and advertising which, combined
with the lower cost structure of the smaller market stores, has resulted in
operating margins which are among the highest in the retailing industry.
BENEFITS OF STRONG VENDOR RELATIONSHIPS. The Company's extensive store base
offers major vendors a unique vehicle for accessing small markets in a cost
effective manner. The proliferation of media combined with the significant
national marketing efforts of these vendors has created significant demand for
branded merchandise in small markets. However, the financial and other
limitations of many local retailers has left large national brands with limited
acess to such markets. Furthermore, these vendors, in order to preserve brand
image, generally do not sell to national discounters. As a result, the Company
is able to carry branded merchandise frequently not carried by local
competitors. In addition, the Company continuously seeks to expand its vendor
base and has recently added nationally recognized name brands such as Dockers
for Women, Oshkosh and Polo, as well as fragrances by Elizabeth Arden, Liz
Claiborne and Perry Ellis during 1996. In addition, the Company has also
increased the participation by key vendors in joint marketing programs to a
level that the Company believes exceeds the standard vendor programs provided to
its smaller competitors. For example, the Company is among the largest customers
of Levi Strauss, Liz Claiborne and Haggar Apparel and enjoys significant support
from such vendors in sales promotions, advertising and store fixture programs.
EFFECTIVE MERCHANDISING STRATEGY. The Company's merchandising strategy is
based on an in-depth understanding of its customers and is designed to
accommodate the particular demographic profit of each store. This understanding
is attributable to over 70 years of experience operating in its markets coupled
with 43 buyers who average approximately 11 years of service with the Company.
Store layouts and visual merchandising displays are designed to create a
friendly, modern and convenient department store atmosphere which is frequently
not found in small markets. The Company's strategy focuses on moderately-priced,
brand name merchandise categories which have traditionally yielded attractive
margins. The Company offers an edited assortment of quality, moderately-priced,
brand name merchandise that is divided into distinct departments including
misses, women's, men's, boy's, footwear, intimate apparel, junior's,
accessories, cosmetics, fragrances and gifts.
To augment its brand name merchandise offerings, the Company also offers a
quality assortment of higher margin, private label merchandise which comprises
less than 15% of total sales. The Company's private label merchandise includes
its highly successful Graphite(R) label for apparel, accessories and footwear as
well as its new Whispers(R) merchandise through AMC, a cooperative buying
service whose participants include nationally recognized retailers such as
Federated Department Stores.
The Company also utilizes a sophisticated merchandise allocation and
transfer system which is designed to maximize in-stock positions, increase sales
and reduce markdowns. The Company believes that the combination of the size and
experience of its buyer group, its vendor relationships, its strong
merchandising systems and its participation in AMC allow the Company to compete
effectively on both price and selection in its markets.
FOCUSED MARKETING STRATEGY. The Company's primary target customers are
women between the ages of 20 and 55 with household incomes over $25,000 who are
the primary decision makers for family clothing purchases. The Company
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uses a multi-media advertising approach, including newspaper, radio, direct mail
and television, to position its store as the local destination for fashionable,
brand name merchandise. In addition, the Company heavily promotes its
proprietary credit card in order to create customer loyalty and to effectively
identify its core customers. The Company believes it is better able to maintain
personal contact with its customers due to the small size of its markets,
aggressive advertising strategy and well-developed customer service programs
designed to encourage a high level of customer interaction. The Company seeks to
enhance its image in the communities it serves by encouraging its store managers
and employees to be involved in local activities such as youth groups, civic
activities and athletic events.
BENEFITS OF PROPRIETARY CREDIT CARD PROGRAM. The Company aggressively
promotes its proprietary credit card and, as a result, experiences a higher
percentage of proprietary credit card sales (approximately 53% of net sales in
1996) than most apparel retailers. The Company considers its credit card program
to be a critical component of its retailing concept because it: (i) enhances
customer loyalty by providing customers with a service that few of its local and
regional competitors or discounters offer; (ii) allows the Company to identify
and regularly contact its best customers; and (iii) helps create a comprehensive
database that allows the Company to implement detailed, segmented marketing and
merchandising strategies for each store. In addition, the Company has
established a VIP program which offers special services and benefits to
customers with credit card purchases over $750 annually. VIP customers are
rewarded with certain extra services such as free gift-wrapping, emergency check
cashing, free credit card registration, discounts in alterations, and other
benefits. While these customers only represent approximately 17.1% of total
active cardholders, credit sales to these customers during 1996 comprised 42.9%
of total cardholder sales. Sales associates are encouraged to focus their
selling efforts on these customers to increase the productivity of the Company's
marketing efforts.
EMPHASIS ON CUSTOMER SERVICE. A primary corporate objective is to provide
excellent customer service through stores staffed with highly trained and
motivated sales associates. All sales associates are evaluated and compensated
based upon the attainment of specific customer service standards such as
offering prompt assistance, suggesting complementary items, sending thank-you
notes to credit card customers and establishing consistent contact with
customers in order to create a customer base for each associate. The Company
continuously monitors the quality of its service by making over 4,500 calls each
month to its credit card customers who have recently made a purchase. The
results of these surveys are used to determine a portion of each store manager's
bonus. In addition, the Company has extended this service philosophy to the
design of the store; for example, in nearly all stores it has installed call
buttons in the fitting rooms and in smaller market stores, has adopted a "Team
One" concept which locates the store manager on the selling floor. The Team One
concept is also designed to help the store manager ensure that sales associates
focus on selling customer service.
SOPHISTICATED OPERATING AND INFORMATION SYSTEMS. The Company supports its
retail concept with highly automated and integrated systems in areas such as
merchandising, distribution, sales promotions, credit, personnel management,
store design and accounting. The Company's merchandising systems assist
merchandise planners in allocating merchandise assortments for each store based
on specific characteristics and recent sales trends. The Company's point of sale
systems include bar code scanning and electronic credit and check authorization,
all of which allow the Company to capture customer specific sales data for use
in its merchandising system. Other systems allow the Company to identify and
mark down slow moving merchandise or efficiently transfer it to stores selling
such items more rapidly, and to maintain high levels of in-stock positions in
basic items including jeans and hosiery. The Company is focused on expanding its
use of electronic data interchange (EDI) and has made significant progress in
doing so over the last two years. These systems have enabled the Company to
efficiently manage its inventory, improve sales productivity and reduce costs,
which have helped contribute to the Company's relatively high operating income
margins. The Company has developed and utilizes an automated store personnel
scheduling system that analyzes historical hourly and projected sales trends to
efficiently schedule sales personnel. This system is designed to minimize labor
costs while producing a higher level of customer service.
GROWTH STRATEGY
In order to fully realize the potential of its unique market position and
proven ability to operate profitably in small markets, the Company, through its
new management team, has: (i) initiated an aggressive growth strategy to
capitalize on available opportunities through new store openings and
acquisitions; and (ii) refined its retailing concept to successfully operate in
very small markets with populations of less than 12,000.
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NEW STORE OPENINGS IN SMALL MARKETS. The Company opened 23 stores and
acquired 45 stores in 1995, and opened 35 stores and acquired 34 stores in 1996.
The Company expects to open at least 55 new stores in 1997, in addition to those
stores acquired pursuant to the Acquisition. Since 1994, store additions have
allowed the Company to begin operating in 14 additional states. As part of new
management's ongoing expansion strategy, the Company has identified over 600
additional markets in the central United States and contiguous states which meet
the Company's demographic and competitive criteria. All of these target markets
are smaller communities with populations from 12,000 to 30,000, where the
Company has historically experienced its highest profit margins. In addition,
the Company believes it has a competitive advantage over local retailers in
these markets which are typically underserved by department stores. Based on the
Company's historical operating experience, small market stores typically
experience lower incremental opening costs and lower occupancy and operating
expenses than larger markets. When combined with the Company's operating systems
in merchandising, credit, distribution and store personnel scheduling, the
smaller market stores have typically generated higher margins than metropolitan
market stores. For 1996, store contributions as a percentage of sales for small
market stores open for at least one year was 17% as compared to 12% for larger
market stores.
The Company utilizes a proprietary model which is designed to allow
management to identify suitable markets for new stores. The Company targets
communities for new store openings with populations generally ranging from
12,000 to 30,000, an average household income of $25,000 or more, and which are
located at least 30 miles from the nearest regional mall. Such locations
generally face limited competition from national retailers. In addition to
satisfying the above criteria, only those markets that management believes have
the potential to exceed certain minimum sales and profitability standards and
have available, suitable, low cost real estate are selected for new store
openings.
In opening a new store, the Company's investment consists primarily of
inventory, net of vendor payables, furniture, fixtures, equipment and leasehold
improvements and pre-opening expenses. Generally, the Company expects to invest
approximately $700,000 in a new store, including: (i) inventory of $450,000 less
vendor payables of $110,000; (ii) furniture, fixtures, equipment and leasehold
improvements of $300,000; and (iii) pre-opening expenses of $60,000. The average
investment in stores opened during 1996 was slightly lower due to the lower
investment required to convert the Uhlmans stores.
STRATEGIC ACQUISITIONS. The Company believes that it can benefit from
strategic acquisitions by: (i) applying its buying and merchandising
capabilities, sales promotion techniques and customer service methods; (ii)
introducing its proven management systems; and (iii) consolidating overhead
functions. See "Risk Factors--Future Growth Strategy" and "Risk
Factors--Acquisition of CR Anthony." This strategy has been successfully
demonstrated by the Company's acquisition of 45 stores from Beall-Ladymon in
1994 and the subsequent reopening of the stores in the first quarter of 1995
under the Stage name. In 1993, the year prior to their acquisition, the
Beall-Ladymon stores generated sales of approximately $53.4 million. During the
first four full quarters operated by Stage (the 12 months ended August 3, 1996),
the newly opened Stage stores in the same locations generated sales of $95.0
million, an increase of 78%. Over the same period, store contribution more than
doubled.
In June 1996, the Company acquired Uhlmans. These stores were of similar
size and merchandise content to the Company's existing stores and were
compatible with the Company's retailing concept and growth strategy. For 1995,
Uhlmans had net sales of $59.7 million and operating income of $2.2 million. For
the five full months since the merchandising function of Uhlmans was completely
integrated (December 1996 through April 1997), sales at the Uhlmans store have
increased 10.4% over the comparative period in the prior year. The Company
believes that certain changes to the merchandise mix and an increase in
proprietary credit card-based sales will provide further improvement over
Uhlmans historical results.
On June 26, 1997, the Company acquired CR Anthony. CR Anthony was a
retailer of brand name family apparel in small markets and operated 248 stores
as of June 25, 1997 under the names "Anthonys" and "Anthonys Limited." The
Company intends to convert the "Anthonys" and "Anthonys Limited" stores to the
Company's format under its "Stage" and "Bealls" trade names during the remainder
of 1997 and 1998. The Acquisition is expected to strengthen the Company's
position as a leading retailer of national brand name apparel in small markets
throughout the central and midwestern United States where CR Anthony had been
operating for over 70 years. For the fiscal year ended February 1, 1997, CR
Anthony's net sales and EBITDA were $288.4 million and $14.0 million,
respectively. See CR Anthony's Consolidated Financial Statements.
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Similar to the Company, CR Anthony's operating strategy is to offer brand
name apparel and footwear for the entire family at competitive prices. CR
Anthony's stores are located in 16 states, with the highest concentrations in
Texas, Oklahoma, Kansas and New Mexico. The majority of CR Anthony's stores are
located in rural communities with populations under 30,000 and are between 8,000
and 23,100 selling square feet in size, with 92 stores that are less than 10,000
selling square feet.
The Company believes that the Acquisition is consistent with its growth
strategy to expand as a retailer of moderately priced, national brand name
apparel into underserved, small markets through both organic store development
and strategic acquisitions. The Acquisition provides an opportunity for the
Company to accelerate its expansion program in existing markets and expand its
presence in new markets. The Company believes that the Acquisition is attractive
because: (i) CR Anthony stores are located in states which are the same as or
are contiguous to states in which the Company currently operates; (ii) there are
a relatively small number of markets in which the two companies directly
overlap; (iii) a majority of the CR Anthony stores are in markets which fit the
Company's demographic profile; and (iv) a majority of the CR Anthony stores are
comparable in size to the Company's stores in similar markets.
The addition of the CR Anthony stores has not only expanded the geographic
reach of the Company, but the Company believes that there will be meaningful
synergies between the Company and CR Anthony including: (i) central overhead
cost savings; (ii) CR Anthony revenue enhancement opportunities; and (iii) CR
Anthony gross margin improvement opportunities. The Company intends to convert
the "Anthonys" and "Anthonys Limited" stores to the Company's format under its
"Stage" and "Bealls" trade names during the remainder of 1997 and 1998. The
Company expects to realize the aforementioned synergies once the integration and
conversion process is substantially complete. See "Risk Factors--Future Growth
Strategy," "Risk Factors--Acquisition of CR Anthony" and "The Acquisition."
EXPANSION TO MICROMARKETS. The Company believes that there is significant
growth potential targeting communities with populations from 4,000 to 12,000
("micromarkets") using a scaled-down, further edited version of the Company's
small market format. This avenue for growth would be designed to capitalize on
the Company's historically favorable operating experience in markets of this
size. The Company believes that it can successfully operate in micromarkets
because: (i) the Company can tailor its existing successful small market store
model to the appropriate size for these micromarkets (approximately 10,000
selling square feet and smaller); and (ii) micromarkets are generally
characterized by lower levels of competition and lower labor and occupancy costs
compared to small markets. The Company has identified approximately 1,200
potential micromarkets in the central United States and contiguous states which
meet these criteria.
COMPANY OPERATIONS
MERCHANDISE PURCHASING AND ALLOCATION. The Company offers a select
assortment of quality, moderately priced soft goods, which are divided into
departments including misses, women's, men's, boys, juniors, children's,
intimate, petites, accessories, cosmetics, fragrances, gifts and footwear
departments. Merchandise mix may vary significantly from store to store to
accommodate differing demographic factors. The Company modifies its assortments
to focus on merchandise its buyers expect will have the broadest appeal to its
targeted customers based upon sales analyses and individual store attributes.
The Company purchases merchandise from a vendor base of over 2,000
suppliers. The Company's leading vendors for 1996 were Levi Strauss, Liz
Claiborne, Haggar Apparel, Guess, Hanes, Nike, Chorus Line, Parson Place and
Reebok. The Company was one of Levi Strauss's top ten customers in 1996. No one
supplier accounted for more than 9% of the Company's 1996 purchases. The Company
is also a member of the cooperative buying service AMC, and as such is entitled
to make purchases of imported merchandise for its private label program. The
membership provides the Company with group purchasing opportunities. Private
label products result in better gross margins for the Company and excellent
value for the customer as a result of the lower cost of such apparel as compared
to branded items in the same categories. Private label purchases were
approximately 10%, 11% and 9% of total purchases in 1994, 1995 and 1996,
respectively. The Company currently intends to keep private label merchandise
sales below 15% of total sales in order to focus on sales of branded
merchandise.
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Set forth below is certain information regarding the percentage of net
sales by major merchandise departments for the Company for 1995 and 1996:
DEPARTMENT 1995 1996
- ---------------------- --------------- ---------------
Men's/Young Men 22% 22%
Misses Sportswear 15 16
Juniors 13 12
Accessories & Gifts 9 9
Children 9 9
Shoes 8 9
Intimate 6 5
Special Sizes 5 5
Cosmetics 5 5
Misses Dresses 4 4
Boys 3 3
Furs & Coats 1 1
--------------- ---------------
100% 100%
The Company's integrated merchandising systems are designed to provide its
buyers with the information and analytical support needed to maximize
efficiency, increase sales, reduce markdowns and increase inventory turnover
through better inventory management. These systems include, among others: (i) an
automated merchandise, financial planning and allocation system which recognizes
the attributes and current merchandise needs of each store; (ii) a staple stock
replenishment system to ensure the Company is in stock on basic items such as
hosiery, foundation garments, dress shirts and jeans; (iii) markdown and
merchandise transfer analysis; and (iv) an assortment planning system which
enables the Company to closely tailor the merchandise assortment in each store
based on local demographics and historical trends and automatically allocate
merchandise accordingly. In addition, electronic point-of-sale ("POS") terminals
at each store record and transmit to the Company's corporate headquarters a real
time, full accounting of each day's sales by transaction and item. The Company
utilizes its information systems to monitor slow and fast moving merchandise for
the purpose of enabling the Company to transfer slower moving merchandise from
one store to another store where such merchandise is selling more rapidly. The
Company believes that its inventory transfer system improves in-stock positions,
increases sales and reduces markdowns, thereby increasing profit margins.
CREDIT SERVICES. The Company offers its own private label credit card
program, which enhances the Company's relationship with core customers by
tailoring credit availability to individual customers and facilitating frequent
communication of promotional offering. The number of private label credit
accounts and dollar volume of charges reflects an important element in the
Company's marketing strategy. The Company believes that private label credit
card holders shop more regularly and purchase more merchandise than customers
who pay cash or use bankcards. In addition, the Company maintains a database of
all proprietary charge purchases of these customers.
The Company believes that this data base is a significant competitive
advantage over competitors who lack such programs, allowing the Company to
target promotional material, via direct mail, to its regular customers. At
February 1, 1997, there were more than 1.6 million active accounts. Private
label credit card purchases generated approximately 53% of net sales in 1996.
The Company seeks to expand the volume of such credit card purchases through a
marketing strategy emphasizing: (i) direct mail of promotional materials to
existing cardholders to communicate new merchandise offerings; (ii) promotion of
customer incentive programs; and (iii) the issuance of new credit through the
opening of new accounts and extension of credit on existing accounts. It is the
Company's policy to expand the number and use of private label credit card
accounts on a controlled basis by utilizing computerized systems such as
point-scoring for approving new accounts and behavioral scoring for monitoring
account performance and approving additional purchases.
The Company administers its private label credit card program through a
dedicated in-house facility and staff located in Jacksonville, Texas. The
Company's internally developed, fully computerized and highly automated credit
systems analyze customer payment histories, automatically approve or reject new
sales at point of sale and enable account representatives to efficiently manage
delinquent account collections.
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MANAGEMENT INFORMATION SYSTEMS. In addition to its merchandising systems
described above, the Company relies on proprietary management information
systems to maximize productivity and minimize costs in the other labor-intensive
areas of its business, including distribution, personnel management, credit and
accounting. In each store, the Company's POS system uses bar code scanning and
includes electronic credit and check authorization. The Company has made
substantial investments in its systems and utilizes a central mainframe computer
to coordinate store level information and to support almost every aspect of the
business. By linking the corporate headquarters with each store, the Company's
systems allow the merchandising department to track sales of all items at all
stores at any time and enable immediate POS credit approval for the use of
private label credit cards. These systems have enabled the Company to better
manage and plan its inventory while reducing costs and have contributed to the
Company's relatively high operating margins.
DISTRIBUTION. The Company's 450,000 square foot automated and centralized
distribution center in Jacksonville, Texas enables it to distribute most
merchandise within 48 hours of receipt and has the current capacity (with
minimal incremental investment) to support in excess of 1,000 stores. The
Company's centralized distribution system results in more efficient distribution
costs per unit, lower freight costs and reduced accounts payable processing
costs than certain of the Company's competitors. In 1995, the Company entered
into an arrangement with a major freight forwarder for the delivery of
merchandise from the distribution center to all of the Company's stores on a
daily basis. This arrangement is a more cost-efficient method of distribution
than the Company's previous method of multiple common carriers. Distribution
expenses, net of handling fees charged to vendors, were less than 1% of net
sales in each of 1995 and 1996, which the Company believes is below industry
averages.
COMPETITION
The retail apparel business is highly competitive. Retailers generally
compete on the basis of convenience of location, merchandise selection, service
and price. Although competition varies widely from market to market, the Company
faces substantial competition, particularly in metropolitan markets, from
national, regional and local department and specialty stores. Some of the
Company's competitors are considerably larger than the Company and have
substantially greater financial and other resources. The Company believes that
its distinctive retail concept, combined with its emphasis on operating systems
and technology, distinguishes it from department store and specialty store
competitors, especially in small markets. The Company believes that its
knowledge of small markets has enabled it to establish a strong franchise in
those markets.
EMPLOYEES
During 1996, the Company employed an average of 9,606 full and part-time
employees at all of its locations, of which 1,165 were salaried and 8,441 were
hourly. The Company's central office (which includes corporate, credit and
distribution center offices) employed an average of 337 salaried and 679 hourly
employees during 1996. In its stores during 1996, the Company employed an
average of 828 salaried and 7,762 hourly employees. Such averages will vary
during the year as the Company traditionally hires additional employees and
increases the hours of part-time employees during peak seasonal selling periods.
There are no collective bargaining agreements in effect with respect to any of
the Company's employees. The Company believes that relationships with its
employees are good. During 1996, CR Anthony employed approximately 2,000
full-time employees and 950 part-time employees.
PROPERTIES
The Company's corporate headquarters is located in a 130,000 square foot
building in Houston, Texas. The Company leases the building and most of the land
at its Houston facility. The Company owns its 450,000 square foot distribution
center and its credit department facility, both located in Jacksonville, Texas.
See Note 6 to the Consolidated Financial Statements.
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The Company and CR Anthony operate stores located in the following states:
NUMBER OF
CR ANTHONY
NUMBER OF COMPANY STORES(1) STORES
------------------------------ ----------
FEBRUARY 3, FEBRUARY 1, MAY 3, MAY 3,
1996 1997 1997 1997
------ ------ ------ ------
LOCATION
- ---------------------------------
Alabama ......................... 3 3 3 --
Arizona ......................... -- 3 3 1
Arkansas ........................ 12 12 12 11
California ...................... -- -- -- 1
Colorado ........................ 13 5 5 3
Illinois ........................ 5 12 12 --
Indiana ......................... -- 6 7 --
Iowa ............................ 3 6 6 4
Kansas .......................... 2 3 4 19
Louisiana ....................... 26 27 29 11
Michigan ........................ -- 6 6 --
Minnesota ....................... -- 1 3 --
Mississippi ..................... 6 6 7 --
Missouri ........................ 4 6 6 7
Montana ......................... -- -- -- 12
Nebraska ........................ -- 1 1 5
New Mexico ...................... 8 9 9 19
North Dakota .................... -- -- -- 2
Ohio ............................ -- 26 26 --
Oklahoma ........................ 13 13 13 60
South Dakota .................... -- 2 2 2
Texas ........................... 161 168 172 70
Wisconsin ....................... -- -- 1 --
Wyoming ......................... 1 -- -- 11
------ ------ ------ ------
Total........................... 257 315 327 238
====== ====== ====== ======
- ---------------------------
(1) Excluding the stores included in the Store Closure Plan.
Company stores range in size from 4,000 to 46,000 selling square feet with
the majority between 12,000 and 30,000 selling square feet. In general, Bealls
stores are located in small markets primarily in Texas, Oklahoma and New Mexico,
Stage stores are located in small markets in states other than Texas, Oklahoma
and New Mexico and Palais Royal stores are located in metropolitan Houston and
suburban areas. These stores are primarily located in strip shopping centers.
All store locations are leased except for three Bealls stores and one Stage
store that are owned. Most leases provide for a base rent amount plus contingent
rentals, generally based upon a percentage of gross sales.
Some of the buildings which the Company owns and leases in connection with
its business may have been constructed with asbestos-containing materials. In
the past, the Company has owned underground storage tanks. The Company believes
that it is in substantial compliance with federal, state and local environmental
provisions and that it currently has no material environmental liabilities.
LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries are involved in various
litigation matters arising in the ordinary course of its business. Management
believes that none of the matters in which the Company or its subsidiaries are
currently involved, either individually or in the aggregate, is material to the
financial position, results of operations, or cash flows of the Company or its
subsidiaries.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the names, ages and all positions held by the
directors and executive officers of Stage as of July 28, 1997:
NAME AGE POSITION
---- --- --------
Carl Tooker 49 Chairman, President and Chief Executive Officer
Harry Brown 50 Executive Vice President/Chief Merchandising Officer
James Marcum 37 Executive Vice President/Chief Financial Officer
Stephen Lovell 41 Executive Vice President/Director of Stores
Ron Lucas 50 Senior Vice President/Human Resources
Joshua Bekenstein 38 Director
Harold Compton 49 Director
Robert Huth 51 Director
Richard Jolosky 62 Director
Adam Kirsch 35 Director
Peter Mulvihill 38 Director
John J. Wiesner 59 Director
Mr. Tooker joined the Company as Director, President and Chief
Operating Officer on July 1, 1993. On July 1, 1994, Mr. Tooker was appointed
Chief Executive Officer and on January 27, 1997, Mr. Tooker was elected Chairman
of the Board. Mr. Tooker succeeds Mr. Bernard Fuchs, age 70, who retired. Mr.
Tooker has 25 years of experience in the retail industry, 18 of which were spent
in the May Co. where he served as Chairman and Chief Operating Officer of
Filene's of Boston from 1988 to 1990. In 1990, Mr. Tooker joined Rich's, a
division of Federated Department Stores, Inc., as President and Chief Operating
Officer, and in 1991 Mr. Tooker was promoted to Chief Executive Officer of
Rich's where he served until joining the Company in 1993.
Mr. Brown will be joining the Company on August 4, 1997. Prior to
joining the Company, Mr. Brown was the Executive Vice President for
Merchandising, Planning and Marketing at Office Depot in Del Ray Beach, Florida
since 1995. Mr. Brown served as the Executive Vice President, General
Merchandise Manager over all apparel, accessories and cosmetics at Marshall's
from 1990-1995, and as Sr. Vice President of Merchandising for both Men's and
Women's apparel at Macy's, a division of Federated Department Stores, Inc.
Mr. Marcum joined the Company in June 1995 as Executive Vice President
and Chief Financial Officer. Prior to joining the Company, Mr. Marcum held
various positions at the Melville Corporation where he was employed since 1983.
Mr. Marcum served as Treasurer of Melville Corporation from 1986 to 1989, Vice
President and Controller of Marshalls, Inc., a division of the Melville
Corporation, from 1989 to 1990 and from 1990 to 1995 as Senior Vice President
and Chief Financial Officer of Marshalls, Inc. From 1980 to 1983, Mr. Marcum was
employed at Coopers and Lybrand L.L.P.
Mr. Lovell joined the Company in June 1995 as Executive Vice President
and Director of Stores. Before joining the Company, Mr. Lovell served in various
positions at Hit or Miss, a division of TJX Companies, where he was employed
since 1980 and where he served since January 1987 as Senior Vice President and
Director of Stores.
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<PAGE>
Mr. Lucas joined the Company in July 1995 as Senior Vice President,
Human Resources. Between 1987 and 1995, Mr. Lucas served as Vice President,
Human Resources at two different divisions of Limited, Inc., The Limited Stores
Division and Lane Bryant. Previously, he spent seventeen years at the Venture
Stores Division of May Co. where from 1985 to 1987 he was Vice President,
Organization Development.
Mr. Bekenstein has been a Director since December 1988 and was Vice
Chairman of the Board of Directors and Chief Financial Officer of the Company
from May 1992 until June 1995. In March 1996, Mr. Bekenstein resigned as Vice
Chairman. Mr. Bekenstein continues to serve as a Director. Mr. Bekenstein has
been a Managing Director of Bain Capital, Inc. since May 1993 and a General
Partner of Bain Venture Capital since its inception in 1987. Mr. Bekenstein also
currently serves on the Board of Directors of Waters Corporation.
Mr. Compton has been a Director since March 1997. Mr. Compton has
served as Executive Vice President and Chief Operating Officer of CompUSA Inc.
since January 1995. Previously, he served as Executive Vice
President-Operations, from August 1994 to January 1995. Prior to joining CompUSA
Inc., Mr. Compton served as President and Chief Operating Officer of Central
Electric Inc. from December 1993 to August 1994. Previously, Mr. Compton served
as Executive Vice President-Operations & Human Resources of HomeBase, Inc. from
1989 to 1993.
Mr. Huth has been a Director since March 1997. Mr. Huth has served as
President of David's Bridal from 1995 to the present. Prior to joining David's
Bridal, Mr. Huth was employed by Melville Corporation from 1987 to 1995, where
he served as Director, Executive Vice President and Chief Executive Officer.
Mr. Jolosky has been a Director since March 1997. Mr. Jolosky has
served as President of Payless ShoeSource, Inc. since 1996. Mr. Jolosky
previously served as President and Chief Executive Officer of Silverman Jewelry
Company from 1995 to 1996 and as Chief Executive Officer of the Richard Allen
Company from 1992 to 1995.
Mr. Kirsch has been a Director since June 1992 and has been a Managing
Director of Bain Capital, Inc. since May 1993 and a General Partner of Bain
Venture Capital since 1990 and was an associate and principal of Bain from 1987
to 1990. Mr. Kirsch also currently serves as a Director of Brookstone, Inc.,
Duane Reade Holding Corp., Diagnostics Holdings Inc. and the Wesley-Jessen
Corporation.
Mr. Mulvihill has been a Director since December 1988. Mr. Mulvihill
has served as a Managing Director of Oak Hill Partners, Inc. (the management
company for Acadia) since 1993. From June 1987 to 1993, Mr. Mulvihill worked for
and was associated with Rosecliff, Inc. (the predecessor of Oak Hill). Prior to
joining Rosecliff, Mr. Mulvihill was an investment banker with Drexel Burnham
Lambert Incorporated in the corporate finance department from 1985 to 1987. Mr.
Mulvihill also serves as a director of Harvest Foods, Inc., an Arkansas-based
grocery chain.
Mr. Wiesner joined the Company as Director effective July 1, 1997.
Prior to joining the Company, Mr. Wiesner held varying positions at CR Anthony,
including Chairman of the Board, Chief Executive Officer from 1987 to 1997, and
President from 1987 to 1990 and 1992 to 1995. From 1977 to 1987, Mr. Wiesner was
employed by Pamida, Inc., an operator of discount stores in the midwestern
United States, serving as Corporate Controller from 1977 to 1979, Senior Vice
President from 1979 to 1981, Senior Executive Vice President and Chief Financial
Officer from 1981 to 1985 and Vice Chairman of the Board and Chief
Administrative Officer from 1985 to 1987. Prior to joining Pamida, Inc., Mr.
Wiesner was employed for seven years by Fisher Foods, Inc., a supermarket chain,
attaining the position of Vice President and Controller.
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<PAGE>
DESCRIPTION OF NEW CREDIT AGREEMENT
In connection with the Offering, SRI entered into the New Credit
Agreement with a syndicate of financial institutions (the "Lenders") for which
Credit Suisse First Boston, an affiliate of Credit Suisse First Boston
Corporation, acted as arranger and administrative agent (the "Agent"). Stage and
all existing and future material subsidiaries of SRI (excluding SRPC) will
guarantee the borrowings under the New Credit Agreement. The New Credit
Agreement provides for the Working Capital Facility and the Expansion Facility.
The following is a summary of the material terms and conditions of the New
Credit Agreement and is subject to the detailed provisions of the New Credit
Agreement and various related documents entered into in connection with the New
Credit Agreement.
GENERAL. The New Credit Agreement consists of: (i) the $100 million
Working Capital Facility, pursuant to which SRI has the right at any time prior
to the third anniversary of the closing date of the Offering to solicit one or
more Lenders and/or new financial institutions to provide up to $25 million in
additional commitments to increase the Working Capital Facility to an amount not
to exceed in the aggregate $125 million, subject to certain conditions, of which
up to $50 million may be used for letters of credit and $10 million may be used
for a swing line facility; and (ii) the $100 million Expansion Facility.
Proceeds of the Working Capital Facility will be used to finance the working
capital and general corporate requirements of the Company, including the interim
financing of the acquisition of the receivables of CR Anthony. Proceeds of the
Expansion Facility will be used for acquisitions and general corporate purposes.
Each of the Working Capital Facility and Expansion Facility are available in
multiple drawings from time to time on and following the closing of the Offering
and amounts borrowed and repaid may be reborrowed until the fifth anniversary of
the closing date of the Offering (the "Final Maturity Date"); provided that in
addition to the mandatory reductions in commitments described below, the
commitments under the Expansion Facility will be reduced by $25 million on the
fourth anniversary of the closing of the Offering by the amount, if any,
necessary so that total reductions in the amount of the commitments under the
Expansion Facility (taking into account all mandatory reductions) will have been
at least $25 million. The Working Capital Facility (other than the amount of the
excess thereof over $100 million after giving effect to any increase thereof)
must be reduced to $0.0 million (excluding issued and undrawn letters of credit)
for a minimum of 45 consecutive days of each rolling 12 month period.
INTEREST RATES; FEES. Each of the Working Capital Facility and
Expansion Facility may be maintained from time to time, at the Company's option,
as (a) Base Rate Loans (as defined in the New Credit Agreement) which bear
interest at the Base Rate plus the applicable Margin Percentage (each as defined
in the New Credit Agreement) or (b) Eurodollar Rate Loans (as defined in the New
Credit Agreement) bearing interest at the Eurodollar Rate (adjusted for
reserves) as determined by the Agent for the applicable interest period, plus
the applicable Margin Percentage (as defined in the New Credit Agreement). The
initial Margin Percentage for Eurodoller loans shall be per annum rate equal to
2.00%, and the initial Margin Percentage for Base Rate Loans shall be a per
annum rate equal to 1.00%. The Margin Percentage will be determined from time to
time based on the Adjusted Leverage Ratio (as defined in the New Credit
Agreement).
Interest on Base Rate Loans are payable quarterly in arrears on the
last business day of each quarter. Eurodollar Rate Loans may have 1, 2, 3 and 6
month interest periods. Interest on Eurodollar Rate Loans are payable in arrears
at the end of the applicable interest period and every three months where the
applicable period exceeds three months.
SRI pays a commitment fee on the unutilized commitments of each of the
Working Capital Facility and Expansion Facility. This fee accrues from the date
of consummation of the Offering to and including the Final Maturity Date
quarterly in arrears. The amount of the commitment fee will be determined based
on the Adjusted Leverage Ratio (as defined in the New Credit Agreement), and
will range from 0.25% to 0.50% per annum.
With respect to standby letters of credit issued pursuant to the
Working Capital Facility, SRI will pay a fee equal to the applicable Margin
Percentage for Eurodollar Rate Loans less 0.25% on the aggregate outstanding
stated amount of such letters of credit and with respect to documentary letters
of credit issued pursuant to the Working Capital Facility, SRI will pay a fee
equal to the then applicable Margin Percentage for Eurodollar Loans less 0.75%
(and in no event less than 0.75% per annum) on the aggregate outstanding stated
amount of such letters of credit, and in each case SRI will pay such other fees
as may separately be agreed between SRI and the applicable issuing lender.
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<PAGE>
PREPAYMENTS; MANDATORY PREPAYMENTS. The New Credit Agreement will
terminate on the Final Maturity Date. Amounts outstanding under the Working
Capital Facility and Expansion Facility shall be due in full and such
commitments shall expire on the Final Maturity Date. The Expansion Facility is
subject to the following mandatory prepayments, subject to a maximum Expansion
Facility reduction of 50%: (i) 50% of the net cash proceeds of Indebtedness (as
defined in the New Credit Agreement), other than certain Indebtedness permitted
to be incurred thereunder, is rated BBB/Baa2 or better; (ii) 50% of the net cash
proceeds of an equity issuance by the Company (excluding any issuance of equity
by the Company substantially concurrent with an acquisition to fund such
acquisition) if the Adjusted Leverage Ratio is greater than 3.5:1; (iii) 75% of
Excess Cash Flow (as defined in the New Credit Agreement) if the Adjusted
Leverage Ratio is greater than 3.5:1 and 50% of Excess Cash Flow if the Adjusted
Leverage Ratio is less than or equal to 3.5:1 and greater than 2.5:1; (iv) 100%
of net cash proceeds from Asset Sales (as defined in the New Credit Agreement),
excluding Eligible Asset Sales (as defined in the New Credit Agreement) subject
to reinvestment conditions contained therein shall be applied to the Expansion
Facility; and (v) 100% of net cash proceeds from insurance receipts (subject to
certain reinvestment provisions) shall be applied to the Expansion Facility.
COLLATERAL. All amounts owing under the New Credit Agreement are
secured by: (i) a first priority (subject to permitted liens and encumbrances)
perfected security interest in SRI's 450,000 square foot distribution center
located in Jacksonville, Texas, including equipment located therein, in Stage's,
SRI's and each other future guarantor's, if any, intangibles, in the receivables
of CR Anthony in the event proceeds of the New Credit Agreement are used to
purchase such receivables, provided that a security interest in such receivables
will be released upon the sale of the receivables to a receivables trust upon
terms and conditions no worse than those of the Accounts Receivable Program and
the application of all the proceeds of such sale to the payment of the Working
Capital Facility; and (ii) a pledge of SRPC's common stock, the common stock of
SRI and the stock of all existing and future material subsidiaries of Stage and
SRI.
COVENANTS. Stage, SRI and each of their existing and future
subsidiaries, other than SRPC, are subject to certain affirmative and negative
covenants contained in the New Credit Agreement, including without limitation
covenants that restrict, subject to specified exceptions: (i) the incurrence of
additional indebtedness and other obligations and the granting of additional
liens; (ii) mergers, acquisitions, investments and acquisitions and dispositions
of assets; (iii) the incurrence of capitalized lease obligations; (iv)
dividends; (v) prepayments or repurchase of other indebtedness and amendments to
certain agreements governing indebtedness, including the Indentures, the
Exchange Notes and the Accounts Receivable Program; (vi) engaging in
transactions with affiliates and formation of subsidiaries; (vii) capital
expenditures; (viii) the use of proceeds; and (ix) changes of lines of business.
There are also covenants relating to compliance with ERISA and environmental and
other laws, payment of taxes, maintenance of corporate existence and rights,
maintenance of insurance and interest rate protection, and financial reporting.
Certain of these covenants are more restrictive than those set forth in the
Indenture. In addition, the New Credit Agreement requires the Company to
maintain compliance with certain specified financial covenants, including
covenants relating to minimum interest coverage, minimum fixed charge coverage
and maximum Adjusted Leverage Ratio.
EVENTS OF DEFAULT. The New Credit Agreement also includes customary
events of default, including, without limitation, a default in the event of a
change of control of the Company and a default under the Accounts Receivable
Program. The occurrence of any such events of default could result in
acceleration of the Company's obligations under the New Credit Agreement and
foreclosure on the collateral securing such obligations, which could have a
material adverse effect on holders of the Exchange Notes.
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DESCRIPTION OF THE EXCHANGE NOTES
The Series B 8 1/2% Senior Notes due 2005 (the "Senior Exchange Notes")
are to be issued pursuant to the Indenture, dated as of June 17, 1997 (the
"Senior Notes Indenture"), among Stage, SRI and State Street Bank and Trust
Company as trustee (the "Senior Notes Trustee"). The Series B 9% Senior
Subordinated Notes (the "Senior Subordinated Exchange Notes" and, together with
the Senior Exchange Notes, the "Exchange Notes") are to be issued pursuant to
the Indenture, dated as of June 17, 1997 (the "Senior Subordinated Notes
Indenture" and, together with the Senior Notes Indenture, the "Indentures"),
among Stage, SRI and State Street Bank and Trust Company, as trustee (the
"Senior Subordinated Notes Trustee" and, together with the Senior Notes Trustee,
the "Trustees"). The following is a summary of the material provisions of the
Indentures. This summary does not purport to be complete and is subject to and
is qualified in its entirety by reference to all the provisions of the Notes and
the Indentures (including provisions made part of the Indentures by reference to
the Trust Indenture Act of 1939, as amended), including the definitions therein
of terms not defined herein. Certain terms used herein are defined below under
"-- Certain Definitions." Copies of the forms of the Indentures and the
Registration Rights Agreement are available as set forth under "Available
Information." For purposes of this section, references to the "Senior and Senior
Subordinated Notes" include the Exchange Notes and the Notes.
GENERAL
The Senior Notes are, and the Senior Exchange Notes will be, senior
unsecured obligations of SRI, limited to $200 million aggregate principal
amount. The Senior Subordinated Notes are, and the Senior Subordinated Exchange
Notes will be, senior subordinated unsecured obligations of SRI, limited to $100
million aggregate principal amount. The Exchange Notes will be issued only in
fully registered form, without coupons, in denominations of $1,000 and any
multiple of $1,000. No service charge will be made for any registration of
transfer or exchange of Senior and Senior Subordinated Notes, but SRI may
require payment of a sum sufficient to cover any transfer tax or other
governmental charge payable in connection therewith. Initially, the Trustee will
act as paying agent and registrar for the Exchange Notes. The form and terms of
the Exchange Notes are the same as the form and terms of the Notes (which they
replace) except that (i) the Exchange Notes bear a Series B designation, (ii)
the Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof and (iii) the holders of
the Exchange Notes will not be entitled to certain rights under the Registration
Rights Agreement, including the provisions providing for an increase in the
interest rate on the Notes in certain circumstances relating to the timing of
the Exchange Offer, which rights will terminated when the Exchange Offer is
consummated.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes and the Senior Exchange Notes will mature on, July 15,
2005 and will bear interest at the rate per annum shown on the cover page
hereof, from June 17, 1997 or from the most recent date to which interest has
been paid as provided for, payable semi-annually on January 15 and July 15 of
each year, commencing January 15, 1998 to each Person in whose name a Senior
Note or a Senior Exchange Note is registered at the close of business on the
preceding January 1 or July 1, as the case may be.
The Senior Subordinated Notes and the Senior Subordinated Exchange
Notes will mature on July 15, 2007 and will bear interest at the rate per annum
shown on the cover page hereof from June 17 , 1997 or from the most recent date
to which interest has been paid as provided, payable semi-annually on January 15
and July 15 of each year, commencing January 15, 1998 to each Person in whose
name a Senior Subordinated Note or a Senior Subordinated Exchange Note is
registered at the close of business on the preceding January 1 or July 1, as the
case may be.
Principal of and premium, if any, and any interest on the Senior and
Senior Subordinated Notes will be payable, and the transfer of Senior and Senior
Subordinated Notes will be registrable, at the office or agency maintained by
SRI in the City of New York. In addition, payment of interest may, at the option
of SRI, be made by check mailed to the address of the person entitled thereto as
it appears in the Senior Note Register or the Senior Subordinated Note Register
or the Senior Exchange Note Register or the Senior Subordinated Exchange Note
Register, as the case may be. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
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OPTIONAL REDEMPTION
SENIOR EXCHANGE NOTES
Except as set forth in the following paragraph, the Senior Exchange
Notes will not be redeemable at the option of SRI prior to July 15, 2001.
Thereafter, the Senior Exchange Notes will be redeemable, at SRI's option, in
whole or in part from time to time, upon not less than 30 nor more than 60 days
prior notice mailed to each Holder of Senior Exchange Notes to be redeemed at
the Holder's address appearing in the Senior Exchange Note Register, at the
following redemption prices (expressed in percentages of principal amount at
maturity), plus accrued and unpaid interest to the redemption date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), if redeemed during the 12-month
period beginning July 15 of the years set forth below:
REDEMPTION
PERIOD PRICE
----------
2001............................................................. 104.250%
2002............................................................. 102.125%
2003 and thereafter.............................................. 100.000%
In addition, at any time and from time to time prior to July 15, 2000,
SRI may redeem in the aggregate up to 35% of the original principal amount of
the Senior Exchange Notes with the net cash proceeds of one or more Public
Equity Offerings, at a redemption price (expressed as a percentage of principal
amount) of 108.50% plus accrued interest to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); PROVIDED, HOWEVER, that at least $130
million aggregate principal amount at maturity of the Senior Exchange Notes,
together with the Senior Notes, must remain outstanding after each such
redemption.
SENIOR SUBORDINATED EXCHANGE NOTES
Except as set forth in the following paragraph, the Senior Subordinated
Exchange Notes will not be redeemable at the option of SRI prior to July 15,
2002. Thereafter, the Senior Subordinated Exchange Notes will be redeemable, at
SRI's option, in whole or in part from time to time, upon not less than 30 nor
more than 60 days prior notice mailed to each Holder of Senior Subordinated
Exchange Notes to be redeemed at the Holder's address appearing in the Senior
Subordinated Exchange Note Register, at the following redemption prices
(expressed in percentages of principal amount at maturity), plus accrued and
unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period beginning July 15
of the years set forth below:
REDEMPTION
PERIOD PRICE
----------
2002 ............................................................. 104.50%
2003 ............................................................. 103.00%
2004 ............................................................. 101.50%
2005 and thereafter .............................................. 100.00%
In addition, at any time and from time to time prior to July 15, 2000,
SRI may redeem in the aggregate up to 35% of the original principal amount of
the Senior Subordinated Exchange Notes with the net cash proceeds of one or more
Public Equity Offerings, at a redemption price (expressed as a percentage of
principal amount) of 109.00% plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); PROVIDED, HOWEVER,
that at least $65 million aggregate principal amount at maturity of the Senior
Subordinated Exchange Notes, together with the Senior Subordinated Notes, must
remain outstanding after each such redemption.
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NOTICES AND SELECTION
In the case of any partial redemption, selection of the Senior and
Senior Subordinated Notes for redemption will be made by the appropriate Trustee
on a pro rata basis, by lot or by such other method as such Trustee in its sole
discretion shall deem to be fair and appropriate, although no Senior and Senior
Subordinated Notes of $1,000 in principal amount at maturity or less shall be
redeemed in part. If any Senior and Senior Subordinated Notes is to be redeemed
in part only, the notice of redemption relating to such Senior or Senior
Subordinated Note shall state the portion of the principal amount at maturity
thereof to be redeemed. A new Senior and Senior Subordinated Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Senior and Senior Subordinated
Note.
RANKING
As of May 3, 1997, on a pro forma basis after giving effect to the
Acquisition and the Refinancing, (i) the Senior Debt of SRI, including the
Senior Exchange Notes and the obligations of SRI under the New Credit Agreement,
would have been approximately $209.8 million in principal amount and (ii) the
Senior Subordinated Debt of SRI would have been approximately $100.0 million in
principal amount, including the Senior Subordinated Exchange Notes. Although the
Indentures contain limitations on the amount of additional Debt that Stage and
its Restricted Subsidiaries may Incur, under certain circumstances the amount of
such Debt could be substantial and, in any case, such Debt may be Senior Debt.
See "--Certain Covenants-- Limitation on Debt; - Limitation on Restrictions on
Distributions from Restricted Subsidiaries."
SENIOR EXCHANGE NOTES
The indebtedness evidenced by the Senior Exchange Notes and the Senior
Exchange Notes Guaranties will constitute senior unsecured obligations of SRI or
Stage, as the case may be, will rank PARI PASSU in right of payment with all
existing and future Senior Debt of SRI and Stage, as the case may be, and will
be senior in right of payment to all existing and future subordinated
indebtedness of SRI and Stage, including the Senior Subordinated Exchange Notes
and the Senior Subordinated Exchange Notes Guaranties.
SENIOR SUBORDINATED EXCHANGE NOTES
The indebtedness evidenced by the Senior Subordinated Exchange Notes
and the Senior Subordinated Exchange Notes Guaranties will constitute senior
subordinated unsecured obligations of SRI or the Guarantors, as the case may be,
will be subordinate in right of payment to all existing and future Senior Debt
of SRI or the Guarantors, as the case may be, to the extent set forth in the
Senior Subordinated Notes Indenture, and will rank PARI PASSU in right of
payment with all existing and future Senior Subordinated Debt of SRI or the
Guarantors, as the case may be, and will be senior in all respects to all
existing and future subordinated debt of SRI or the Guarantors, as the case may
be. SRI and Stage have agreed in the Senior Subordinated Notes Indenture that
they will not, and that they will not permit any Guarantor to, Incur, directly
or indirectly, any Debt that is subordinate or junior in ranking in right of
payment to its Senior Debt unless such Debt is Senior Subordinated Debt or is
expressly subordinated in right of payment to Senior Subordinated Debt.
SRI may not pay principal of, premium (if any) or interest on, the
Senior Subordinated Exchange Notes or make any deposit pursuant to the
provisions described under "Defeasance" below and may not repurchase, redeem or
otherwise retire any Senior Subordinated Exchange Notes (collectively, "pay the
Senior Subordinated Exchange Notes") if (i) any Designated Senior Debt is not
paid when due or (ii) any other default on Designated Senior Debt occurs and the
maturity of such Designated Senior Debt is accelerated in accordance with its
terms unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Designated Senior Debt has been paid in
full. However, SRI may pay the Senior Subordinated Exchange Notes without regard
to the foregoing if SRI and the Senior Subordinated Notes Trustee receive
written notice approving such payment from the Representative of the Designated
Senior Debt with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing and
no other event of the type described in such clause (i) or (ii) has occurred and
is continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the second
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preceding sentence) with respect to any Designated Senior Debt pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, SRI may not pay the Senior
Subordinated Exchange Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Senior Subordinated Notes Trustee (with a
copy to SRI) of written notice (a "Blockage Notice") of such default from the
Representative of the holders of such Designated Senior Debt specifying an
election to effect a Payment Blockage Period and ending 179 days thereafter (or
earlier if such Payment Blockage Period is terminated (i) by written notice to
the Senior Subordinated Notes Trustee and SRI from the Person or Persons who
gave such Blockage Notice, (ii) because the default giving rise to such Blockage
Notice is no longer continuing or (iii) because such Designated Senior Debt has
been repaid in full). Notwithstanding the provisions described in the
immediately preceding sentence, unless the holders of such Designated Senior
Debt or the Representative of such holders have accelerated the maturity of such
Designated Senior Debt, SRI may resume payments on the Senior Subordinated Notes
after the end of such Payment Blockage Period. The Senior Subordinated Exchange
Notes shall not be subject to more than one Payment Blockage Period in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Debt during such period; PROVIDED, HOWEVER, that if a
Blockage Notice is delivered by holders of Designated Senior Debt other than the
Bank Debt, holders of the Bank Debt shall not be prohibited from delivering a
Blockage Notice during the succeeding 360-day period.
Upon any payment or distribution of the assets of SRI upon a total or
partial liquidation or dissolution or reorganization of or similar proceeding
relating to SRI or its property, the holders of Senior Debt will be entitled to
receive payment in full of such Senior Debt before the holders of the Senior
Subordinated Notes are entitled to receive any payment, and until the Senior
Debt is paid in full, any payment or distribution to which holders of the Senior
Subordinated Notes would be entitled but for the subordination provisions of the
Senior Subordinated Notes Indenture will be made to holders of such Senior Debt
as their interests may appear. If a distribution is made to holders of the
Senior Subordinated Notes that, due to the subordination provisions, should not
have been made to them, such holders are required to hold it in trust for the
holders of Senior Debt and pay it over to them as their interests may appear.
If payment of the Senior Subordinated Exchange Notes is accelerated
because of an Event of Default, SRI or the Senior Subordinated Notes Trustee
shall promptly notify the holders of Designated Senior Debt or the
Representative of such holders of the acceleration.
By reason of the subordination provisions contained in the Senior
Subordinated Notes Indenture, in the event of insolvency, creditors of SRI or a
Guarantor who are holders of Senior Debt of SRI or such Guarantor, as the case
may be, may recover more, ratably, than the holders of the Senior Subordinated
Exchange Notes, and creditors of SRI who are not holders of Senior Debt may
recover less, ratably, than holders of Senior Debt and may recover more,
ratably, than the holders of the Senior Subordinated Exchange Notes.
The terms of the subordination provisions described above will not
apply to payments from money or the proceeds of U.S. Government Obligations held
in trust by the Senior Subordinated Notes Trustee for the payment of principal
of and interest on the Senior Subordinated Exchange Notes pursuant to the
provisions described under "--Defeasance" so long as such deposit shall not have
violated the terms of any Senior Debt.
GUARANTIES
Stage and Specialty NV and any Person that shall become a Restricted
Subsidiary of Stage or SRI after the Issue Date (the "Subsidiary Guarantors")
will unconditionally guarantee on a joint and several basis the payment and
performance by SRI of (i) SRI's obligations under the Senior Exchange Notes on a
senior unsecured basis (the "Senior Notes Guaranties") and (ii) SRI's
obligations under the Senior Subordinated Exchange Notes on a senior
subordinated unsecured basis (the "Senior Subordinated Notes Guaranties" and,
together with the Senior Notes Guaranties, the "Notes Guaranties") and will pay
all expenses (including, without limitation, fees and disbursements of counsel)
paid or incurred by the Trustees or the Holders in enforcing their rights under
the Senior and Senior Subordinated Notes Guaranties.
The Senior Notes Guaranties will be unsecured senior obligations of the
Guarantors and will rank PARI PASSU with future senior unsecured indebtedness of
the Guarantors. The Senior Subordinated Notes Guaranties will be unsecured
senior subordinated obligations of the Guarantors and will rank PARI PASSU with
future senior subordinated
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unsecured indebtedness of the Guarantors. The Senior Subordinated Notes
Guaranties will, to the extent set forth in the Senior Subordinated Notes
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Debt of such Guarantor and will be subject to the rights of holders
of Designated Senior Debt of such Guarantor to initiate blockage periods upon
terms substantially comparable to the subordination of the Senior Subordinated
Exchange Notes to all Senior Debt of SRI. The principal asset of Stage is all of
the outstanding shares of common stock of SRI, and virtually all of the
operations of Stage are conducted through SRI.
The obligations of Subsidiary Guarantors are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary and after giving effect to any collections from
or payments made by or on behalf of any other Subsidiary in respect of the
obligations of such other Subsidiary under its Notes Guaranties or pursuant to
its contribution obligations under the Indentures, result in the obligations of
such Subsidiary under its Notes Guaranties not constituting a fraudulent
conveyance or fraudulent transfer under federal, state or foreign law. Each such
Subsidiary Guarantor that makes a payment or distribution of more than its
proportionate share under a Notes Guaranty shall be entitled to a contribution
from each other such Subsidiary Guarantor which has not paid its share of such
payment or distribution.
Pursuant to the Indentures, a Subsidiary Guarantor may consolidate
with, merge with or into, or transfer all or substantially all its assets to any
other Person to the extent described below under "--Merger and Consolidation";
PROVIDED, HOWEVER, that if such other Person is not Stage or SRI, such
Subsidiary Guarantor's obligations under its Notes Guaranties must be expressly
assumed by such other Person. However, upon the sale or other disposition
(including by way of consolidation or merger) of a Subsidiary Guarantor or the
sale or disposition of all or substantially all the assets of a Subsidiary
Guarantor (in each case other than to Stage or SRI or an Affiliate of Stage or
SRI) permitted by the Indentures including any sale pursuant to foreclosure on a
pledge of the stock of such Subsidiary Guarantor securing the Bank Debt in
accordance with the applicable provisions of the Uniform Commercial Code, such
Subsidiary Guarantor will be released and relieved from all its obligations
under its Notes Guaranties.
Although holders of the Senior and Senior Subordinated Notes will be
direct creditors of the Guarantors by virtue of the Notes Guaranties, existing
or future creditors of Subsidiary Guarantors could attempt to avoid the relevant
Notes Guaranties, in whole or in part, under fraudulent conveyance laws. To the
extent any such Guaranty is avoided as a fraudulent conveyance or held
unenforceable for any other reason, the claims of the holders of the Senior and
Senior Subordinated Notes against a Subsidiary who is not a valid Guarantor
would be subject to the prior payment of all liabilities of that Subsidiary. In
addition, the claims of holders of the Senior and Senior Subordinated Notes
against any Subsidiary that is not required to become a Guarantor will be
subject to the prior payment of all liabilities of that Subsidiary. As of May 3,
1997, after giving pro forma effect to the Acquisition and the Refinancing, the
amount of liabilities (consisting of Debt and payables) of Subsidiaries that are
not Guarantors would have been approximately $34.1 million.
BOOK-ENTRY, DELIVERY AND FORM
The Senior and Senior Subordinated Notes were issued in the form of
Global Notes except as described below. The Global Notes will be deposited with,
or on behalf of, the Depositary and registered in the name of the Depositary or
its nominee. Except as set forth below, the Global Notes may be transferred, in
whole and not in part, only to the Depositary or another nominee of the
Depositary. Investors may hold their beneficial interests in the Global Notes
directly through the Depositary if they have an account with the Depositary or
indirectly through organizations which have accounts with the Depositary.
Senior and Senior Subordinated Notes that are issued as described below
under "-- Certificated Notes" will be issued in definitive form. Upon the
transfer of a Senior and Senior Subordinated Note in definitive form, such
Senior and Senior Subordinated Note will, unless the applicable Global Note has
previously been exchanged for Senior and Senior Subordinated Notes in definitive
form, be exchanged for an interest in the applicable Global Note representing
the principal amount of Senior and Senior Subordinated Notes being transferred.
The Depositary has advised SRI as follows: The Depositary is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the
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meaning of the New York Uniform Commercial Code and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of institutions that have accounts
with the Depositary ("participants") and to facilitate the clearance 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 (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. 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,
whether directly or indirectly.
Upon the issuance of the Global Notes, the Depositary will credit, on
its book-entry registration and transfer system, the principal amount of Senior
and Senior Subordinated Notes represented by such Global Notes to the accounts
of participants. The accounts to be credited shall be designated by the Initial
Purchasers of such Senior and Senior Subordinated Notes. Ownership of beneficial
interests in the Global Notes will be limited to participants or persons that
may hold interests through participants. Ownership of beneficial interests in
the Global Notes will be shown on, and the transfer of those ownership interests
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) and such participants (with respect to the
owners of beneficial interests in the Global Notes other than participants). The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer or pledge beneficial interests in the
Global Notes.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Notes, the Depositary or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Senior and
Senior Subordinated Notes for all purposes of such Senior and Senior
Subordinated Notes and the Indentures. Except as set forth below, owners of
beneficial interests in the Global Notes will not be entitled to have the Senior
and Senior Subordinated Notes represented by the applicable Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated Senior and Senior Subordinated Notes in definitive form
and will not be considered to be the owners or holders of any Senior and Senior
Subordinated Notes under such Global Note. SRI understands that under existing
industry practice, in the event an owner of a beneficial interest in a Global
Note desires to take any action that the Depositary, as the holder of such
Global Note, is entitled to take, the Depositary would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payment of principal of and interest on Senior and Senior Subordinated
Notes represented by the Global Notes registered in the name of and held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner and holder of the Global Notes.
SRI expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the applicable Global
Note as shown on the records of the Depositary or its nominee. SRI also expects
that payments by participants to owners of beneficial interests in the Global
Notes held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. SRI
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the Global Notes for any Senior and Senior Subordinated Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between the Depositary and
its participants or the relationship between such participants and the owners of
beneficial interests in the Global Notes owning through such participants.
Unless and until it is exchanged in whole or in part for certificated
Senior and Senior Subordinated Notes in definitive form, a Global Note may not
be transferred except as a whole by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order
to facilitate transfers of interests in the Global Notes among participants of
the Depositary, it is under no obligation to perform or continue to perform such
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procedures, and such procedures may be discontinued at any time. Neither the
Trustees nor SRI will have any responsibility for the performance by the
Depositary or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Senior and Senior Subordinated Notes represented by the Global Note
are exchangeable for certificated Senior and Senior Subordinated Notes in
definitive form of like tenor as such Senior and Senior Subordinated Notes in
denominations of U.S. $1,000 and integral multiples thereof if (i) the
Depositary notifies SRI that it is unwilling or unable to continue as Depositary
for the applicable Global Note or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act, (ii) SRI in its discretion at
any time determines not to have all of the Senior and Senior Subordinated Notes
represented by the Global Notes or (iii) a default entitling the holders of the
Senior and Senior Subordinated Notes to accelerate the maturity thereof has
occurred and is continuing. Any Senior and Senior Subordinated Note that is
exchangeable pursuant to the preceding sentence is exchangeable for certificated
Senior and Senior Subordinated Notes issuable in authorized denominations and
registered in such names as the Depositary shall direct. Subject to the
foregoing, a Global Note is not exchangeable, except for a Global Note of the
same aggregate denomination to be registered in the name of the Depositary or
its nominee. In addition, such certificates will bear the legend referred to
under "Transfer Restrictions" (unless SRI determines otherwise in accordance
with applicable law) subject, with respect to such Senior and Senior
Subordinated Notes, to the provisions of such legend.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require SRI to repurchase such Holder's Senior and Senior Subordinated
Notes at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest (if any) to the date of repurchase (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date).
The occurrence of any of the following events will constitute a "Change
of Control" under the Indentures:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all shares
that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting
Stock of Stage;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of Stage (together with any new directors whose election by such Board
of Directors or whose nomination for election by the shareholders of
Stage, was approved by a majority of the directors of Stage 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 the Board of Directors
of Stage then in office;
(iii) the merger or consolidation of Stage or SRI, as the case
may be, with or into another Person or the merger of another Person
with or into Stage or SRI, as the case may be, or the sale or transfer
in one or a series of transactions of all or substantially all the
assets of Stage or SRI, as the case may be, to another Person, and, in
the case only of any such merger or consolidation, the securities of
Stage or SRI, as the case may be, that are outstanding immediately
prior to such transaction and which represent 100% of the aggregate
voting power of the Voting Stock of Stage or SRI, as the case may be,
are changed into or exchanged for cash, securities or property, unless
pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of
the surviving corporation that represent immediately after such
transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving corporation; PROVIDED, HOWEVER, that the
merger or consolidation of Stage with or into SRI or the merger or
consolidation of SRI with or into Stage shall not be deemed a Change of
Control; or
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(iv) Stage shall hold, directly or indirectly, less than 100%
of the Capital Stock of SRI or less than 100% of the Voting Stock of
SRI; and provided further, that a Change of Control shall occur if at
any time that Stage does not directly hold such Capital Stock or Voting
Stock of SRI, the entity holding such Capital Stock or Voting Stock of
SRI shall not be a Restricted Subsidiary and a Subsidiary Guarantor.
Within 30 days following any Change of Control, SRI shall mail a notice
to each Holder with a copy to the Trustees stating: (1) that a Change of Control
has occurred and that such Holder has the right to require SRI to purchase such
Holder's Senior and Senior Subordinated Notes at a purchase price in cash equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest on the relevant interest payment date);
(2) the material circumstances and facts regarding such Change of Control
(including information with respect to pro forma historical income, cash flow
and capitalization, each after giving effect to such Change of Control); (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed in the event of a Change of Control); and
(4) the instructions determined by SRI, consistent with the covenant described
hereunder, that a Holder must follow in order to have its Senior and Senior
Subordinated Notes purchased.
SRI shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Senior and Senior Subordinated Notes
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the covenant described
above, SRI shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under such covenant by
virtue thereof.
The Change of Control purchase feature is a result of negotiations
among SRI, Stage and the Initial Purchasers. Management has no present intention
to engage in a transaction involving a Change of Control, although it is
possible that SRI or Stage would decide to do so in the future. The provisions
of the Indentures relating to a Change of Control may not afford Holders
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction (including, in certain
circumstances, a transaction involving SRI's management or its affiliates) that
may adversely affect Holders, if such transaction does not constitute a Change
of Control, as defined above. Any such transaction will result in a Change of
Control only if it is the type of transaction specified by such definition.
The New Credit Agreement generally will prohibit SRI from purchasing
any Senior and Senior Subordinated Notes, and will also provide that the
occurrence of certain change of control events with respect to SRI would
constitute a default thereunder. In the event a Change of Control occurs at a
time when SRI is prohibited from purchasing Senior and Senior Subordinated
Notes, SRI could seek the consent of its lenders to the purchase of Senior and
Senior Subordinated Notes or could attempt to refinance the borrowings that
contain such prohibition. If SRI does not obtain such a consent or repay such
borrowings, SRI will remain prohibited from purchasing Senior and Senior
Subordinated Notes. In such case, SRI's failure to purchase tendered Senior and
Senior Subordinated Notes would constitute an Event of Default under the
Indentures which would, in turn, constitute a default under the New Credit
Agreement.
Future indebtedness of SRI may contain prohibitions on the occurrence
of certain events that would constitute a Change of Control or require such
indebtedness to be repurchased upon a Change of Control. Moreover, the exercise
by the holders of their right to require SRI to repurchase the Senior and Senior
Subordinated Notes could cause a default under such indebtedness, even if the
Change of Control itself does not, due to the financial effect of such
repurchase on SRI. Finally, SRI's ability to pay cash to the holders of Senior
and Senior Subordinated Notes following the occurrence of a Change of Control
may be limited by SRI's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required repurchases. The provisions under the Indentures relating to SRI's
obligation to make an offer to repurchase the Senior and Senior Subordinated
Notes as a result of a Change of Control may be waived or modified with the
prior written consent of the Holders of a majority in principal amount of the
Senior and Senior Subordinated Notes.
The Change of Control purchase feature of the Senior and Senior
Subordinated Notes may in certain circumstances make more difficult or
discourage a takeover of SRI or Stage, and, thus, removal of incumbent
management.
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CERTAIN COVENANTS
Except as otherwise specified, each of the Indentures will contain
certain covenants, including among others the ones summarized below.
LIMITATION ON DEBT. (a) Stage shall not, and shall not permit any of
its Restricted Subsidiaries to, Incur, directly or indirectly, any Debt unless
the Consolidated EBITDA Coverage Ratio at the date of such Incurrence exceeds
2.25 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), Stage and its
Restricted Subsidiaries may Incur the following Debt: (1) the Senior and Senior
Subordinated Notes; (2) Debt Incurred by Stage and its Restricted Subsidiaries
pursuant to the Working Capital Facility Provisions of the New Credit Agreement
or any other working capital facility which, when taken together with the
outstanding principal amount of all unreimbursed letters of credit and the
outstanding principal amount of all other Debt Incurred pursuant to this clause
(2), does not exceed at any time in an aggregate principal amount the greater of
(A) $125 million and (B) the sum of (i) 50% of the book value of the inventory
of Stage and its Restricted Subsidiaries and (ii) 85% of the book value of
Receivables (or interests in a Master Trust comprised of Receivables including,
without limitation, "Transferor Certificates" under the Accounts Receivable
Facility) of Stage, its Restricted Subsidiaries and any Accounts Receivable
Subsidiary, but only to the extent that such Receivables (or Master Trust
interests) are owned by Stage, any of its Restricted Subsidiaries or any
Accounts Receivable Subsidiary and may be transferred by Stage, any Restricted
Subsidiary or any Accounts Receivable Subsidiary to a third party for fair value
without the consent of existing investors in such Receivables or such Master
Trust; (3) Debt Incurred by Stage and its Restricted Subsidiaries pursuant to
the Expansion Revolving Credit Facility Provisions of the New Credit Agreement
or Debt Incurred under any other credit or loan agreement or any indenture in
each case which Refinances Debt Incurred under such Expansion Revolving Credit
Facility Provisions or any Debt that previously Refinanced such Debt in
accordance with this clause (3) during the term thereof or concurrent with the
termination thereof which, when taken together with the principal amount of all
other Debt Incurred pursuant to this clause (3), does not exceed $100 million
outstanding at any one time; (4) Debt of Stage owed to and held by a Wholly
Owned Subsidiary and Debt of a Wholly Owned Subsidiary owed to and held by Stage
or another Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent
issuance or transfer of any Capital Stock which results in such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of such Debt
(other than to a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Debt by the issuer thereof; (5) Debt of a
Restricted Subsidiary Incurred and outstanding on or prior to the date on which
such Restricted Subsidiary became a Restricted Subsidiary or was acquired by
Stage (other than Debt Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by Stage); (6) Debt of Stage and
its Restricted Subsidiaries outstanding on the Issue Date (other than Debt
described in clause (1), (2), (3), (4) or (5)); (7) Refinancing Debt in respect
of Debt Incurred pursuant to paragraph (a) or pursuant to clause (1) or (6) or
this clause (7); (8) Hedging Obligations to the extent directly related to Debt
permitted to be Incurred by Stage pursuant to the Indentures; and (9) Debt in an
aggregate principal amount which, together with all other Debt of Stage and its
Restricted Subsidiaries then outstanding (other than Debt permitted by clauses
(1) through (8) of this paragraph (b) or paragraph (a) above) does not exceed
$25 million.
(c) Notwithstanding the foregoing paragraphs (a) and (b) above, Stage
shall not, and shall not permit any Restricted Subsidiary to, Incur any Debt if
the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Debt shall be subordinated to the
applicable Senior and Senior Subordinated Notes at least to the same extent as
the Subordinated Obligations.
(d) The Senior Subordinated Notes Indenture will further provide that,
notwithstanding paragraphs (a) and (b) above, Stage shall not, and shall not
permit SRI or any Guarantor to, Incur any Debt if such Debt is subordinated or
junior in ranking to any Senior Debt, unless such Debt is Senior Subordinated
Debt or is expressly subordinated in right of payment to Senior Subordinated
Debt.
(e) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Debt meets the criteria of more than one of the
types of Debt described in paragraph (b), Stage, in its sole discretion, will
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classify such item of Debt and only be required to include the amount and type
of such Debt in one of the clauses of paragraph (b), (ii) an item of Debt may be
divided and classified in more than one of the types of debt in paragraph (b)
and (iii) Guarantees of Debt otherwise included in the determination of
particular amounts of Debt of Stage or any Restricted Subsidiary shall not also
be included.
LIMITATION ON RESTRICTED PAYMENTS. (a) Stage shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend (either in cash or property) or make any distribution on or in
respect of, or redeem, repurchase, retire or otherwise acquire, its Capital
Stock or the Capital Stock of any Restricted Subsidiary (including any payment
in connection with any merger or consolidation involving Stage) or similar
payment to the direct or indirect holders of its Capital Stock (except dividends
or distributions payable solely in its Non-Convertible Capital Stock or in
options, warrants or other rights to purchase its Non-Convertible Capital Stock
and except dividends or distributions payable to Stage or a Restricted
Subsidiary), and other than pro rata dividends or other distributions made by a
Restricted Subsidiary of Stage that is not a Wholly Owned Subsidiary to minority
shareholders (or owners of an equivalent interest in the case of a Restricted
Subsidiary that is an entity other than a corporation), (ii) purchase, redeem or
otherwise acquire or retire for value any Capital Stock of Stage or a Restricted
Subsidiary (other than such Capital Stock owned by Stage or any Wholly Owned
Subsidiary), (iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition);
(iv) make any Investment (other than a Permitted Investment) in any Person (any
such dividend, distribution, purchase, redemption, repurchase, defeasance or
other acquisition, retirement or Investment being herein referred to as a
"Restricted Payment"), if at the time Stage or such Restricted Subsidiary makes
such Restricted Payment or after giving effect thereto: (1) a Default shall have
occurred and be continuing (or would result therefrom); (2) Stage, after giving
pro forma effect to such Restricted Payment, would not be permitted to Incur at
least an additional $1.00 of Debt pursuant to paragraph (a) under "--Limitation
on Debt"; or (3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income (excluding any extraordinary or nonrecurring charges in
connection with the Refinancing and the Acquisition) accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
during which the Notes were originally issued to the end of the most recent
fiscal quarter ending at least 45 days (or, if less, the number of days after
the end of such fiscal quarter as the consolidated financial statements of Stage
shall be provided to Holders pursuant to the Indentures) prior to the date of
such Restricted Payment (or, in case such Consolidated Net Income shall be a
deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds and
aggregate Deemed Asset Value received by Stage from the issue or sale of its
Capital Stock (other than Redeemable Stock or Exchangeable Stock) subsequent to
the Issue Date (other than an issuance or sale to a Subsidiary or an employee
stock ownership plan or similar trust); (C) the amount by which Debt of Stage is
reduced on Stage's balance sheet upon the conversion or exchange (other than by
a Subsidiary) subsequent to the Issue Date, of any Debt of Stage convertible or
exchangeable for Capital Stock (other than Redeemable Stock or Exchangeable
Stock) of Stage (less the amount of any cash, or the fair value of any other
property, distributed by Stage upon such conversion or exchange); (D) an amount
equal to the sum of (i) the net reduction in Investments in Unrestricted
Subsidiaries resulting from dividends, repayments of loans or advances or other
transfers of assets, in each case to Stage or any Restricted Subsidiary from
Unrestricted Subsidiaries (except as provided in clause (xi) of the definition
of "Permitted Investment"), and (ii) the portion (proportionate to the equity
interest of Stage in such Subsidiary) of the fair market value of the net assets
of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; PROVIDED, HOWEVER, that the foregoing sum
shall not exceed, in the case of an Unrestricted Subsidiary, the amount of
Investments previously made (and treated as a Restricted Payment) by Stage or
any Restricted Subsidiary in such Unrestricted Subsidiary; and (E) $5 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated Obligations of
Stage made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of Stage (other than Redeemable Stock or
Exchangeable Stock of Stage and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan); PROVIDED, HOWEVER, that (A)
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be
excluded from clause (3)(B) of paragraph (a) above; (ii) any purchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Obligations of Stage made by exchange for, or out of the
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proceeds of the substantially concurrent sale of, Debt of Stage which is
permitted to be Incurred pursuant to the covenant described under "--Limitation
on Debt" above; PROVIDED, HOWEVER, that such purchase, redemption, defeasance or
other acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments; (iii) any purchase or redemption of
Subordinated Obligations of Stage from Net Available Cash to the extent
permitted under "--Limitation on Sales of Assets and Subsidiary Stock" below;
PROVIDED, HOWEVER, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments; (iv) dividends paid within 60
days after the date of declaration thereof if at such date of declaration such
dividend would have complied with this provision; PROVIDED, HOWEVER, that at the
time of declaration of such dividend, no other Default shall have occurred and
be continuing (or would result therefrom); and PROVIDED, FURTHER, HOWEVER, that
such dividend shall be included in the calculation of the amount of Restricted
Payments; (v) the repurchase of shares of, or options to purchase shares of,
common stock of Stage or any of its Subsidiaries from employees, former
employees, directors or former directors of Stage or any of its Subsidiaries (or
permitted transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of Directors
under which such individuals purchase or sell or are granted the option to
purchase or sell, shares of such common stock; PROVIDED, HOWEVER, that the
aggregate amount of such repurchases shall not exceed $5 million in any calendar
year; PROVIDED, FURTHER, HOWEVER, that such repurchases shall be excluded in the
calculation of the amount of Restricted Payments; (vi) the issuance of
securities or payment of cash to consummate the Acquisition in accordance with
the terms of the Merger Agreement; PROVIDED, HOWEVER, that such issuance or
payment shall be excluded in the calculation of the amount of Restricted
Payments; and (vii) Restricted Payments, in addition to those otherwise
permitted pursuant to this covenant, in an aggregate amount not to exceed $15
million; PROVIDED, HOWEVER, that such payments shall be excluded in the
calculation of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. Stage shall not, and shall not permit any Restricted Subsidiary
to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Debt or other obligation owed to Stage or any Restricted
Subsidiary, (ii) make any loans or advances to Stage or any Restricted
Subsidiary or (iii) transfer any of its property or assets to Stage or any
Restricted Subsidiary, except: (a) any encumbrance or restriction pursuant to
the New Credit Agreement or any agreement in effect on the Issue Date or
pursuant to the issuance of the Notes; (b) any encumbrance or restriction with
respect to a Restricted Subsidiary pursuant to an agreement relating to any Debt
Incurred by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by Stage (other than Debt Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by Stage), and outstanding on such date; (c) any
encumbrance or restriction pursuant to an agreement effecting a Refinancing of
Debt Incurred pursuant to an agreement referred to in clause (a) or (b) or
contained in any amendment to an agreement referred to in clause (a) or (b);
PROVIDED, HOWEVER, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment are no less favorable to the Holders than
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in such agreements; (d) any such encumbrance or restriction consisting
of customary nonassignment provisions in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease or other customary
non-assignment provisions in contracts (other than contracts that constitute
Debt) entered into in the ordinary course of business to the extent such
provisions restrict the transfer of the assets subject to such contracts; (e) in
the case of clause (iii) above, restrictions contained in security agreements or
mortgages securing Debt of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements or mortgages; (f) encumbrances or restrictions imposed by operation
of applicable law; (g) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
the Capital Stock or assets of such Restricted Subsidiary pending the closing of
such sale or disposition; and (h) any encumbrance or restriction on the sale of
Receivables arising under agreements in connection with such sales between Stage
or a Restricted Subsidiary and an Accounts Receivable Subsidiary.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) Stage shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) Stage or such Restricted Subsidiary
receives consideration at the time of such Asset Disposition at least equal to
the fair market value (including as to the value of all non-cash consideration),
as determined in good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition and at least 75% of the consideration thereof
received by Stage or such Restricted
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Subsidiary is in the form of cash or cash equivalents and (ii) an amount equal
to 100% of the Net Available Cash from such Asset Disposition is applied by
Stage or SRI (or such Restricted Subsidiary, as the case may be) (A) FIRST, to
the extent Stage or SRI elects (or is required by the terms of any Senior Debt),
to prepay, repay or purchase Senior Debt (other than Debt owed to Stage or SRI
or an Affiliate of Stage or SRI) within one year from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash; (B) SECOND, to
the extent of the balance of such Net Available Cash after application in
accordance with clause (A), at the election of Stage to the investment by Stage
or any Wholly Owned Subsidiary in assets to replace the assets that were the
subject of such Asset Disposition or an asset or assets that (as determined by
the Board of Directors) will be used in the business of Stage and the Wholly
Owned Subsidiaries existing on the Issue Date or in businesses reasonably
related thereto, in each case within the later of one year from the date of such
Asset Disposition or the receipt of such Net Available Cash; (C) THIRD, to the
extent of the balance of such Net Available Cash after application and in
accordance with clauses (A) and (B), to make an offer to purchase the applicable
Senior and Senior Subordinated Notes (and any other Debt designated by SRI
ranking PARI PASSU with such Senior and Senior Subordinated Notes) pursuant to
and subject to the conditions contained in the applicable Indenture (it being
understood that, in all cases, SRI shall be required to make an offer to
purchase the Senior Exchange Notes or Senior Notes prior to making any offer to
purchase the Senior Subordinated Exchange Notes or Senior Subordinated Notes);
and (D)FOURTH, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to (x) the acquisition
by Stage or any Wholly Owned Subsidiary of Tangible Property or (y) the
prepayment, repayment or purchase of Debt (other than any Redeemable Stock) of
Stage or SRI (other than Debt owed to an Affiliate of Stage or SRI) or Debt of
any Restricted Subsidiary (other than Debt owed to Stage or SRI or an Affiliate
of Stage or SRI), in each case within one year from the later of the receipt of
such Net Available Cash and the date the offer described in paragraph (b) below
is consummated; PROVIDED, HOWEVER, that in connection with any prepayment,
repayment or purchase of Debt pursuant to clause (A), (C) or (D) above, Stage,
SRI or such Restricted Subsidiary shall retire such Debt and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this paragraph, Stage and its Restricted Subsidiaries
shall not be required to apply any Net Available Cash in accordance with this
paragraph except to the extent that the aggregate Net Available Cash from all
Asset Dispositions which are not applied in accordance with this paragraph
exceeds $10 million. Pending application of Net Available Cash pursuant to this
paragraph, such Net Available Cash shall be invested in Permitted Investments or
to reduce loans outstanding under any working capital facility.
For the purposes of this covenant, the following are deemed to be cash
or cash equivalents: (x) the express assumption of Debt of Stage or any
Restricted Subsidiary and the release of Stage or Restricted Subsidiary from all
liability on such Debt in connection with such Asset Disposition and (y)
securities received by Stage or any Restricted Subsidiary from the transferee
that are converted by Stage or such Restricted Subsidiary into cash within 90
days of the receipt of such securities.
(b) In the event of an Asset Disposition that requires the purchase of
the Senior and Senior Subordinated Notes (and other Debt ranking PARI PASSU with
the applicable Senior and Senior Subordinated Notes) pursuant to clause
(a)(ii)(C) above, SRI will be required to purchase Senior and Senior
Subordinated Notes tendered pursuant to an offer by SRI for the Senior and
Senior Subordinated Notes (and such other Debt) at a purchase price of 100% of
the principal amount of the Senior and Senior Subordinated Notes on the date of
such offer (without premium) plus accrued but unpaid interest (or, in respect of
such other Debt, such lesser price, if any, as may be provided for by the terms
of such Debt) in accordance with the procedures (including prorating in the
event of oversubscription) set forth in the applicable Indenture. If the
aggregate purchase price of Senior and Senior Subordinated Notes (and any such
other Debt) tendered pursuant to any such offer is less than the Net Available
Cash allotted to the purchase thereof, SRI will be required to apply the
remaining Net Available Cash in accordance with clause (a)(ii)(D) above. SRI
shall not be required to make any such offers to purchase Senior and Senior
Subordinated Notes (and other Debt ranking PARI PASSU with the applicable Senior
and Senior Subordinated Notes) pursuant to this covenant if the Net Available
Cash available therefore is less than $10 million (which lesser amount shall be
carried forward for purposes of determining whether any such offer is required
with respect to any subsequent Asset Disposition).
(c) SRI shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Senior and Senior Subordinated
Notes pursuant to this covenant. To the extent that the provisions of any
securities laws or regulations conflict with provisions
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of this covenant, SRI shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
clause by virtue thereof.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) Stage shall not, and
shall not permit any Restricted Subsidiary to, enter into any transaction or
series of related transactions (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate (including any Accounts Receivable Subsidiary) of
Stage (an "Affiliate Transaction") unless (i) the terms of such Affiliate
Transaction are (A) set forth in writing and (B) as favorable to Stage or such
Restricted Subsidiary as terms that would be obtainable at the time for a
comparable transaction or series of related transactions in arm's-length
dealings with an unrelated third Person, (ii) if such Affiliate Transaction
involves an amount in excess of $3 million, a majority of the disinterested
members of the Board of Directors of Stage have approved, by resolution, and
determined in good faith that such Affiliate Transaction meets the criteria set
forth in (i)(B) above and (iii) if such Affiliate Transaction involves an amount
in excess of $7.5 million (other than a contribution, disposition or other
transfer of Receivables to an Accounts Receivable Subsidiary as permitted under
the Indentures and the related customary contractual arrangements and Customary
Securitization Undertakings), such Affiliate Transaction is determined by a
nationally recognized investment banking firm to be fair from a financial
standpoint to Stage or such Restricted Subsidiary, as the case may be.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to the covenant
described under "--Limitation on Restricted Payments," (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors of Stage, (iii) loans or
advances to employees in the ordinary course of business, but in any event not
to exceed $5 million in the aggregate outstanding at any one time, (iv) the
payment of reasonable and customary fees to directors of Stage and its
Restricted Subsidiaries, (v) any transaction between Stage and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries, (vi) any written agreement as
in effect on the Issue Date and as amended from time to time PROVIDED that any
such amendment is not less favorable in any material respect to Stage and its
Subsidiaries than the terms in effect on the Issue Date, and (vii)
indemnification payments to directors and officers of Stage in accordance with
applicable state laws.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. Stage shall not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except (i) to Stage or a Wholly Owned Subsidiary;
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary remains a Restricted Subsidiary; or
(iii) if, immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving effect
thereto would have been permitted to be made under the covenant described under
"--Limitation on Restricted Payments" if made on the date of such issuance, sale
or other disposition. In connection with any such sale or disposition of Capital
Stock, Stage or any such Restricted Subsidiary shall comply with the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock." Nothing
herein shall limit or modify SRI's obligations under "--Change of Control"
above.
LIMITATION ON LIENS. The Senior Notes Indenture will provide that Stage
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, incur or permit to exist any Lien of any nature whatsoever on any of
its properties (including Capital Stock of a Restricted Subsidiary), whether
owned at the Issue Date or thereafter acquired, other than Permitted Liens,
without effectively providing that the Senior Notes shall be secured equally and
ratably with (or prior to) the obligations so secured for so long as such
obligations are so secured.
The Senior Subordinated Notes Indenture will provide that,
notwithstanding paragraphs (a) and (b) of the covenant described under
"--Limitation on Debt" above, Stage shall not, and shall not permit SRI or any
Guarantor to, incur any Secured Debt which is not Senior Debt unless
contemporaneously therewith effective provision is made to secure the Senior
Subordinated Exchange Notes, the Senior Subordinated Notes or the Senior
Subordinated Notes Guaranties, as applicable, equally and ratably with such
Secured Debt for so long as such Secured Debt is secured by a Lien.
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LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Senior Notes Indenture
will provide that Stage shall not, and shall not permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction with respect to any
property unless (i) Stage or such Restricted Subsidiary would be entitled to (A)
incur Debt in an amount equal to the Attributable Debt with respect to such
Sale/Leaseback Transaction pursuant to the covenant described under
"--Limitation on Debt" and (B) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Senior Exchange Notes
and the Senior Notes pursuant to the covenant described under "--Limitation on
Liens," (ii) the net proceeds received by Stage or any Restricted Subsidiary in
connection with such Sale/Leaseback Transaction are at least equal to the fair
value (as determined by the Board of Directors) of such property and (iii) Stage
applies the proceeds of such transaction in compliance with the covenant
described under "--Limitation on Sale of Assets and Subsidiary Stock."
ACCOUNTS RECEIVABLE SUBSIDIARIES. Stage (a) shall not permit any
Accounts Receivable Subsidiary to sell any Receivables purchased from Stage or
any of its Subsidiaries or participation interests therein to any other Person
except on an arms-length basis and solely for consideration in the form of cash,
cash equivalents, promissory notes of such Person or Debt of or other interests
in a Master Trust; PROVIDED, HOWEVER, that such Accounts Receivable Subsidiary
may not sell such Debt or other interests to any other Person except on an
arms-length basis and solely for consideration in the form of cash or cash
equivalents; (b) shall not permit any Accounts Receivable Subsidiary to incur
Debt in an amount in excess of the book value of such Accounts Receivable
Subsidiary's total assets, as determined in accordance with GAAP; and (c) shall
not, and shall not permit any of its Subsidiaries to, sell Receivables to an
Accounts Receivable Subsidiary if (i) such Accounts Receivable Subsidiary,
pursuant to or within the meaning of Bankruptcy Law, (A) commences a voluntary
case, (B) consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a Custodian of it or for
all or substantially all of its property or (D) makes a general assignment for
the benefit of its creditors or (ii) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that (A) is for relief against such
Accounts Receivable Subsidiary, (B) appoints a Custodian of such Accounts
Receivable Subsidiary or for all or substantially all of the property of such
Accounts Receivable Subsidiary or (C) orders the liquidation of such Accounts
Receivable Subsidiary.
FUTURE GUARANTORS. Stage and SRI shall cause each Restricted Subsidiary
to execute and deliver to each Trustee a Guaranty Agreement pursuant to which
such Restricted Subsidiary will Guarantee payment of the Senior and Senior
Subordinated Notes on the same terms and conditions as those set forth in the
Indentures.
SEC REPORTS. Notwithstanding that Stage may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Stage shall file with the SEC and provide the Trustees and Holders with
such annual reports and such information, documents and other reports specified
in Sections 13 and 15(d) of the Exchange Act, such information, documents and
other reports to be so filed and provided at the times specified for the filing
of such information, documents and reports under such sections.
MERGER AND CONSOLIDATION
Neither Stage nor SRI shall consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all its properties and assets to any Person, unless: (i) the
resulting, surviving or transferee Person (the "Successor Company"), if other
than Stage or SRI, as the case may be, shall be a Person organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia and the Successor Company expressly assumes, by an
indenture supplemental thereto, executed and delivered to the Trustees, in form
acceptable to the Trustees, all the obligations of Stage or SRI, as the case may
be, under the Senior and Senior Subordinated Notes and the Indentures; (ii)
immediately after giving effect to such transaction, on a pro forma basis (and
treating any Debt which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, on a pro forma basis, the Successor Company would be
able to Incur at least $1.00 of additional Debt pursuant to paragraph (a) of the
covenant described under "--Limitation on Debt"; (iv) immediately after giving
effect to such transaction, on a pro forma basis, the Successor Company shall
have Consolidated Net Worth in an amount at least equal to the Consolidated Net
Worth of Stage or SRI, as the case may be, prior to such transaction minus any
costs incurred in connection with such transaction; and (v) Stage or SRI, as the
case may be, shall have delivered to the Trustees an
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Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indentures. The foregoing shall not prohibit the consummation of
the Acquisition by Stage and SRI on the terms described under "The Acquisition."
The Successor Company shall be the successor to Stage or SRI, as the
case may be, and shall succeed to, and be substituted for, and may exercise
every right and power of, Stage or SRI, as the case may be, under the
Indentures, but the predecessor Person in the case of a conveyance, transfer or
lease shall not be released from the obligation to pay the principal of and
interest on the Senior and Senior Subordinated Notes, in the case of SRI, or
from the obligations under the Notes Guaranties, in the case of Stage.
No Subsidiary Guarantor shall, and Stage or SRI, as the case may be,
shall not permit any Subsidiary Guarantor to, consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless: (i)
the resulting, surviving or transferee Person (if not such Subsidiary Guarantor)
shall be a Person organized and existing under the laws of the jurisdiction
under which such Subsidiary Guarantor was organized or under the laws of the
United States of America, or any State thereof or the District of Columbia, and
such Person shall expressly assume, by Guaranty Agreements, in a form
satisfactory to the Trustees, all the obligations of such Subsidiary Guarantor,
if any, under its Notes Guaranties; (ii) immediately after giving effect to such
transaction or transactions on a pro forma basis (and treating any Debt which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at the time of
such transaction), no Default shall have occurred and be continuing; and (iii)
Stage or SRI, as the case may be, delivers to the Trustees Officers'
Certificates and Opinions of Counsel, each stating that such consolidation,
merger or transfer and such Guaranty Agreements, if any, comply with the
Indenture.
DEFAULTS
An "Event of Default" is defined in the Indentures as (a) a default in
any payment of interest on any Exchange Note or Note when the same becomes due
and payable, and such default continues for a period of 30 days; (b) a default
in the payment of the principal of, or premium, if any, on any Exchange Note or
Note when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration, upon required repurchase or otherwise; (c) the
failure by SRI or any Guarantor to comply with its obligations under "- Merger
and Consolidation"; (d) the failure by Stage or SRI to comply for 30 days after
the notice specified below with any of its obligations in the covenants
described above under "--Change of Control" (other than a failure to purchase
Notes) or under "--Certain Covenants" under "--Limitation on Debt,"
"--Limitation on Restricted Payments," "--Limitation on Restrictions on
Distributions from Restricted Subsidiaries," "--Limitation on Sales of Assets
and Subsidiary Stock" (other than a failure to purchase Notes), "--Limitation on
Transactions with Affiliates," "--Limitation on Liens," "--Limitation on
Sale/Leaseback Transactions," "Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries," "Accounts Receivable Subsidiaries," "Future
Guarantors" or "--SEC Reports"; (e) the failure by Stage, SRI or any Guarantor
to comply with any of its agreements in the Senior and Senior Subordinated Notes
or the Indentures (other than those referred to in (a), (b), (c) or (d) above)
and such failure continues for 60 days after the notice specified below; (f) a
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Debt for money borrowed
by Stage or any of its Subsidiaries (or the payment of which is Guaranteed by
Stage or any of its Subsidiaries) whether such Debt or Guarantee now exists, or
is created after the date of the Indentures, which default (i) is caused by
failure to pay principal of such Debt at the final maturity thereof or, in the
case of the Senior Exchange Notes and the Senior Notes only, failure to pay
principal of or interest on such Debt, prior to the expiration of the grace
period provided in such Debt on the date of such default ("Payment Default") or
(ii) results in the acceleration of such Debt prior to its express maturity and,
in each case, the principal amount of any such Debt, together with the principal
amount of any other such Debt under which there has been a Payment Default or
the maturity of which has been so accelerated, aggregates $15 million or more;
(g) certain events of bankruptcy or insolvency of Stage, SRI or any Significant
Subsidiary; (h) any final non-appealable judgment or decree in excess of $15
million is rendered against Stage, SRI or a Significant Subsidiary and is not
discharged and either an enforcement proceeding has been commenced upon such
judgment or decree or such judgment or decree shall remain undischarged for a
period of 60 days; or (i) any Guarantee ceases to be in effect (other than in
accordance with the terms of the Indentures) or any Guarantor denies or
disaffirms its Guarantee obligations. A Default under clause (d) or (e) is not
an Event of Default until the relevant Trustee
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or the Holders of at least 25% in principal amount of the applicable Senior and
Senior Subordinated Notes notify SRI of the Default and SRI does not cure such
Default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing with respect to the
Senior and Senior Subordinated Notes, the applicable Trustee or the holders of
at least 25% in principal amount of the applicable outstanding Senior and Senior
Subordinated Notes may declare the principal of and accrued but unpaid interest
on all such Senior and Senior Subordinated Notes to be due and payable. Upon
such a declaration, such principal amount and interest shall be due and payable
immediately; PROVIDED that if any Bank Debt shall remain outstanding, such
declaration with respect to the Senior Subordinated Exchange Notes shall not
become effective until three Business Days after notice of such declaration has
been given to the Representative of the holders of the Bank Debt. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of Stage, SRI or a Significant Subsidiary occurs and is continuing, the
principal of and interest on all the relevant Senior and Senior Subordinated
Notes will IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the applicable Trustee or any holders of
the relevant Senior and Senior Subordinated Notes. Under certain circumstances,
the holders of a majority in principal amount of the applicable outstanding
Senior and Senior Subordinated Notes may rescind any such acceleration with
respect to such Senior and Senior Subordinated Notes and its consequences.
Subject to the provisions of the Indentures relating to the duties of
the Trustees, in case an Event of Default occurs and is continuing, the Trustees
will be under no obligation to exercise any of the rights or powers under the
Indentures at the request or direction of any of the holders of the Senior and
Senior Subordinated Notes unless such holders have offered to the Trustees
reasonable indemnity or security against any loss, liability or expense. Except
to enforce the right to receive payment of principal, premium (if any) or
interest when due, no holder of an Exchange Note or a Note may pursue any remedy
with respect to the Indentures or the Senior and Senior Subordinated Notes
unless: (i) such holder has previously given the relevant Trustee notice that an
Event of Default is continuing; (ii) holders of at least 25% in principal amount
of the applicable outstanding Senior and Senior Subordinated Notes have
requested the applicable Trustee to pursue the remedy; (iii) such holders have
offered the applicable Trustee reasonable security or indemnity against any
loss, liability or expense ; (iv) the applicable Trustee has not complied with
such request within 60 days after the receipt thereof and the offer of security
or indemnity and (v) the holders of a majority in principal amount of the
applicable outstanding Senior and Senior Subordinated Notes have not given such
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the applicable outstanding Senior and Senior Subordinated Notes are given the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the applicable Trustee or of exercising any trust or power
conferred on such Trustee.
The Indentures provide that if a Default occurs and is continuing and is
known to the Trustees, the Trustees must mail to each Holder notice of the
Default within 90 days (or such shorter period as may be required by applicable
law) after it occurs. Except in the case of a Default in the payment of
principal of, premium (if any) or interest on any Exchange Note or on any Note,
the Trustees may withhold notice if and so long as a committee of its trust
officers determines that withholding notice is in the interest of the holders of
the Senior and Senior Subordinated Notes. In addition, SRI is required to
deliver to the Trustees, within 120 days after the end of each fiscal year, a
certificate indicating whether the signers thereof know of any Default that
occurred during the previous year. SRI also is required to deliver to the
Trustees, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Defaults, their status and what action SRI
is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, each of the Senior Notes Indenture and
the Senior Subordinated Notes Indenture may be amended or supplemented with the
consent of the holders of a majority in principal amount of the Senior Exchange
Notes or the Senior Subordinated Exchange Notes, as the case may be, then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Senior and Senior Subordinated Notes) and any past default or
compliance with any provisions may also be waived with the consent of the
holders of a majority in principal amount of the Senior Exchange Notes or the
Senior Subordinated Exchange Notes and the Senior Subordinated Notes, as the
case may be, then outstanding. However, without the consent of each holder of an
outstanding Senior Exchange Note or Senior Subordinated Exchange Note, as the
case may be, no amendment may, among other things: (i) reduce
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the amount of Senior and Senior Subordinated Notes whose holders must consent to
an amendment; (ii) reduce the rate of or extend the time for payment of interest
on any and Senior and Senior Subordinated Note; (iii) reduce the principal of or
extend the Stated Maturity of any Senior and Senior Subordinated Note; (iv)
reduce the premium payable upon the redemption of any Senior and Senior
Subordinated Note or change the time at which any Senior and Senior Subordinated
Note may or shall be redeemed as described under "--Optional Redemption"; (v)
make any Senior and Senior Subordinated Note payable in money other than that
stated in the Senior and Senior Subordinated Note; (vi) impair the right of any
holder of the Senior and Senior Subordinated Notes to receive payment of
principal of, or premium, if any, and interest on such holder's Senior and
Senior Subordinated Notes on or after the due dates therefore or to institute
suit for the enforcement of any payment on or with respect to such holder's
Senior and Senior Subordinated Notes; (vii) make any change in the amendment
provsions which requires each holder's consent or in the waiver provisions;
(viii) make any change in any Notes Guaranty that would adversely affect the
Holders; or (ix) in the case of the Senior Subordinated Exchange Notes, make any
change in the subordination provisions of the Senior Subordinated Notes
Indenture that would adversely affect the holders of the Senior Subordinated
Exchange Notes.
Without the consent of any holder of the Senior and Senior Subordinated
Notes, SRI and the Trustees may amend or supplement the Indentures to cure any
ambiguity, omission, defect or inconsistency, to provide for the assumption by a
successor corporation of the obligations of Stage, SRI or any Guarantor under
the Indentures, to provide for uncertificated Senior and Senior Subordinated
Notes in addition to or in place of certificated Senior and Senior Subordinated
Notes (provided that the uncertificated Senior and Senior Subordinated Notes are
issued in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Senior and Senior Subordinated Notes are
described in Section 163(f)(2)(B) of the Code), to add guarantees with respect
to the Senior and Senior Subordinated Notes, to release a Notes Guaranty when
permitted by the applicable Indenture, to secure the Senior and Senior
Subordinated Notes, to add to the covenants of Stage and its Subsidiaries for
the benefit of the Holders or to surrender any right or power conferred upon
Stage, SRI or any Guarantor to make any change that does not adversely affect
the rights of any Holder or to comply with any requirement of the SEC in
connection with the qualification of the Indentures under the Trust Indenture
Act of 1939. However, no amendment may be made to the subordination provisions
of the Senior Subordinated Notes Indenture that adversely affects the rights of
any holder of Senior Debt then outstanding unless the holders of such Senior
Debt (or their Representative) consent to such change.
The consent of the Holders is not necessary under either the Senior
Notes Indenture or the Senior Subordinated Notes Indenture to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under either the Senior Notes Indenture or the
Senior Subordinated Notes Indenture becomes effective, SRI is required to mail
to the applicable Holders a notice briefly describing such amendment. However,
the failure to give such notice to all applicable Holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
SRI at any time may terminate all the obligations of Stage and SRI
under the Senior Notes Indenture or the Senior Subordinated Notes Indenture
("legal defeasance"), except for certain obligations, including those respecting
the defeasance trust and obligation to register the transfer or exchange of the
Senior and Senior Subordinated Notes issued under such Indenture, to replace
mutilated, destroyed, lost or stolen Senior and Senior Subordinated Notes and to
maintain a registrar and paying agent in respect of the Senior and Senior
Subordinated Notes. SRI at any time may terminate the obligations of Stage and
SRI under "--Change of Control" and the covenants described under "--Certain
Covenants," the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries and the judgment default
provision described under "--Defaults" above and the limitations contained in
clauses (iii) and (iv) of the first paragraph under "--Merger and Consolidation"
above ("covenant defeasance").
SRI may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option. If SRI exercises its legal
defeasance option, payment of the Senior and Senior Subordinated Notes may not
be accelerated because of an Event of Default with respect thereto. If SRI
exercises its covenant defeasance option, payment of the Senior and Senior
Subordinated Notes may not be accelerated because of an Event of Default
specified in clauses
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(d), (f) and (g) (with respect only to Significant Subsidiaries) or (h) under
"--Events of Default" above or because of the failure of SRI to comply with
clause (iii) or (iv) under "--Merger and Consolidation" above. If SRI exercises
its legal defeasance option or its covenant defeasance option, each Guarantor
will be released from all of its obligations with respect to its Notes
Guaranties.
In order to exercise either defeasance option, SRI must irrevocably
deposit in trust (the "defeasance trust") with the applicable Trustee money or
U.S. Government Obligations for the payment of principal, premium (if any) and
interest on the Senior and Senior Subordinated Notes to redemption or maturity,
as the case may be, and must comply with certain other conditions, including
delivering to the applicable Trustee an Opinion of Counsel to the effect that
holders of the Senior and Senior Subordinated Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or a change in applicable Federal income tax law).
CONCERNING THE TRUSTEES
State Street Bank and Trust Company is to be the trustee under the
Senior Notes Indenture and the Senior Subordinated Notes Indenture and has been
appointed by SRI as Registrar and Paying Agent with regard to the Senior and
Senior Subordinated Notes.
The Holders of a majority in principal amount of the outstanding Senior
Exchange Notes or the Senior Subordinated Exchange Notes, as the case may be,
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the applicable Trustee,
subject to certain exceptions. The Indentures provide that if an Event of
Default occurs (and is not cured), the Trustees will be required, in the
exercise of their power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, neither Trustee will be
under any obligation to exercise any of its rights or powers under the
Indentures at the request of any Holder of Senior and Senior Subordinated Notes,
unless such Holder shall have offered to the applicable Trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the applicable Indenture.
GOVERNING LAW
The Indentures provide that they and each of the Senior and Senior
Subordinated Notes will be governed by, and construed in accordance with, the
laws of the State of New York without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Accounts Receivable Facility" means the program and the transactions
in effect on the Issue Date pursuant to the following principal documents, each
as in effect on the Issue Date, pursuant to which SRPC has acquired and
securitized Receivables originated by SRI: Receivables Purchase Agreement
between SRI and SRPC; Pooling and Servicing Agreement among SRI, as servicer,
SRPC, as transferor, and Bankers Trust (Delaware), as trustee; Series 1993-1
Supplement, Series 1993-2 Supplement and Series 1995-1 Supplement, each between
SRPC, as transferor, and Bankers Trust (Delaware), as trustee; each related
certificate purchase agreement and placement agent agreement; Indenture between
SRPC, as issuer, and Bankers Trust (Delaware), as trustee and collateral agent;
and Purchase Agreement between BT Securities Corp., SRPC and SRI, pertaining to
12.5% Trust Certificate-Backed Notes.
"Accounts Receivable Subsidiary" means a wholly owned Subsidiary of
Stage or a Subsidiary of such wholly owned Subsidiary, in each case which
engages in no activities other than in connection with the financing of
Receivables, including any Banking Subsidiary, and which is designated by the
Board of Directors as an Accounts Receivable Subsidiary pursuant to a board
resolution set forth in an Officers' Certificate and delivered to the Trustees,
(a) no portion of the Debt or any other obligations (contingent or otherwise) of
which: (i) is Guaranteed by Stage or any other Subsidiary of Stage; (ii) is
recourse to or obligates Stage or any other Subsidiary of Stage in any way,
other than pursuant
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to Customary Securitization Undertakings; or (iii) subjects any property or
asset of Stage or any other Subsidiary of Stage, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
Customary Securitization Undertakings, (b) with which none of Stage or any other
Subsidiary of Stage has any contract, agreement, arrangement or understanding
other than or such other Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of Stage, other than sales of
Receivables in accordance with clause (v) of the definition of "Asset
Disposition" and fees payable in the ordinary course of business in connection
with servicing Receivables and (c) with which neither Stage nor any other
Subsidiary of Stage or has any obligation: (i) to subscribe for additional
shares of Capital Stock therein; or (ii) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve certain
levels of operating results.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants --Limitation on
Affiliate Transactions" and "--Certain Covenants --Limitations on Sales of
Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of Capital
Stock representing 10% or more of the total voting power of the Voting Stock (on
a fully diluted basis) of Stage, or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by Stage or any of its Restricted
Subsidiaries, including, without limitation, any disposition by means of a
merger, consolidation or similar transaction, other than: (i) a disposition by a
Restricted Subsidiary to Stage or by Stage or a Restricted Subsidiary to a
Wholly Owned Subsidiary; (ii) a disposition of property or assets (other than
shares of Capital Stock of a Restricted Subsidiary and which do not constitute
all or substantially all of the assets of any division or line of business of
Stage or any Restricted Subsidiary) at fair market value in the ordinary course
of business; (iii) for purposes of the covenant described under "--Certain
Covenants--Limitation on Sale of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment or a Permitted Investment
permitted by the covenant described under "--Certain Covenants --Limitation on
Restricted Payments"; (iv) a transaction or series of related transactions for
which Stage or its Restricted Subsidiaries receive aggregate consideration of
less than $250,000; (v) contributions, dispositions or other transfers of
Receivables to an Accounts Receivable Subsidiary that is wholly owned, directly
or indirectly, by Stage in exchange for Capital Stock or an increase in paid-in
capital in such Accounts Receivable Subsidiary or sales of Receivables to an
Accounts Receivable Subsidiary for cash and promissory notes, in each case for
consideration having a value at least equal to 95% of the book value thereof as
determined in accordance with GAAP; and (vi) the disposition of all or
substantially all of the assets of Stage permitted by the covenant described
under "Merger and Consolidation."
"Attributable Debt" means, in respect of a Sale/Leaseback Transaction,
as at the time of determination, the present value (discounted at the interest
rate borne by the Senior Exchange Notes, compounded annually) of the total
obligations of the lesse for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Debt or Preferred Stock, the quotient obtained by dividing: (i) the sum of
the products of numbers of years from the date of determination to the dates of
each successive scheduled principal payment of such Debt or redemption or
similar payment with respect to such Preferred Stock multiplied by the amount of
such payment by; and (ii) the sum of all such payments.
"Bank Debt" means all obligations pursuant to the New Credit Agreement
including reimbursement obligations in respect of letters of credit and interest
accruing at the contract rate specified therein on or after the filing of any
petition in bankruptcy or for reorganization relating to Stage or SRI whether or
not post-filing interest is an allowed claim in such proceeding.
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"Banking Subsidiary" means a wholly owned Subsidiary of Stage or a
Subsidiary of a wholly owned Subsidiary of Stage, in each case chartered under
the banking laws of the United States or any state thereof, which engages in
activities permitted by applicable banking laws and the primary purpose of which
is to finance the Receivables arising out of sales of goods and services by
Stage and its Subsidiaries.
"Bankruptcy Law" means Title 11, United States Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of Stage or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in such Person (however designated), including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; PROVIDED, HOWEVER, that (1) if Stage or any Restricted
Subsidiary has Incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated EBITDA Coverage Ratio is an Incurrence of Debt, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been Incurred on
the first day of such period and the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
as if such discharge had occurred on the first day of such period, (2) if since
the beginning of such period Stage or any Restricted Subsidiary shall have made
any Asset Disposition, the EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or increased by an amount
equal to the EBITDA (if negative), directly attributable thereto for such
period, and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Debt of Stage or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to Stage and its continuing Restricted
Subsidiaries in connection with such Asset Dispositions for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Debt of such
Restricted Subsidiary to the extent Stage and its continuing Restricted
Subsidiaries are no longer liable for such Debt after such sale), (3) if since
the beginning of such period Stage or any Restricted Subsidiary (by merger or
otherwise) shall have made an Investment in any Restricted Subsidiary (or any
Person which becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Debt) as if such Investment or
acquisition occurred on the first day of such period, and (4) if since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into Stage or any Restricted Subsidiary since
the beginning of such period) shall have made any Asset Disposition or any
Investment that would have required an adjustment pursuant to clause (2) or (3)
above if made by Stage or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition or Investment occurred on
the first day of such period. For purposes of this definition, whenever pro
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forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto, and the amount of Consolidated Interest Expense
associated with any Debt Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of Stage. If any Debt bears a floating rate of interest and
is being given pro forma effect, the interest of such Debt shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account any Interest Rate Agreement
applicable to such Debt if such Interest Rate Agreement has a remaining term in
excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of Stage and its consolidated Restricted Subsidiaries
(excluding amortization of deferred financing costs), plus, to the extent not
included in such interest expense: (i) interest expense attributable to Capital
Lease Obligations; (ii) amortization of debt discount; (iii) capitalized
interest; (iv) non-cash interest expense; (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; (vi) net costs under Hedging Obligations (including amortization of
fees); (vii) Preferred Stock dividends in respect of all Redeemable Stock of
Stage and Preferred Stock dividends payable in cash in respect of all Preferred
Stock held by Persons other than Stage or a Wholly Owned Subsidiary; (viii)
interest incurred in connection with Investments in discontinued operations;
(ix) interest accruing on any Debt of any other Person to the extent such Debt
is Guaranteed by Stage or any of its Restricted Subsidiaries; and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than Stage) in connection with Debt Incurred by such plan
or trust.
"Consolidated Net Income" means, for any period, the net income of
Stage and its consolidated Subsidiaries; provided, however, that there shall not
be included in such Consolidated Net Income (i) any net income of any Person if
such Person is not a Restricted Subsidiary, except that subject to the exclusion
contained in clause (iv) below, Stage's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person during such
period to Stage or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (iii) below); (ii) any net
income of any Person acquired by Stage or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income of any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to
Stage, except that (A) subject to the exclusion contained in clause (iv) below,
Stage's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Restricted Subsidiary during such
period to Stage or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to
another Restricted Subsidiary, to the limitation contained in this clause) and
(B) Stage's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income; (iv) any
gain or loss realized upon the sale or other disposition of any property, plant
or equipment of Stage or its consolidated subsidiaries (including pursuant to
any sale-and-leaseback arrangement) which is not sold or otherwise disposed of
in the ordinary course of business and any gain or loss realized upon the sale
or other disposition of any Capital Stock of any Person; (v) extraordinary or
nonrecurring gains or losses; and (vi) the cumulative effect of a change in
accounting principles. Notwithstanding the foregoing, for the purposes of the
covenant described under "Certain Covenants --Limitation on Restricted Payments"
only, there shall be excluded from Consolidated Net Income any dividends,
repayments of loans as advances or other transfers of assets from Unrestricted
Subsidiaries to Stage or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" of any Person means the total of the amounts
shown on the balance sheet of such Person and its consolidated subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of such Person ending at least 45 days prior to the
taking of any action for the purpose of which the determination is being made,
as (i) the par or stated value of all outstanding Capital Stock of such Person
plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit,
(B) any amounts attributable to Redeemable Stock and (C) any amounts
attributable to Exchangeable Stock.
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"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Customary Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by Stage or any of its
Restricted Subsidiaries in connection with a Receivables transaction with an
Accounts Receivable Subsidiary and which are reasonably customary in asset
securitization transactions involving accounts, general intangibles or other
rights to payment. All terms and provisions of the Accounts Receivable Facility
shall constitute Customary Securitization Undertakings.
"Debt" of any Person means, without duplication, (i) the principal of
and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations of such Person and all
obligations of such Person under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business); (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) all Redeemable
Stock of such Person and, with respect to any Subsidiary of such Person, all
Preferred Stock (the amount of Debt represented thereby shall equal the greater
of its liquidation preference and the redemption, repayment or other repurchase
obligations with respect thereto, but excluding any accrued dividends); (vi) all
Hedging Obligations of such Person; (vii) all obligations of the type referred
to in clauses (i) through (v) of other Persons and all dividends of other
Persons for the payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including by
means of any Guarantee; and (viii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured. The amount of
Debt of any Person at any date shall be the outstanding balance of such date of
all unconditional obligations as described above and the maximum liability upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date; PROVIDED, HOWEVER, that the amount
outstanding at any time of any Debt Incurred with original issue discount is the
face amount of such Debt less the remaining unamortized portion of the original
issue discount of such Debt at such time as determined in conformity with GAAP.
"Deemed Asset Value" means 75% of the fair market value, as determined
in good faith by the Board of Directors of Stage, of assets (other than cash)
received by Stage from the issuance or sale of its Capital Stock.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Senior Debt" of any Person means (i) the Bank Debt and (ii)
any other Senior Debt of such Person which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $20
million and is specifically designated by such Person in the instrument
evidencing or governing such Senior Debt as "Designated Senior Debt" for
purposes of the Senior Subordinated Notes Indenture.
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of Stage,
(b) depreciation expense, (c) amortization expense and (d) all other non-cash
items reducing such Consolidated Net Income (excluding any non-cash items to the
extent it represents an accrual of, or reserve for, cash disbursements for any
subsequent period) less all non-cash items increasing such Consolidated Net
Income, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
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amortization of, a Subsidiary of Stage shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same proportion) that the net
income of such Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to Stage by such Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchangeable Stock" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of Stage which is
neither Exchangeable Stock nor Redeemable Stock).
"Expansion Revolving Credit Facility Provisions" means the provisions
of the New Credit Agreement pursuant to which lenders thereunder have committed
to make available to SRI a reducing revolving credit facility.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Certified Public Accountants, (ii)
statements and pronouncements of the Financial Accounting Standards Board, (iii)
in such other statements by such other entity as approved by a significant
segment of the accounting profession, and (iv) the rules and regulations of the
SEC governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and pronouncements in staff
accounting bulletins and similar written statements from the accounting staff of
the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business,
guarantees of obligations of a Subsidiary in the ordinary course of business if
such obligations do not constitute Debt of such Subsidiary or Customary
Securitization Undertakings. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor" means any Person that Guarantees SRI's obligations with
respect to the Senior and Senior Subordinated Notes, as the case may be.
"Guaranty Agreement" means a supplemental indenture, in a form
satisfactory to the applicable Trustee, pursuant to which a Guarantor becomes
subject to the applicable terms and conditions of the Senior Notes Indenture or
the Senior Subordinated Notes Indenture.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means the Person in whose name Senior and Senior Subordinated
Note is registered on the Registrar's books.
"Incur" means issue, create, assume, Guarantee, incur or otherwise
become liable for; PROVIDED, HOWEVER, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
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"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect Stage or any Restricted Subsidiary against fluctuations in interest
rates.
"Investment" in any Person means any loan or advance to, any
acquisition of Capital Stock, equity interest, obligation or other security of,
or capital contribution or other investment in, or any other credit extension to
(including by way of Guarantee of any Debt of) such Person. For purposes of the
definition of "Unrestricted Subsidiary," the definition of "Restricted Payment"
and the covenant described under "--Certain Covenants --Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Stage's equity interest in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of Stage at the time that such Subsidiary is designated
an Unrestricted Subsidiary; PROVIDED, HOWEVER, that if such designation is made
in connection with the acquisition of such Subsidiary or the assets owned by
such Subsidiary, the "Investment" in such Subsidiary shall be deemed to be the
consideration paid in connection with such acquisition; PROVIDED, FURTHER,
HOWEVER, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, Stage shall be deemed to continue to have a permanent "Investment"
in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x)
Stage's "Investmentment" in such Subsidiary at the time of such redesignation
less (y) the portion (proportionate to Stage's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at the
time of such redesignation; and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors.
"Issue Date" means the original issue date of the Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Master Trust" means a trust organized for the purpose securitizing
Receivables held by an Accounts Receivable Subsidiary that does not engage in
any business other than (a) the purchase of Receivables or participation
interests therein, (b) the issuance and distribution of indebtedness and other
interests in such trust to (i) the Accounts Receivable Subsidiary or (ii) to
other parties for cash or cash equivalents on an arms-length basis, (c) the
servicing of Receivables and any indebtedness or interests in such trust and (d)
activities ancillary to the actions described in clauses (a), (b) and (c).
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
March 5, 1997, by and between Stage and CR Anthony.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
properties or assets that are the subject of such Asset Disposition or received
in any other noncash form) therefrom, in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes required to be
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Debt which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition, and
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts provided by the
sellers as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset Disposition
and retained by Stage or any Restricted Subsidiary after such Asset Disposition.
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"Net Cash Proceeds" means, with respect to any issuance or sale of
Capital Stock, the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"New Credit Agreement" means the agreement dated June 17, 1997 among
SRI, Credit Suisse First Boston, as administrative agent, and the other lenders
party thereto, and their respective successors and assigns, together with all
other instruments, documents and agreements related thereto, as the same may be
amended, supplemented, waived and otherwise modified from time to time in
accordance with the terms thereof, and any agreement (and all other related
instruments, documents and agreements) governing Debt Incurred to refund,
replace or refinance, in whole or in part, the borrowings and commitments then
outstanding or permitted to be outstanding under such New Credit Agreement or a
successor New Credit Agreement, whether by the same or any other lender or group
of lenders.
"Non-Convertible Capital Stock" means, with respect to any corporation,
any non-convertible Capital Stock of such corporation and any Capital Stock of
such corporation convertible solely into non-convertible common stock of such
corporation; PROVIDED, HOWEVER, that Non-Convertible Capital Stock shall not
include any Redeemable Stock or Exchangeable Stock.
"Notes Guaranty" means the Guarantee by a Guarantor of SRI's
obligations with respect to the Senior and Senior Subordinated Notes, as the
case may be.
"Permitted Investment" means an Investment by Stage or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary; PROVIDED, HOWEVER, that the
primary business of such Restricted Subsidiary is reasonably related to the
business of Stage; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, Stage or a Restricted Subsidiary; PROVIDED,
HOWEVER, that such Person's primary business is reasonably related to the
business of Stage; (iii) Temporary Cash Investments; (iv) receivables owing to
Stage or any Restricted Subsidiary if created or acquired in the ordinary course
of business and payable or dischargeable in accordance with customary trade
terms; PROVIDED, HOWEVER, that such trade terms may include such concessionary
trade terms as Stage or any such Restricted Subsidiary deems reasonable under
the circumstances; (v) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans or advances to employees made in the ordinary course of
business consistent with past practices of Stage or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to Stage or any Restricted
Subsidiary or in satisfaction of judgments; (viii) other Investments in an
aggregate amount not to exceed $5 million; (ix) Investments in an Accounts
Receivable Subsidiary received in consideration of contributions or sales of
Receivables permitted pursuant to clause (v) of the definition of "Asset
Disposition;" (x) Investments in a Banking Subsidiary in an aggregate amount not
to exceed $10 million; (xi) Investments in an Accounts Receivable Subsidiary in
an aggregate amount not to exceed the amount of dividends and other
distributions made to Stage or any of its Restricted Subsidiaries from such
Accounts Receivable Subsidiary; PROVIDED, HOWEVER, that the amount of such
Investments actually made shall reduce the amount included in the calculation
made pursuant to clause (a)(3)(D) of the covenant described under "--Certain
Covenants --Limitation on Restricted Payments" to the extent that the amount of
dividends and other distributions by the Accounts Receivable Subsidiary to which
such Investments relate shall have otherwise increased the amount included in
the calculation made pursuant to such clause (a)(3)(D); and (xii) any Person to
the extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to the covenant
described under "--Certain Covenants --Limitation on Sales of Assets and
Subsidiary Stock."
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers',
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warehousemen's and mechanics' Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings or other Liens arising out of
judgments or awards against such Person with respect to which such Person shall
then be proceeding with an appeal or other proceedings for review; (c) Liens for
property taxes not yet subject to penalties for non-payment or which are being
contested in good faith and by appropriate proceedings; (d) Liens in favor of
issuers of surety bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
PROVIDED, HOWEVER, that such letters of credit do not constitute Debt; (e) minor
survey exceptions, minor encumbrances, easements or reservations of, or rights
of others for, licenses, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real property or Liens incidental to the conduct of the business
of such Person or to the ownership of its properties which were not Incurred in
connection with Debt and which do not in the aggregate materially adversely
affect the value of said properties or materially impair their use in the
operation of the business of such Person; (f) Liens securing Debt Incurred to
finance the construction, purchase or lease of, or repairs, improvements or
additions to, property of such Person; PROVIDED, HOWEVER, that the Lien may not
extend to any other property owned by such Person or any of its Subsidiaries at
the time the Lien is Incurred, and the Debt secured by the Lien may not be
Incurred more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien; PROVIDED, FURTHER, HOWEVER, that all such Debt
does not exceed 10% of Total Assets at the time of Incurrence; (g) Liens to
secure Debt permitted under the provisions described in clause (b)(2) and (b)(3)
under "--Certain Covenants --Limitation on Debt"; (h) Liens existing on the
Issue Date; (i) Liens on property or shares of Capital Stock of another Person
at the time such other Person becomes a Subsidiary of such Person; PROVIDED,
HOWEVER, that such Liens are not created, incurred or assumed in connection
with, or in contemplation of, such other Person becoming such a Subsidiary;
PROVIDED, FURTHER, HOWEVER, that such Lien may not extend to any other property
owned by such Person or any of its Subsidiaries; (j) Liens on property at the
time such Person or any of its Subsidiaries acquires the property, including any
acquisition by means of a merger or consolidation with or into such Person or a
Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such
acquisition; PROVIDED, HOWEVER, that the Liens may not extend to any other
property owned by such Person or any of its Subsidiaries; (k) Liens securing
Debt or other obligations of a Subsidiary of such Person owing to such Person or
a wholly owned Subsidiary of such Person; (l) Liens securing Hedging Obligations
so long as such Hedging Obligations relate to Debt that is, and is permitted to
be under the Indenture, secured by a Lien on the same property securing such
Hedging Obligations; (m) Liens on Receivables in connection with the
contribution or sale of such Receivables to an Accounts Receivable Subsidiary;
and (n) Liens to secure any Refinancing (or successive Refinancings) as a whole,
or in part, of any Debt secured by any Lien referred to in the foregoing clauses
(f), (h), (i) and (j); PROVIDED, HOWEVER, that (x) such new Lien shall be
limited to all or part of the same property that secured the original Lien (plus
improvements to or on such property) and (y) the Debt secured by such Lien at
such time is not increased to any amount greater than the sum of (A) the
outstanding principal amount or, if greater, committed amount of the Debt
described under clauses (f), (h), (i) or (j) at the time the original Lien
became a Permitted Lien and (B) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing, refunding, extension,
renewal or replacement. Notwithstanding the foregoing, "Permitted Liens" will
not include any Lien described in clauses (f), (i) or (j) above to the extent
such Lien applies to any Additional Assets acquired directly or indirectly from
Net Available Cash pursuant to the covenant described under "--Certain Covenants
- --Limitation on Sale of Assets and Subsidiary Stock." References to "Debt" in
the foregoing definition of Permitted Liens include Debt and the related
interest or other obligations.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means an underwritten primary public offering
of common stock of Stage pursuant to an effective registration statement under
the Securities Act.
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"Receivables" means accounts, general intangibles or other rights to
payment from obligors arising from extension of credit to obligors, together
with any financing charges or other fees or charges related thereto, and any
related assets which are transferred under the Accounts Receivable Facility or
which are customarily transferred in connection with asset securitization
transactions involving accounts, general intangibles or other rights to payment.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Senior and Senior Subordinated Notes or is redeemable at
the option of the holder thereof at any time on or prior to the first
anniversary of the Stated Maturity of the Senior and Senior Subordinated Notes.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease, exchange or retire, or to issue other
Debt in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Debt" means Debt that Refinances any Debt of Stage or any
Restricted Subsidiary existing on the Issue Date or Incurred in compliance with
the Indentures including Debt that Refinances Refinancing Debt; PROVIDED,
HOWEVER, that (i) such Refinancing Debt has a Stated Maturity no earlier than
the Stated Maturity of the Debt being Refinanced, (ii) such Refinancing Debt has
an Average Life at the time such Refinancing Debt is Incurred that is equal to
or greater than the Average Life of the Debt being Refinanced, (iii) such
Refinancing Debt has an aggregate principal amount or premium, if any, (or if
Inc) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Debt being Refinanced and (iv) with respect to any
Refinancing Debt of Debt other than Senior Debt, such Refinancing Debt shall
rank no more senior, and shall be at least as subordinated, in right of payment
to the Notes as the Debt being so extended, renewed, refunded or refinanced;
PROVIDED FURTHER, HOWEVER, that Refinancing Debt shall not include (x) Debt of a
Subsidiary that Refinances Debt of Stage or (y) Debt of Stage or a Restricted
Subsidiary that Refinances Debt of an Unrestricted Subsidiary.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Debt.
"Restricted Subsidiary" means any Subsidiary of Stage that is not an
Unrestricted Subsidiary, and in all cases shall include SRI.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby Stage or a Restricted Subsidiary
transfers such property to a Person and Stage or a Restricted Subsidiary leases
it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Debt" means any Debt of Stage or any Guarantor secured by a
Lien.
"Senior Debt" of any Person means (I) (i) Debt of such Person, whether
outstanding on the Issue Date or thereafter Incurred and (ii) accrued and unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to such Person to the extent
post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the applicable
Senior and Senior Subordinated Notes; PROVIDED, HOWEVER, that Senior Debt shall
not include (1) any obligation of such Person to any subsidiary of such Person,
(2) any liability for Federal, state, local or other taxes owed or owing by such
Person, (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (4) any Debt of such Person (and any accrued and
unpaid interest in respect thereof) which is subordinate or junior in any
respect to any other Debt or other obligation of such Person, (5) that portion
of any Debt which at the time of Incurrence is Incurred in violation of an
Indenture, (6) Debt owed to, due, or guaranteed on behalf of, any director,
officer or
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employee of such Person or any subsidiary of such Person (including, without
limitation, amounts owed for compensation), and (7) Debt which when Incurred and
without respect to any election under Section 1111(b) of Title 11 United States
Code, is without recourse to such Person and (II) the Bank Debt.
"Senior Subordinated Debt" means (i) with respect to SRI,any other Debt
of SRI that specifically provides that such Debt is to rank PARI PASSU with the
Senior Subordinated Exchange Notes in right of payment and is not subordinated
by its terms in right of payment to any Debt or other obligation of SRI which is
not Senior Debt of SRI and (ii) with respect to any Guarantor, their respective
Senior Subordinated Notes Guaranties and any other Debt of such Person that
specifically provides that such Debt ranks PARI PASSU with such Senior
Subordinated Notes Guaranties in right of payment and is not subordinated by its
terms in right of payment to any Debt or other obligation of such Person which
is not Senior Debt of such Person.
"Significant Subsidiary" of any Person means any Restricted Subsidiary
that would be a "significant subsidiary" of such Person as defined in Rule 1-02
of Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" of any Person means (i) with respect to the
Senior Notes Indenture, any Debt of such Person (whether outstanding on Issue
Date or hereafter Incurred) which is subordinate or junior in right of payment
to the Senior Exchange Notes pursuant to a written agreement and (ii) with
respect to the Senior Subordinated Notes Indenture, any Debt of such Person
(whether outstanding on Issue Date or hereafter Incurred) which is subordinate
or junior in right of payment to the Senior Subordinated Exchange Notes pursuant
to a written agreement, in each case including, without limitation, the Bealls
Holding Subordinated Notes, the FB Holdings Subordinated Notes and the Bealls
Holding Junior Subordinated Debentures.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) Stage, (ii) Stage and one or more Subsidiaries or
(iii) one or more Subsidiaries.
"Tangible Property" means all land, buildings, machinery and equipment
and leasehold interests and improvements which would be reflected on a balance
sheet of Stage prepared in accordance with generally accepted accounting
principles, excluding (i) all rights, contracts and other intangible assets of
any nature whatsoever and (ii) all inventories and other current assets.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof in a money market mutual fund registered under the Investment Company
Act of 1940, the principal of which is invested solely in such direct or
guaranteed obligations, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000 (or
the foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above and (iv) investments in commercial paper, maturing not more than 90
days after the date of acquisition, issued by a corporation (other than an
Affiliate of Stage) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein
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is made of "P-1" (or higher) according to Moody's Investor Service, Inc. or
"A-1" (or higher) according to Standard & Poor's Ratings Group.
"Total Assets" means the total consolidated assets of Stage and its
Subsidiaries, as shown on the most recent balance sheet of Stage.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Unrestricted Subsidiary" means (i) any Subsidiary of Stage that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; (ii) any Subsidiary of an
Unrestricted Subsidiary and (iii) any Accounts Receivable Subsidiary. The Board
of Directors may designate any Subsidiary of Stage (including any newly acquired
or newly formed Subsidiary), to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries own any Capital Stock or Debt of, or holds
any Lien on any property of, Stage or any other Subsidiary of Stage that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets of greater than $1,000, such designation
would be permitted under the covenant described under "--Certain Covenants --
Limitation on Restricted Payments"; and PROVIDED, FURTHER, HOWEVER, that (1) no
Subsidiary of Stage that is a Restricted Subsidiary on the Issue Date may be
designated an Unrestricted Subsidiary and (2) no Subsidiary holding, directly or
indirectly, any assets held by Stage or a Restricted Subsidiary on the Issue
Date may be designated an Unrestricted Subsidiary. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED,
HOWEVER, that immediately after giving effect to such designation (x) Stage
could Incur $1.00 of additional Debt under paragraph (a) of the covenant
described under "--Certain Covenants --Limitation on Debt" and (y) no Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be by Stage to the Trustee by promptly filing with the Trustee a
copy of the board resolution giving effect to such designation and an Officer's
Certificate certifying that such designation complied with the foregoing
provisions.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled (without regard to any
contingency) to vote in the election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by Stage or
another Wholly Owned Subsidiary.
"Working Capital Facility Provisions" means the provisions of the New
Credit Agreement pursuant to which lenders thereunder have committed to make
available to SRI and certain other Subsidiaries of Stage a revolving credit and
letter of credit facility.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were originally sold by the Company on June 17, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Notes to qualified institutional buyers in reliance on
Rule 144A under the Securities Act. As a condition to the Purchase Agreement,
the Company entered into the Registration Rights Agreement with the Initial
Purchasers (the "Registration Rights Agreement") pursuant to which the Company
has agreed, for the benefit of the holders of the Notes, at the Company's cost,
to use its best efforts to (i) file the Exchange Offer Registration Statement
within 60 days after the date of the original issue of the Notes with the
Commission with respect to the Exchange Offer for the Exchange Notes, and (ii)
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act within 150 days after the date of original issuance of the
Notes. Upon the Exchange Offer Registration Statement being declared effective,
the Company will offer the Exchange Notes in exchange for surrender of the
Notes. The Company will keep the Exchange Offer open for not less than 30
calendar days (or longer if required by applicable law) after the date on which
notice of the Exchange Offer is mailed to the holders of the Notes. For each
Note surrendered to the Company pursuant to the Exchange Offer, the holder of
such Note will receive an Exchange Note having a principal amount equal to that
of the surrendered Note. Interest on each Exchange Note will accrue from the
date of its original issue.
Under existing interpretations of the staff of the Commission contained
in several no-action letters to third parties, the Exchange Notes would in
general be freely tradeable after the Exchange Offer without further
registration under the Securities Act. However, any purchaser of Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing the Exchange Notes (i) will not be able to rely
on the interpretation of the staff of the Commission, (ii) will not be able to
tender its Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Notes, unless such sale or transfer
is made pursuant to an exemption from such requirements.
Each holder of the Notes (other than certain specified holders) who
wishes to exchange the Notes for Exchange Notes in the Exchange Offer will be
required to represent in the Letter of Transmittal that (i) it is not an
affiliate of the Company, (ii) the Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
commencement of rangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes. In addition,
in connection with any resales of Exchange Notes, any Participating
Broker-Dealer who acquired the Notes for its own account as a result of
market-making or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act. The Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of the Notes) with the prospectus contained in the
Exchange Offer Registration Statement. Under the Registration Rights Agreement,
the Company is required to allow Participating Broker-Dealers and other persons,
if any, subject to similar prospectus delivery requirements to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such Exchange Notes.
In the event that changes in the law or the applicable interpretations
of the staff of the Commission do not permit the Company to effect such an
Exchange Offer, or if for any other reason the Exchange Offer is not consummated
within 180 days after the original issue date of the Notes, or if any holder of
the Notes (other than an "affiliate" of the Company or the Initial Purchaser) is
not eligible to participate in the Exchange Offer, or upon the request of the
Initial Purchaser under certain circumstances, the Company will, at its cost,
(a) as promptly as practicable but in no event more than 30 days after so
required or requested, file the Shelf Registration Statement covering resales of
the Notes, (b) use its best efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act and (c) use its best efforts to
keep effective the Shelf Registration Statement for a period of two years (or
for such longer period as may be required under certain circumstances) from the
date of its effectiveness or such shorter period that will terminate when the
Notes covered by the Shelf Registration Statement can be sold pursuant to Rule
144 without any limitation under clauses (c), (e), (f) and (h) of Rule 144 (or
any successor rule thereof). The Company will, in the event of the filing of the
Shelf Registration Statement, provide to each applicable holder of the Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective
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and take certain other actions as are required to permit unrestricted resales of
the Notes. A holder of Notes that sells such Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each holder
of the Notes will be required to deliver information to be used in connection
with the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Notes included in the Shelf Registration
Statement and to benefit from the provisions set forth in the following
paragraph.
If (i) on or prior to August 18, 1997, neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been filed with
the SEC; (ii) on or prior to December 15, 1997, neither the Registered Exchange
Offer is consummated nor the Shelf Registration Statement is declared effective;
or (iii) after the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Exchange Notes in accordance with and during the
periods specified in the Registration Rights Agreement (each such event referred
to in clause (i) through (iii) being herein called a "Registration Default"),
additional interest will accrue on the Senior and Senior Subordinated Notes over
and above the stated interest at the rate of 0.50% per annum from and including
the date on which any such Registration Default shall occur to, but excluding,
the date on which all Registration Defaults have been cured. At all other times,
the Notes will bear interest at the applicable rate set forth on the cover page
hereof.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original interest payment dates
as the Notes. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Notes, multiplied by a fraction, the numerator of which is the number of
days such Additional Interest rate was applicable during such period (determined
on the basis of a 360-day year comprised of twelve 30-day months and, in the
case of a partial month, the actual number of days elapsed), and, the
denominator of which is 360.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Notes will not have any further registration rights and such Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Notes in exchange for each $1,000 principal amount of outstanding Notes
accepted in the Exchange Offer. Holders may tender some or all of their Notes
pursuant to the Exchange Offer. However, Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Notes, (ii) the Exchange Notes
have been registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the Exchange Notes
will not be entitled to certain rights under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Notes in certain circumstances relating to the timing of the Exchange Offer, all
of which rights will terminate when the Exchange Offer is terminated. The
Exchange Notes will evidence the same debt as the Notes and will be entitled to
the benefits of the Indentures.
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As of the date of this Prospectus, $200,000,000 aggregate principal
amount of Senior Notes were outstanding and $100,000,000 aggregate principal
amount of Senior Subordinated Notes were outstanding. The Company has fixed the
close of business on __________, 1997 as the record date for the Exchange Offer
for purposes of determining the persons to whom this Prospectus and the Letter
of Transmittal will be mailed initially.
Holders of Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions into the
exchange of Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
__________, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. Notwithstanding the
foregoing, the Company will not extend the Expiration Date beyond _________,
1997.
In order to extend the Exchange Offer, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "--Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance.
Holders of Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on January 15, 1998. Interest on the Notes accepted for exchange
will cease to accrue upon issuance of the Exchange Notes.
Interest on the Senior Exchange Notes and the Senior Subordinated
Exchange Notes is payable semi-annually on each January 15 and July 15,
commencing January 15, 1998.
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PROCEDURES FOR TENDERING
Only a holder of Notes may tender such Notes in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Notes and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Notes, Letter of
Transmittal and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. Delivery of the Notes may
be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the
Company the representations set forth above in the third paragraph under the
heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instruction
to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Notes listed therein, such Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Notes at the book-entry transfer facility, The Depository Trust Company (the
"Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Notes by causing such Book-Entry Transfer Facility to
transfer such Notes into the
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Exchange Agent's account with respect to the Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
The Depositary and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Notes to the Depositary in accordance with DTC's ATOP
procedures for transfer. DTC will then send an Agent's Message to the
Depositary.
The term "Agent's Message" means a message transmitted by DTC, received
by the Depositary and forming part of the confirmation of a book-entry transfer,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that SRI may enforce such agreement
against such participant. In the case of an Agent's Message relating to
guaranteed delivery, the term means a message transmitted by DTC and received by
the Depositary, which states that DTC has received an express acknowledgment
from the participant in DTC tendering Notes that such participant has received
and agrees to be bound by the Notice of Guaranteed Delivery.
Notwithstanding the foregoing, in order to validly tender in the
Exchange Offer with respect to Securities transferred pursuant to ATOP, a DTC
participant using ATOP must also properly complete and duly execute the
applicable Letter of Transmittal and deliver it to the Depositary. Pursuant to
authority granted by DTC, any DTC participant which has Notes credited to its
DTC account at any time (and thereby held of record by DTC's nominee) may
directly provide a tender as though it were the registered holder by so
completing, executing and delivering the applicable Letter of Transmittal to the
Depositary. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right in its sole discretion to waive any defects, irregularities
or conditions of tender as to particular Notes. The Company's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
the Letter of Transmittal) will be final and binding on all parties. Unless
waived, aconnection with tenders of Notes must be cured within such time as the
Company shall determine. Although the Company intends, to notify holders of
defects or irregularities with respect to tenders of Notes, neither the Company,
the Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering holders, unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
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(b) prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder, the
certificate number(s) of such Notes and the principal amount of Notes
tendered, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility), and any other
documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal
(of facsimile thereof), as well as the certificate(s) representing all
tendered Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility), and all other documents required by
the Letter of Transmittal are received by the Exchange Agent upon five
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Notes to be withdrawn (the "Depositor"),
(ii) identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Notes register the transfer of such Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Notes are to
be registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Notes so withdrawn are validly retendered. Any
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time prior
to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or Exchange Notes for, any Notes, and
may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Notes, if:
(a) any action or proceeding is instituted or threatened in
any court or by or before any governmental agency with respect to the
Exchange Offer which, in the sole judgment of the Company, might
materially impair the ability of the Company to proceed with the
Exchange Offer or any material adverse development has occurred in any
existing action or proceeding with respect to the Company or any of its
subsidiaries; or
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(b) any law, statute, rule, regulation or interpretation by
the staff of the Commission is proposed, adopted or enacted, which, in
the sole judgment of the Company, might materially impair the ability
of the Company to proceed with the Exchange Offer or materially impair
the contemplated benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which
approval the Company shall, in its sole discretion, deem necessary for
the consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Notes and
return all tendered Notes to the tendering holders, (ii) extend the Exchange
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Notes (see
"--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
State Street Bank and Trust Company
2 International Place (4th Floor)
Boston, Massachusetts 02110
Delivery to an address other than as set forth above will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, which is face value, as reflected in the Company's accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Notes are eligible for resale pursuant to Rule 144A under the
Securities Act, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A
96
<PAGE>
in a transaction meeting the requirements of Rule 144A, in accordance with Rule
144 under the Securities Act, or pursuant to another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel reasonably acceptable to the Company), (iii) outside the United States
to a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act, or (iv) pursuant to an effective registration statement
under the Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who receives Exchange Notes in exchange for Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Notes, where such Notes were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives an Exchange Note
for its own account in exchange for Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
97
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion (including the opinion of special counsel
described below) is based upon current provisions of the Internal Revenue Code
of 1986, as amended, applicable Treasury regulations, judicial authority and
administrative rulings and practice. There can be no assurance that the Internal
Revenue Service (the "Service") will not take a contrary view, and no ruling
from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Company recommends that
each holder consult such holder's own tax advisor as to the particular tax
consequences of exchanging such holder's Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
Kirkland & Ellis, special counsel to the Company, has advised the
Company that in its opinion, the exchange of the Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for federal
income tax purposes because the Exchange Notes will not be considered to differ
materially in kind or extent from the Notes. Rather, the Exchange Notes received
by a holder will be treated as a continuation of the Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to holders
exchanging Notes for Exchange Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sales of the
Exchange Notes by Participating Broker-Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchaser or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating Broker-Dealer and/or the purchasers of any such Exchange Notes.
Any Participating Broker-Dealer that resells the Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compe The Letter
of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the Holders of the Senior and Senior Subordinated Notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
Holders of the Securities (including any Broker-Dealer) against certain
liabilities under the Securities Act.
98
<PAGE>
Prior to the Exchange Offer, there has not been any public market for
the Notes. The Notes have not been registered under the Securities Act and will
be subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in this
Exchange Offer. The holders of Notes (other than any such holder that is an
"affiliate" of the company within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Company is required to file a Shelf
Registration Statement with respect to such Notes. The Exchange Notes will
constitute a new issue of securities with no established trading market. SRI
does not intend to list the Exchange Notes on any national securities exchange
or to seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer and the pendency of
the Shelf Registration Statements. Accordingly, no assurance can be given that
an active public or other market will develop for the Exchange Notes or as to
the liquidity of the trading market for the Exchange Notes. If a trading market
does not develop or is not maintained, holders of the Exchange Notes may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them at all. If a market for the Exchange Notes develops, any such market may be
discontinued at any time.
If a public trading market develops for the Exchange Notes, future
trading prices of the Exchange Notes will depend on many factors, including,
among other things, prevailing interest rates, SRI's operating results and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of SRI, the Exchange Notes may trade at a discount from their
principal amount.
LEGAL MATTERS
Certain legal matters in connection with the issuance of Exchange Notes
offered hereby will be passed upon for the Company by Kirkland & Ellis, New
York, New York.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of the Company at February 1,
1997 and February 3, 1996 and for each of the three years in the period ended
February 1, 1997, included in this Prospectus, have been audited by Price
Waterhouse LLP, independent accountants, as stated in their report appearing
elsewhere herein. The consolidated financial statements of CR Anthony as of and
for the 52 weeks ended February 1, 1997, 53 weeks ended February 3, 1996 and the
52 weeks ended January 29, 1995, included in this Prospectus, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing elsewhere herein.
AVAILABLE INFORMATION
SRI has filed with the Commission a Registration Statement on Form S-4
(the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to SRI and the Exchange Offer, reference is made to the Exchange
Offer Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the commission at 75 Park
Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Additionally, the
Commission maintains a web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission, including the Company.
99
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The following documents of Stage, which have been filed with the
Commission pursuant to the Exchange Act, are incorporated herein by reference:
1. Stage's Current Report on Form 8-K dated June 26, 1997.
2. Stage's Proxy Statement/ Prospectus on Form S-4 dated May 27,
1997.
3. Stage's Quarterly Report on Form 10-Q for the three months
ended May 3, 1997.
4. Stage's Annual Report on Form 10-K for the 52 weeks ended
February 1, 1997.
5. Stage's Proxy Statement dated April 16, 1997.
6. Stage's Current Report on Form 8-K dated March 5, 1997.
All documents filed by Stage with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination or completion of this Exchange Offer
shall be deemed to be incorporated by reference in this Prospectus and to be
part of this Prospectus from the date of the filing of such document. Any
statement contained herein or 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
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Stage hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any or all of the information filed by it that
has been incorporated by reference in this Prospectus (not including exhibits to
the information that is incorporated by reference herein unless such exhibits
are specifically incorporated by reference in such information). Requests for
such information should be directed to Stage Stores, Inc., 10201 Main Street,
Houston, Texas 77025, Attention: Investor Relations (telephone number: (713)
667-5601).
100
<PAGE>
INDEX TO FINANCIAL STATEMENTS
STAGE STORES, INC.
AND
CR ANTHONY COMPANY
Page
----
FINANCIAL STATEMENTS OF STAGE STORES, INC.
UNAUDITED FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheet at May 3, 1997 and
February 1, 1997 ................................................... F-2
Consolidated Condensed Statement of Income for the three
months ended May 3, 1997 and May 4, 1996 ........................... F-3
Consolidated Condensed Statement of Cash Flows for the
three months ended May 3, 1997 and May 4, 1996 ..................... F-4
Consolidated Condensed Statement of Stockholders' Equity
for the three months ended May 3, 1997 ............................. F-5
Notes to Unaudited Consolidated Condensed Financial Statements ....... F-6
AUDITED FINANCIAL STATEMENTS
Report of Independent Accountants .................................... F-8
Consolidated Balance Sheet at February 1, 1997 and February 3, 1996 .. F-9
Consolidated Statement of Operations for 1996, 1995 and 1994 ......... F-10
Consolidated Statement of Cash Flows for 1996, 1995 and 1994 ......... F-11
Consolidated Statement of Stockholders' Equity for 1996, 1995 and 1994 F-13
Notes to Consolidated Financial Statements ........................... F-14
FINANCIAL STATEMENTS OF C.R. ANTHONY COMPANY
UNAUDITED FINANCIAL STATEMENTS
Consolidated Balance Sheets at May 3, 1997, May 4, 1996 and
February 1, 1997 ................................................... F-28
Consolidated Statements of Operations for the thirteen weeks
ended May 3, 1997 and May 4, 1996 .................................. F-29
Consolidated Statements of Cash Flows for the thirteen weeks
ended May 3, 1997 and May 4, 1996 .................................. F-30
Notes to Unaudited Consolidated Financial Statements ................. F-31
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report ......................................... F-32
Consolidated Balance Sheets at February 1, 1997 and
February 3, 1996 ................................................... F-33
Consolidated Statements of Income for 1996, 1995 and 1994 ............ F-34
Consolidated Statements of Stockholders' Equity for 1996,
1995 and 1994 ...................................................... F-35
Consolidated Statements of Cash Flows for 1996, 1995 and 1994 ........ F-36
Notes to Consolidated Financial Statements ........................... F-37
F-1
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUE)
FEBRUARY 1,
MAY 3, 1997 1997
------------ ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents ...................... $ 10,017 $ 18,286
Undivided interest in accounts
receivable trust ............................ 65,382 80,672
Merchandise inventories ........................ 222,762 187,717
Prepaid expenses ............................... 19,783 15,690
Other current assets ........................... 18,457 32,797
------------ ------------
Total current assets ........................ 336,401 335,162
Property, equipment and leasehold
improvements, net ........................... 116,687 111,189
Goodwill, net .................................. 47,016 47,173
Other assets ................................... 15,089 15,759
------------ ------------
$ 515,193 $ 509,283
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ............................... $ 57,620 $ 54,336
Accrued interest ............................... 7,881 12,908
Accrued expenses and other current
liabilities ................................. 32,850 32,699
------------ ------------
Total current liabilities ................... 98,351 99,943
Long-term debt ................................. 298,599 298,453
Other long-term liabilities .................... 18,859 18,621
------------ ------------
Total liabilities ........................... 415,809 417,017
------------ ------------
Preferred stock, par value $1.00, non-voting,
3 shares authorized, no shares issued
or outstanding .............................. -- --
Common stock, par value $0.01, 75,000 shares
authorized, 22,048 and 22,033 shares
issued and outstanding, respectively ........ 220 220
Class B common stock, par value $0.01,
non-voting 3,000 shares authorized, 1,251
issued and outstanding ...................... 13 13
Additional paid-in capital .................. 169,835 169,811
Accumulated deficit ......................... (70,684) (77,778)
------------ ------------
Stockholders' equity ........................ 99,384 92,266
------------ ------------
Commitments and contingencies ............... -- --
------------ ------------
$ 515,193 $ 509,283
============ ============
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
(UNAUDITED)
THREE MONTHS ENDED
----------------------------
MAY 3, 1997 MAY 4, 1996
------------ ------------
Net sales ...................................... $ 191,512 $ 163,177
Cost of sales and related buying,
occupancy and distribution expenses .......... 129,587 111,096
------------ ------------
Gross profit ................................... 61,925 52,081
Selling, general and administrative expenses ... 41,258 35,965
Store opening and closure costs ................ 143 71
------------ ------------
Operating income ............................... 20,524 16,045
Interest, net .................................. 8,942 11,588
------------ ------------
Income before income tax ....................... 11,582 4,457
Income tax expense ............................. 4,488 1,805
------------ ------------
Net income ..................................... $ 7,094 $ 2,652
============ ============
Earnings per common share data:
Earnings per common share ...................... $ 0.30 $ 0.21
============ ============
Weighted average common shares outstanding ..... 23,904 12,861
============ ============
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
---------------------------
MAY 3, 1997 MAY 4, 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................... $ 7,094 $ 2,652
------------ ------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ............... 3,620 3,149
Deferred income taxes ....................... 487 (958)
Accretion of discount ....................... 146 3,768
Amortization of debt issue costs ............ 530 469
Changes in working capital .................. (10,990) (12,295)
------------ ------------
Total adjustments .................... (6,207) (5,867)
------------ ------------
Net cash provided by (used in)
operating activities .................. 887 (3,215)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, equipment and
leasehold improvements .................... (9,097) (6,449)
------------ ------------
Net cash used in investing activities ... (9,097) (6,449)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock .................. 20 34
Payments on long-term debt .................. -- (125)
Redemption of common stock .................. -- (14)
Additions to debt issue costs ............... (79) (92)
------------ ------------
Net cash used in financing activities ... (59) (197)
------------ ------------
Net decrease in cash and cash equivalents ........ (8,269) (9,861)
Cash and cash equivalents:
Beginning of period ......................... 18,286 20,273
------------ ------------
End of period ............................... $ 10,017 $ 10,412
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ............................... $ 13,247 $ 13,207
============ ============
Income taxes paid ........................... $ 2 $ 5,883
============ ============
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------
CLASS B
--------------------
SHARES SHARES ADDITIONAL ACCUMU-
OUTSTAND- OUTSTAND- PAID-IN LATED
ING AMOUNT ING AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ --------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1997 ............... 22,033 $ 220 1,251 $ 13 $ 169,811 $(77,778) $92,266
Net income .............................. -- -- -- -- -- 7,094 7,094
Vested compensatory stock
options .............................. -- -- -- -- 4 -- 4
Exercise of stock options ............... 15 -- -- -- 20 -- 20
--------- ------ --------- ------ ---------- -------- -------
Balance, May 3, 1997 .................... 22,048 $ 220 1,251 $ 13 $ 169,835 $(70,684) $99,384
========= ====== ========= ====== ========== ======== =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
STAGE STORES, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated condensed financial statements
of Stage Stores, Inc. (the "Company" or "Stage Stores"), have been prepared in
accordance with Rule 10-01 of Regulation S-X and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Those adjustments, which include only normal
recurring adjustments, that are, in the opinion of management, necessary for a
fair presentation of the results of the interim periods have been made. The
results of operations for such interim periods are not necessarily indicative of
results of operations for a full year. The unaudited consolidated condensed
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended February 1, 1997,
filed with Stage Stores, Inc.'s Annual Report on Form 10-K/A. Certain
reclassifications have been made to prior year amounts to conform with the
current year presentation. References to a particular year are to the Company's
fiscal year which is the 52 or 53 week period ending on the Saturday closest to
January 31 of the following calendar year (e.g., a reference to "1997" is a
reference to the fiscal year ended January 31, 1998).
The Company, through its wholly owned subsidiary, Specialty Retailers, Inc.
("SRI"), operates family apparel stores primarily under the names "Bealls",
"Palais Royal" and "Stage" offering branded fashion apparel and accessories for
women, men and children. As of May 3, 1997, the Company operated 327 stores in
20 states located throughout the central United States.
2. Pursuant to the accounts receivable securitization program (the
"Accounts Receivable Program"), the Company transfers all of the accounts
receivable generated by the holders of the Company's private label credit card
accounts to a wholly-owned special purpose entity, SRI Receivables Purchase Co.,
Inc. ("SRPC"). SRPC, in turn, transfers the accounts receivable to a
securitization vehicle, a special purpose trust (the "Trust"), in exchange for
cash or an increase in a retained interest in the Trust which is represented by
two certificates of beneficial ownership (the "Retained Certificates"). SRPC is
operated in a fashion intended to ensure that its assets and liabilities are
distinct from those of the Company and its other affiliates as SRPC's creditors
have a claim on its assets prior to becoming available to any creditor of the
Company.
3. During October 1996, the Company completed an initial public offering
(the "Offering") of its common stock. The Company sold 10,750,000 shares at an
initial offering price of $16.50 per share. The net proceeds from the Offering
were approximately $165.7 million after deducting underwriting discounts and
expenses related to the transaction. The net proceeds were used primarily to
retire the 12 3/4% Senior Discount Debentures due 2000 (the "Senior Discount
Debentures"). The remaining proceeds of approximately $26.5 million were used
for general corporate purposes.
Immediately prior to the Offering, the Board of Directors approved a .94727
for 1 reverse stock split, the effect of which is reflected on the accompanying
financial statements for all periods presented.
4. On March 5, 1997, the Company reached a definitive agreement to acquire
C.R. Anthony Company ("CR Anthony"), a retailer of branded and private label
apparel for the entire family which operated 238 stores in 16 southwestern and
Rocky Mountain states as of May 3, 1997. The transaction is subject to approval
by the shareholders of CR Anthony and other closing conditions. In addition, the
agreement contains provisions relating to the obligations of the parties in the
event of termination of the agreement. It is expected that the transaction will
be completed by mid-year 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
5. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). SFAS 128, which is effective for periods ending after December 15, 1997,
specifies the computation, presentation and disclosure requirements of earnings
per share ("EPS") and supersedes Accounting Principles Board Opinion No. 15
("APB 15"). SFAS 128 requires a dual presentation of basic and diluted EPS.
Basic EPS, which excludes the impact of common stock equivalents, replaces
primary EPS. Diluted EPS, which utilizes the average market price per share as
opposed to the greater of the average market price per share or ending market
price per share when applying the treasury stock method in determining common
stock equivalents, replaces fully diluted EPS. Basic and diluted EPS for all
historical periods presented, calculated assuming
F-6
<PAGE>
SFAS 128 was effective at the beginning of such historical period, would not be
materially different than the presentations using APB 15.
F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Stage Stores, Inc.:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Stage Stores, Inc. and its subsidiaries at February 1, 1997 and
February 3, 1996, and the results of their operations and their cash flows for
each of the three years in the period ended February 1, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
March 12, 1997
F-8
<PAGE>
STAGE STORES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PAR VALUE AND NUMBER OF SHARES)
FEBRUARY 1, FEBRUARY 3,
1997 1996
--------- ---------
ASSETS
Cash and cash equivalents .............................. $ 18,286 $ 20,273
Undivided interest in accounts receivable trust ........ 80,672 56,515
Merchandise inventories ................................ 187,717 150,032
Prepaid expenses ....................................... 15,690 17,378
Other current assets ................................... 32,797 12,225
--------- ---------
Total current assets ................................ 335,162 256,423
Property, equipment and leasehold improvements, net .... 111,189 93,118
Goodwill, net .......................................... 47,173 30,876
Other assets ........................................... 15,759 27,837
--------- ---------
$ 509,283 $ 408,254
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ....................................... $ 54,336 $ 41,494
Accrued interest ....................................... 12,908 12,327
Accrued employee compensation costs .................... 10,068 7,892
Accrued expenses and other current liabilities ......... 22,631 24,602
--------- ---------
Total current liabilities ........................... 99,943 86,315
Long-term debt ......................................... 298,453 380,039
Other long-term liabilities ............................ 12,638 14,214
Deferred income taxes .................................. 5,983 --
--------- ---------
Total liabilities ................................... 417,017 480,568
--------- ---------
Preferred stock, par value $1.00, non-voting, 2,500
shares authorized, no shares issued or outstanding ... -- --
Common stock, par value $0.01, 75,000,000 shares
authorized, 22,033,303 and 10,866,041 shares
issued and outstanding, respectively ................. 220 109
Class B common stock, par value $0.01, non-voting
3,000,000 shares authorized, 1,250,584 and
1,391,303 shares issued and outstanding, respectively 13 14
Additional paid-in capital ............................. 169,811 3,800
Accumulated deficit .................................... (77,778) (76,237)
--------- ---------
Stockholders' equity (deficit) ....................... 92,266 (72,314)
--------- ---------
Commitments and contingencies .......................... -- --
--------- ---------
$ 509,283 $ 408,254
========= =========
The accompanying notes are an integral part of this statement.
F-9
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
FISCAL YEAR
-----------------------------------
1996 1995 1994
---------- ---------- ----------
Net sales ................................ $ 776,550 $ 682,624 $ 581,463
Cost of sales and related buying,
occupancy and distribution expenses ... 532,563 468,347 398,659
---------- ---------- ----------
Gross profit ............................. 243,987 214,277 182,804
Selling, general and
administrative expenses ............... 172,579 149,102 126,200
Store opening and closure costs .......... 2,838 3,689 5,647
---------- ---------- ----------
Operating income ......................... 68,570 61,486 50,957
Interest, net ............................ 45,954 43,989 40,010
---------- ---------- ----------
Income before income tax and
extraordinary item .................... 22,616 17,497 10,947
Income tax expense ....................... 8,594 6,767 4,317
---------- ---------- ----------
Income before extraordinary item ......... 14,022 10,730 6,630
Extraordinary item - early retirement
of debt ............................... (16,081) -- (308)
---------- ---------- ----------
Net income (loss) ........................ $ (2,059) $ 10,730 $ 6,322
========== ========== ==========
Earnings (loss) per common share data:
Earnings per common share before
extraordinary item .................... $ 0.88 $ 0.84 $ 0.54
Extraordinary item - early retirement
of debt ............................... (1.01) -- (0.03)
---------- ---------- ----------
Earnings (loss) per common share after
extraordinary item .................... $ (0.13) $ 0.84 $ 0.51
========== ========== ==========
Weighted average common shares
outstanding ........................... 15,927 12,726 12,393
========== ========== ==========
The accompanying notes are an integral part of this statement.
F-10
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .......................................... $ (2,059) $ 10,730 $ 6,322
---------- ---------- ----------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization ............................ 14,181 12,816 9,997
Deferred income taxes .................................... 15,650 (4,065) (3,608)
Accretion of discount .................................... 11,097 13,940 12,286
Amortization of debt issue costs ......................... 2,104 1,860 1,674
Issuance of long-term debt in lieu of interest payment ... -- 147 282
Loss on early retirement of debt ......................... 16,081 -- 308
Changes in operating assets and liabilities:
Decrease (increase) in undivided interest in
accounts receivable trust ......................... (18,815) 7,885 (11,974)
Increase in merchandise inventories ................... (28,199) (31,650) (14,077)
Increase in other assets .............................. (3,339) (6,611) (3,265)
Increase (decrease) in accounts payable
and accrued liabilities ........................... (6,614) 1,202 11,861
---------- ---------- ----------
Total adjustments ................................... 2,146 (4,476) 3,484
---------- ---------- ----------
Net cash provided by operating activities ............. 87 6,254 9,806
---------- ---------- ----------
Cash flows from investing activities:
Decrease (increase) in restricted investments ............ -- (100) 10,811
Acquisitions, net of cash acquired ....................... (27,346) (1,167) (20,840)
Additions to property, equipment and leasehold
improvements, net ..................................... (26,096) (28,638) (19,706)
---------- ---------- ----------
Net cash used in investing activities ................. (53,442) (29,905) (29,735)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from:
Long-term debt ............................................. 30,000 16,458 --
Common stock ............................................... 165,969 68 97
Payments on:
Long-term debt ........................................... (140,677) (266) (10,442)
Redemption of common stock ............................... (46) (122) --
Additions to debt issue costs ............................ (3,878) (807) (448)
---------- ---------- ----------
Net cash provided by (used in)
financing activities ............................... 51,368 15,331 (10,793)
---------- ---------- ----------
Net decrease in cash and cash equivalents ............. (1,987) (8,320) (30,722)
Cash and cash equivalents:
Beginning of year ........................................ 20,273 28,593 59,315
---------- ---------- ----------
End of year .............................................. $ 18,286 $ 20,273 $ 28,593
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-11
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
FISCAL YEAR
----------------------------
1996 1995 1994
-------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid .................................. $ 32,094 $ 27,845 $ 28,414
======== ======== ========
Income taxes paid .............................. $ 6,988 $ 5,939 $ 5,198
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased Uhlmans, Inc. on June 3, 1996, Mammouth, Inc. and
Szolds, Inc. during 1995 and a significant portion of the assets of
Beall-Ladymon, Inc. during 1994. In conjunction with these acquisitions,
liabilities were assumed as follows:
<TABLE>
<S> <C> <C> <C>
Fair value allocated to assets acquired ......................... $ 35,001 $ 1,702 $ 24,043
Cash paid for assets acquired, including acquisition expenses ... (27,346) (1,167) (20,840)
Purchase price payable at closing ............................... -- (393) --
-------- -------- --------
Liabilities assumed ............................................. $ 7,655 $ 142 $ 3,203
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-12
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT NUMBERS OF SHARES)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------
CLASS B
------------------ ADDITIONAL
SHARES SHARES PAID-IN ACCUMULATED
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL DEFICIT TOTAL
----------- ---- ---------- ---- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 29, 1994 ........................ 10,735,544 $107 1,391,303 $ 14 $ 3,228 $(91,076) $ (87,727)
----------- ---- ---------- ---- --------- -------- ---------
Net income ....................................... -- -- -- -- -- 6,322 6,322
Vested compensatory stock options ................ -- -- -- -- 247 -- 247
Issuance of stock ................................ 45,469 -- -- -- 97 -- 97
Adjustment for minimum pension liability ......... -- -- -- -- -- (132) (132)
----------- ---- ---------- ---- --------- -------- ---------
Balance, January 28, 1995 ........................ 10,781,013 107 1,391,303 14 3,572 (84,886) (81,193)
Net income ....................................... -- -- -- -- -- 10,730 10,730
Vested compensatory stock options ................ -- -- -- -- 284 -- 284
Issuance of stock ................................ 115,208 2 -- -- 66 -- 68
Adjustment for minimum pension liability ......... -- -- -- -- -- (2,081) (2,081)
Retirement of stock .............................. (30,180) -- -- -- (122) -- (122)
----------- ---- ---------- ---- --------- -------- ---------
Balance, February 3, 1996 ........................ 10,866,041 109 1,391,303 14 3,800 (76,237) (72,314)
Net loss ......................................... -- -- -- -- -- (2,059) (2,059)
Vested compensatory stock options ................ -- -- -- -- 198 -- 198
Issuance of stock ................................ 11,032,236 110 -- -- 165,859 -- 165,969
Conversion of Class B common stock ............... 140,719 1 (140,719) (1) -- -- --
Adjustment for minimum pension liability ......... -- -- -- -- -- 518 518
Retirement of stock .............................. (5,693) -- -- -- (46) -- (46)
----------- ---- ---------- ---- --------- -------- ---------
Balance, February 1, 1997 ........................ 22,033,303 $220 1,250,584 $ 13 $ 169,811 $(77,778) $ 92,266
=========== ==== ========== ==== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-13
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS: Stage Stores, Inc. ("Stage Stores" or the
"Company"), through its wholly owned subsidiary, Specialty Retailers, Inc.
("SRI"), operates family apparel stores primarily under the names "Bealls",
"Palais Royal" and "Stage" offering branded fashion apparel and accessories for
women, men and children. As of February 1, 1997, the Company operated 315 stores
in nineteen states located throughout the central United States.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of Stage Stores and its wholly owned subsidiaries. All
significant intercompany transactions have been eliminated in consolidation.
FISCAL YEAR: References to a particular year are to the Company's
fiscal year which is the 52 or 53 week period ending on the Saturday closest to
January 31 of the following calendar year (e.g., a reference to "1996" is a
reference to the fiscal year ended February 1, 1997). All fiscal years presented
consisted of 52 weeks except for 1995 which consisted of 53 weeks.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
ACCOUNTS RECEIVABLE SECURITIZATION: The Company securitizes all of its
trade accounts receivable through a wholly owned special purpose entity, SRI
Receivables Purchase Co., Inc. ("SRPC"). SRPC holds a retained interest in the
securitization vehicle, a special purpose trust (the "Trust"), which is
represented by two certificates of beneficial ownership in the Trust (the
"Retained Certificates"). The Company accounts for the Retained Certificates
under Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS 115"). Under SFAS 115,
the Retained Certificates are accounted for as debt securities and classified as
trading securities. Accordingly, the Retained Certificates are recorded at fair
value in the accompanying balance sheet with any change in fair value reflected
currently in income.
In June 1996, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 125, "Accounting for Transfers of Financial Assets and
Extinguishments of Liabilities" ("SFAS 125"). Among other things, SFAS 125
provides new accounting and reporting standards for sales, securitization and
servicing of receivables and is generally effective for transactions occurring
after December 31, 1996. The Company's current accounting policy is consistent
with the provisions of SFAS 125 and therefore, the implementation of this
statement had no impact on the Company's financial statements.
MERCHANDISE INVENTORIES: The Company states its merchandise inventories
at the lower of cost or market, cost being determined using the retail last-in,
first-out ("LIFO") method. Market is estimated on a pool-by-pool basis. The
Company believes that the LIFO method, which charges the most recent merchandise
costs to the results of current operations, provides a better matching of
current costs with current revenues in the determination of operating results.
Some companies use the retail first-in, first-out ("FIFO") method in valuing
their inventories. If the retail FIFO method had been used, inventories at
February 1, 1997 and February 3, 1996 would have been lower by $5.3 million and
$3.5 million, respectively.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS: Property, equipment and
leasehold improvements are stated at cost and depreciated over their estimated
useful lives using the straight-line method. The estimated useful lives of
leasehold improvements do not exceed the term of the related lease, including
renewal options. The estimated useful lives in years are as follows:
Buildings............................................ 20-25
Store and office fixtures and equipment.............. 7-12
Warehouse equipment.................................. 5-15
Leasehold improvements............................... 15-50
F-14
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INCOME TAXES: The provision for income taxes is computed based on the
pretax income included in the consolidated statement of operations. The asset
and liability approach is used to recognize deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax basis of assets and liabilities.
EARNINGS (LOSS) PER COMMON SHARE: Common stock options outstanding are
treated as common stock equivalents in the computation of earnings or loss per
common share using the treasury stock method. Prior to the initial public
offering of the Company's common stock (see Note 2), the fair value of the
Company's common stock was determined in good faith by the Board of Directors
based upon the Company's historical and projected financial performance.
STOCK SPLIT: Share and per share amounts for all periods presented
reflect the impact of a .94727 for 1 reverse stock split of the Company's common
stock consummated concurrently with the Company's initial public offering.
DEBT ISSUE COSTS: Debt issue costs are accounted for as a deferred
charge and amortized on a straight-line basis over the term of the related
issue. Amortization of debt issue costs were $2.1 million, $1.9 million and $1.7
million for 1996, 1995 and 1994, respectively.
GOODWILL AND OTHER INTANGIBLES: The Company amortizes goodwill and
intangible assets on a straight-line basis over the estimated future periods
benefited, not to exceed forty years. Amortization periods for goodwill and
other intangibles associated with acquisitions are currently five to forty
years. Each year, the Company evaluates the remaining useful life associated
with goodwill based upon, among other things, historical and expected long-term
results of operations. Accumulated amortization of goodwill was $5.4 million and
$4.7 million at February 1, 1997 and February 3, 1996, respectively.
STORE PRE-OPENING EXPENSES: Pre-opening expenses of new stores are
charged to operations in the year the store opens.
ADVERTISING EXPENSES: Advertising costs are charged to operations when
the related advertising first takes place. Advertising costs were $29.7 million,
$25.9 million and $22.3 million for 1996, 1995 and 1994, respectively. Prepaid
advertising costs were $1.2 million and $0.5 million at February 1, 1997 and
February 3, 1996, respectively.
STATEMENT OF CASH FLOWS: The Company considers highly liquid
investments with initial maturities of less than three months to be cash
equivalents in its statement of cash flows.
FINANCIAL INSTRUMENTS: Except for the Retained Certificates, the
Company records all financial instruments at cost. The cost of all financial
instruments, except long-term debt and the Retained Certificates, approximates
fair value.
IMPAIRMENT OF ASSETS: The Company adopted Statement of Financial
Accounting Standard No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during the first
quarter of 1996. The adoption of SFAS 121 did not have a material effect on the
Company's financial position or results of operations.
RECLASSIFICATIONS: The accompanying consolidated financial statements
include reclassifications from financial statements issued in previous years.
F-15
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2--INITIAL PUBLIC OFFERING OF COMMON STOCK
During October 1996, the Company completed an initial public offering
whereby the Company sold 10,750,000 shares of its common stock to the public.
The net proceeds of $165.7 million were used primarily to retire the 12 3/4%
Senior Discount Debentures due 2000 (the "Senior Discount Debentures"). In
addition, the Company replaced its working capital facility in January 1997. As
a result of the early retirement of the Senior Discount Debentures and the
replacement of the working capital facility, the Company recorded an
extraordinary charge of $16.1 million, net of applicable income taxes of $9.8
million.
NOTE 3--ACCOUNTS RECEIVABLE SECURITIZATION
Pursuant to the accounts receivable securitization (the "Accounts
Receivable Program"), the Company transfers all of the accounts receivable
generated by the holders of the Company's private label credit card accounts to
SRPC on a daily basis in exchange for cash or an increase in the Retained
Certificates. SRPC is a separate limited-purpose subsidiary that is operated in
a fashion intended to ensure that its assets and liabilities are distinct from
those of the Company and its other affiliates as SRPC's creditors have a claim
on its assets prior to becoming available to any creditor of the Company. The
Trust currently has $165.0 million of term certificates and a $40.0 million
revolving certificate outstanding which represent undivided interests in the
Trust. The holder of the revolving certificate has agreed to purchase interests
in the Trust equal to the amount of accounts receivable in the Trust above the
level required to support the Retained Certificates, up to a maximum of $40.0
million. If accounts receivable balances in the Trust fall below the level
required to support the term certificates and revolving certificates, certain
principal collections may be retained in the Trust until such time as the
receivable balances exceed the certificates then outstanding and the required
Retained Certificates. The Trust may issue additional series of certificates
from time to time. Terms of any future series will be determined at the time of
issuance. The outstanding balances of the term certificates totaled $165.0
million at February 1, 1997 and February 3, 1996. There were no balances
outstanding under the revolving certificates at February 1, 1997 or February 3,
1996.
Total accounts receivable transferred to the Trust during 1996, 1995
and 1994 were $441.4 million, $411.6 million and $362.3 million, respectively.
The cash flows generated from the accounts receivable in the Trust are dedicated
to (i) the purchase of new accounts receivable generated by the Company, (ii)
payment of a return on the certificates and (iii) the payment of a servicing fee
to SRI. Any remaining cash flows are remitted to the Company. The term
certificates entitle the holders to receive a return, based upon the London
Interbank Offered Rate ("LIBOR"), plus a specified margin paid on a quarterly
basis. Principal payments commence on December 31, 1999 but can be accelerated
upon occurrence of certain events. The revolving certificate entitles the holder
to receive a return based upon a floating LIBOR rate, plus a specified margin,
or prime rate, at the option of the Company paid on a monthly basis. The Company
is currently protected against increases above 12% under an agreement entered
into with a bank. The Company is exposed to a loss in the event of
non-performance by the bank. However, the Company does not anticipate
non-performance by the bank. At February 1, 1997, the average rate of return on
the term certificates was 6.5%. The purchase commitment for the revolving
certificate is five years, subject to renewal at the option of the parties. The
revolving certificate holders are entitled to repayment in the event the
accounts receivable decrease below that required to support such certificates.
F-16
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The impact of the Accounts Receivable Program on the Company's
statement of operations for the years presented is as follows (in thousands):
Fiscal Year
------------------------------
1996 1995 1994
-------- -------- --------
Finance charge income billed to cardholders ... $ 48,555 $ 41,321 $ 35,183
Return paid to certificateholders ............. (11,428) (11,529) (8,200)
Servicing and bad debt expenses ............... (37,626) (28,551) (22,504)
Other ......................................... 279 (62) (1,552)
-------- -------- --------
$ (220) $ 1,179 $ 2,927
======== ======== ========
NOTE 4--PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements were as follows (in
thousands):
FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------- ----------------
Land ............................... $ 3,074 $ 3,074
Buildings .......................... 16,308 16,313
Fixtures and equipment ............. 104,958 88,794
Leasehold improvements ............. 63,022 49,290
---------------- ----------------
187,362 157,471
Accumulated depreciation ........... 76,173 64,353
---------------- ----------------
$ 111,189 $ 93,118
================ ================
Depreciation expense was $12.3 million, $10.8 million and $8.5 million
for 1996, 1995 and 1994, respectively.
NOTE 5--STORE CLOSURES
During 1994, the Company approved a store closure plan (the "Store
Closure Plan") which provided for the closure of forty Fashion Bar stores. These
stores were primarily located in major regional malls within the Denver area.
Management determined that the merchandising strategy and market positions of
such stores were not compatible with the Company's overall merchandising
philosophy or growth strategy. The Company accrued $5.2 million for the expected
costs associated with the Store Closure Plan in 1994. The Company substantially
completed the Store Closure Plan during 1995. Net sales and operating income
attributable to the stores closed were $23.2 million and $0.6 million,
respectively, in 1994. Such amounts were not material during 1996 and 1995.
F-17
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 6--LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------- ----------------
SRI Senior Notes ....................... $ 130,000 $ 130,000
SRI Senior Subordinated Notes,
net of discount ...................... 116,686 116,530
Revolving Credit Agreements ............ -- --
SRPC Notes ............................. 30,000 --
Bealls Holding Subordinated Notes,
net of discount ...................... 11,945 11,319
FB Holdings Subordinated Notes,
net of discount ...................... 4,174 4,125
Bealls Holding Junior Subordinated
Debentures, net of discount .......... 6,408 6,221
Port Arthur IDRB ....................... 1,877 2,002
Senior Discount Debentures,
net of discount ...................... -- 109,817
Other long term debt ................... -- 301
---------------- ----------------
301,090 380,315
Current maturities ..................... 2,637 276
---------------- ----------------
$ 298,453 $ 380,039
================ ================
The Company used the proceeds of the initial public offering of the
Company's common stock to retire the Senior Discount Debentures at 112.7% of the
accreted value ($120.0 million). Prior to their retirement, the Senior Discount
Debentures bore interest at 12 3/4% of the accreted value. During the time the
Senior Discount Debentures were outstanding, no cash interest was paid.
The SRI Senior Notes were issued with a principal amount of $150.0
million and bear interest at 10% payable semi-annually on February 15 and August
15. The Company is required to make a mandatory sinking fund payment on August
15, 1999 equal to 25% of the original principal amount. The Company has
purchased $20.0 million of the SRI Senior Notes which satisfied a portion of the
August 15, 1999 sinking fund requirement. The SRI Senior Notes are general
unsecured obligations and rank senior to all subordinated debt of the Company
including the SRI Senior Subordinated Notes. At February 1, 1997 and February 3,
1996, an affiliate of a significant stockholder held $44.2 million of SRI Senior
Notes. Interest expense related to SRI Senior Notes held by related parties was
$4.4 million for 1996 and 1995, and $2.9 million for 1994.
The SRI Senior Subordinated Notes consist of two series with principal
balances of $100.0 million and $18.3 million. The $18.3 million series was
issued at a discount which results in a combined effective interest rate for
both series of 11.3%. Both series bear interest at 11% payable semi-annually on
February 15 and August 15. SRI is required to make a mandatory sinking fund
payment in 2002 equal to forty percent of the original principal amount of both
series. The SRI Senior Subordinated Notes are subordinated to the obligations
under the SRI Senior Notes.
The SRI Senior Notes and SRI Senior Subordinated Notes contain
restrictive covenants which, among other things, limit (i) SRI's ability to sell
certain assets, pay dividends, retire its common stock or retire certain debt,
(ii) its ability to incur additional debt or issue stock and (iii) certain
related party transactions.
On January 31, 1997, SRI entered into amended and restated revolving
credit agreements with a bank (the "Credit Agreements") to help fund its annual
working capital needs. The Credit Agreements provide for a base borrowing level
of $50.0 million, seasonal borrowings of an additional $10.0 million and letters
of credit of an additional $15.0 million for a total commitment of $75.0
million. Prior to this amended agreement, the Company's total availability under
F-18
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
the working capital facility was $35.0 million. The Credit Agreements are
available through January 29, 2000 and provide for a commitment fee of 0.5% per
annum on the average daily unused portion of the commitment amount paid on a
quarterly basis. Interest is charged on outstanding loans at a base rate set
forth in the agreement plus a specified margin. The specified margin range is
0.5% to 2.75% based on calculated debt service ratios as defined in the
agreement. The effective interest rate at February 1, 1997 was 9.25%. As of
February 1, 1997, the Company had no borrowings outstanding under the Credit
Agreements. The Credit Agreements contain covenants which, among other things,
restrict the (i) incurrence of additional debt, (ii) purchase of certain
investments, (iii) payment of dividends, (iv) formation of certain business
combinations, (v) disposition of certain assets, (vi) acquisition of
subordinated debt, (vii) use of proceeds received under the agreement,(viii)
aggregate amount of capital expenditures and (ix) transactions with related
parties. The Credit Agreements also contain certain financial covenants which
require among other things, the maintenance of the debt service ratio above
predetermined levels, the amount of earnings before interest, taxes,
depreciation and amortization on an annual and quarterly basis above
predetermined levels, and the ratio of consolidated current assets to
consolidated current liabilities above 2.5. A portion of the Credit Agreements
are secured by SRI's distribution center located in Jacksonville, Texas,
including equipment located therein, a pledge of SRPC stock and a pledge of the
Company's trademarks. The net book value of the distribution center was
approximately $6.6 million at February 1, 1997.
During 1996, the Company issued $30.0 million in aggregate principal
amount of 12.5% Trust Certificate-Backed Notes (the "SRPC Notes"). The SRPC
Notes are collateralized by the Retained Certificates. Interest and principal
payments are made from amounts otherwise received by SRPC from funds associated
with the Retained Certificates and are non-recourse to the Company to the extent
these funds are insufficient to make scheduled interest and principal payments.
Interest is payable semi-annually on June 15 and December 15 of each year
commencing December 15, 1996. Principal repayments are scheduled to begin during
December 2000.
The increasing rate 3 Bealls Holding, Inc. ("Bealls Holding")
Subordinated Debentures Due 2002 (the "Bealls Holding Subordinated Debentures")
in aggregate principal amount of approximately $15.0 million bear interest at
10% through 1994, 11% in 1995 and 12% thereafter until maturity. Interest is
payable semi-annually on June 30 and December 31. Original issue discount of
$7.3 million is being charged to interest expense over the term to maturity
using the effective interest method. The combination of coupon interest payments
and original issue discount results in an effective interest rate of 20.9%. The
Bealls Holding Subordinated Debentures may be prepaid, at the Company's option,
at their face value. The Company is required to redeem the Bealls Holding
Subordinated Debentures beginning no later than December 31, 1997, in no more
than six equal annual installments. The Bealls Holding Subordinated Debentures
are subordinated to all debt of the Company. SRI is the primary obligor under
these debentures.
In connection with a previous acquisition, a subsidiary of the Company
issued approximately $3.6 million aggregate principal amount of 7% FB Holdings
Subordinated Notes Due 2000 ("FB Holdings Subordinated Notes"). The FB Holdings
Subordinated Notes were recorded at their estimated fair value at issuance date
of $3.1 million. The difference between the estimated fair value and principal
amount of $0.5 million is being charged to interest expense over the term to
maturity using the effective interest method. The FB Holdings Subordinated Notes
are due in two equal installments on June 30, 1999 and 2000. The FB Holdings
Subordinated Notes may be prepaid at any time in whole or in part at SRI's
option. The FB Holdings Subordinated Notes bear interest at 7% per annum,
payable quarterly. The combination of coupon interest payments and original
issue discount results in an effective interest rate of 9.0%. Prior to and
including June 1995, SRI paid interest in the form of additional FB Holdings
Subordinated Notes; thereafter, interest is being paid in cash. The principal
amount of FB Holdings Subordinated Notes at February 1, 1997 was $4.4 million.
The FB Holdings Subordinated Notes are subordinated to all debt of the Company.
SRI is the primary obligor under these debentures.
In connection with the acquisition of Bealls, Bealls Holding issued the
7% Bealls Holding Junior Subordinated Debentures Due 2003 ("Bealls Holding
Junior Subordinated Debentures") at a face value of approximately $12.5 million,
net of discount of approximately $8.4 million. Such discount is being charged to
interest expense over the term to maturity using the effective interest method.
The Bealls Holding Junior Subordinated Debentures are limited to an aggregate
principal amount of approximately $18.3 million. Interest is payable
semi-annually on June 30 and December 31. The combination of coupon interest
payments and original issue discount results in an effective interest rate of
39.4%.
F-19
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The principal amount of Bealls Holding Junior Subordinated Debentures
outstanding at February 1, 1997 was $14.3 million. The Bealls Holding Junior
Subordinated Debentures are subordinated to all debt of the Company. SRI is the
primary obligor under these debentures.
The Port Arthur Industrial Development Revenue Bond (the "Port Arthur
IDRB") bears interest at 75% of the prime rate payable monthly. The interest
rate applicable to the Port Arthur IDRB at February 1, 1997 was 6.0%. The Port
Arthur IDRB is collateralized by a building with a net book value of
approximately $0.7 million. Under a separate agreement, SRI is required to make
scheduled annual sinking fund payments ranging from $0.1 million to $0.2
million.
Aggregate maturities of long-term debt for the next five years are:
1997 - $2.6 million; 1998 - $2.6 million; 1999 - $22.3 million; 2000 - $117.4
million and 2001 - $ 32.7 million.
Management estimates the fair value of its long-term debt to be $320.1
million and $352.3 million at February 1, 1997 and February 3, 1996,
respectively. In developing its estimates, management considered quoted market
prices for each instrument, if available, current market interest rates in
relation to the coupon interest rates of each instrument, the relative
subordination of each instrument and the relative liquidity of the instrument as
indicated by the presence or lack of an active market.
NOTE 7--STOCK OPTION PLANS
In 1993, the Company adopted the Third Amended and Restated Stock
Option Plan (the "1993 Stock Option Plan") designed to provide incentives to
present and future executive, managerial, technical and other key employees and
advisors to the Company (the "Participants") as selected by the Board of
Directors or the compensation committee of the Board of Directors (the "Board").
All options granted under the 1993 Stock Option Plan were non-qualified within
the meaning of Section 422A of the Internal Revenue Code. The number of shares
of common stock which could be granted under the 1993 Stock Option Plan was
1,894,540 shares. As of February 1, 1997, there were 1,475,581 options
outstanding under the 1993 Stock Option Plan. During 1996, the 1993 Stock Option
Plan was frozen and replaced by the 1996 Equity Incentive Plan (the "Incentive
Plan"). The Incentive Plan provides for the granting of the following types of
incentive awards: stock options, stock appreciation rights ("SARs"), restricted
stock, performance units, performance grants and other types of awards that the
Board deems to be consistent with the purposes of the Incentive Plan. An
aggregate of 1,500,000 shares of common stock have been reserved for issuance
under the Incentive Plan; however, no Participant shall be entitled to receive
grants of common stock, stock options or SARs with respect to common stock, in
any calendar year in excess of 400,000 shares in the aggregate. There were no
grants made under the Incentive Plan during 1996.
The Board will have exclusive discretion to select the participants and
to determine the type, size and terms of each award, to modify the terms of
awards, to determine when awards will be granted and paid, and to make all other
determinations which it deems necessary or desirable in the interpretation and
administration of the Incentive Plan. The Incentive Plan is scheduled to
terminate ten years from the date that the Incentive Plan was initially approved
and adopted by the stockholders of the Company, unless extended for up to an
additional five years by action of the Board. With limited exceptions, including
termination of employment as a result of death, disability or retirement, or
except as otherwise determined by the Board, rights to these forms of contingent
compensation are forfeited if a recipient's employment or performance of
services terminates within a specified period following the award. Generally, a
participant's rights and interest under the Incentive Plan will not be
transferable except by will or by the laws of descent and distribution.
Options, which include nonqualified stock options and ISOs, are rights
to purchase a specified number of shares of common stock at a price fixed by the
Board. The option price may be equal to or greater than the fair market value of
the underlying shares of common stock, but in no event less than the fair market
value on the date of grant. Options granted under the 1993 Stock Option Plan and
the Incentive Plan generally become exercisable in installments of 20% per year
on each of the first through the fifth anniversaries of the grant date and have
a maximum term of ten years.
F-20
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the option activity under the various plans follows:
NUMBER OF WEIGHTED
OUTSTANDING AVERAGE
OPTIONS OPTION PRICE
------------ ------------
Options outstanding at January 29, 1994 ....... 540,987 $ 0.46
Granted ....................................... 186,647 2.27
Surrendered ................................... (21,068) 1.25
Exercised ..................................... (2,720) 0.11
------------
Options outstanding at January 28, 1995 ....... 703,846 0.91
Granted ....................................... 409,108 2.95
Surrendered ................................... (7,435) 1.50
Exercised ..................................... (99,985) 0.32
------------
Options outstanding at February 3, 1996 ....... 1,005,534 1.80
Granted ....................................... 783,819 10.72
Surrendered ................................... (31,550) 4.48
Exercised ..................................... (282,222) 1.10
------------
Options outstanding at February 1, 1997 ....... 1,475,581 6.61
============
Exercisable options at February 3, 1996 and January 28, 1995 were 241,355
and 123,685, respectively. A summary of outstanding and exercisable options as
of February 1, 1997 follows:
WEIGHTED
AVERAGE
NUMBER OF REMAINING NUMBER OF
OUTSTANDING CONTRACTUAL EXERCISABLE
OPTION PRICE OPTIONS LIFE OPTIONS
- -------------- ------------------ ------------- -------------------
$ 0.11 175,318 6.3 75,171
2.27 246,392 7.3 79,777
3.04 260,584 8.4 21,392
5.28 503,212 9.0 5,018
10.56 34,329 9.3 --
21.11 255,746 9.3 --
------------------ -------------------
1,475,581 181,358
================== ===================
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for its plans. Compensation expense
was $0.3 million for each of 1996, 1995 and 1994. The following unaudited pro
forma data is calculated as if compensation cost for the Company's stock option
plans were determined based upon the fair value at the grant date for awards
under these plans consistent with the methodology prescribed under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation":
F-21
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1996 1995
---------- ----------
Pro forma net income (loss) ........................... $ (2,653) $ 10,592
Pro forma earnings (loss) per common share ............ (0.17) 0.83
Weighted average grant date value of options granted .. 8.33 3.59
The fair value of the options granted is estimated using the Black-Scholes
option-pricing model with the following assumptions: no dividend yield;
volatility of 34.35%; risk-free interest rate of 6.25%; assumed forfeiture rate
of 68.26% and an expected life of eight years. The pro forma amounts above are
not likely to be representative of future years because options vest over
several years and additional awards generally are made each year.
NOTE 8--EMPLOYEE BENEFIT PLANS
Pension benefits for employees are provided under the SRI Restated
Retirement Plan (the "Retirement Plan"), a qualified defined benefit plan.
Benefits are administered through a Trust arrangement which provides monthly
payments or lump sum distributions. The Retirement Plan covers substantially all
employees who have completed one year of service with 1,000 hours of service.
Benefits under the plan are based upon a percentage of the participant's
earnings during each year of credited service.
The following sets forth the funded status of the Retirement Plan and the
amounts recognized in the consolidated financial statements (in thousands):
FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------- ----------------
Actuarial present value of benefits:
Vested benefit obligations ............... $ (24,650) $ (24,680)
================ ================
Accumulated benefit obligations .......... $ (25,660) $ (25,790)
================ ================
Projected benefit obligations ............ $ (33,790) $ (32,240)
Market value of plan assets, primarily
fixed income and equity securities ... 20,990 20,000
---------------- ----------------
Pension obligations in excess of assets .. (12,800) (12,240)
Unrecognized prior service income ........ (21) (28)
Unrecognized net loss .................... 11,772 10,948
Adjustment required to recognize
minimum liability .................... (3,621) (4,470)
---------------- ----------------
Accrued pension cost ..................... $ (4,670) $ (5,790)
================ ================
Assumptions utilized in determining
projected obligations and
funding amounts:
Discount rate............................. 7.50% 7.00%
Rate of increase in compensation levels... 4.00% 4.00%
Expected long-term rate of return on
plan assets........................... 9.00% 9.00%
The Company's funding policy for the Retirement Plan is to contribute the
minimum amount required by applicable regulations. Retirement Plan assets
include 100,000 shares of Stage Stores common stock purchased during the
Company's initial public offering.
F-22
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The components of pension cost for the Retirement Plan were as follows (in
thousands):
FISCAL YEAR
------------------------------------
1996 1995 1994
---------- ---------- ----------
Service cost ............................ $ 1,269 $ 771 $ 887
Interest cost ........................... 2,085 2,139 1,995
Actual loss (return) on plan assets ..... (2,047) (3,377) 940
Net amortization and deferral ........... 789 2,292 (2,174)
---------- ---------- ----------
$ 2,096 $ 1,825 $ 1,648
========== ========== ==========
NOTE 9--OPERATING LEASES
The Company leases stores, service center facilities, the corporate
headquarters and equipment under operating leases. A number of store leases
provide for escalating minimum rent. Rental expense is recognized on a
straight-line basis over the life of such leases. The majority of the Company's
store leases provide for contingent rentals, generally based upon a percentage
of net sales. The Company has renewal options for most of its store leases; such
leases generally require that the Company pay for utilities, taxes and
maintenance expense. A summary of rental expense associated with operating
leases follows (in thousands):
FISCAL YEAR
------------------------------------------
1996 1995 1994
---------- ---------- ----------
Minimum rentals ................ $ 30,397 $ 26,943 $ 22,979
Contingent rentals ............. 3,318 2,618 2,874
Equipment rentals .............. 829 593 784
---------- ---------- ----------
$ 34,544 $ 30,154 $ 26,637
========== ========== ==========
Minimum rental commitments on long-term operating leases at February 1,
1997, net of sub-leases, are as follows (in thousands):
Fiscal Year:
1997 ........................................ $ 32,657
1998 ........................................ 31,087
1999 ........................................ 29,248
2000 ........................................ 25,561
2001 ........................................ 21,614
Thereafter .................................. 107,428
--------
$247,595
========
F-23
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS
Pursuant to a professional service agreement with an affiliate of a
principal stockholder, the Company paid fees for professional services rendered
and expense reimbursements in the amount of $2.7 million, $0.8 million and $0.6
million for 1996, 1995 and 1994, respectively. Upon consummation of the initial
public offering (see Note 2), such agreement was terminated.
The Company has made loans, in an aggregate principal amount of $1.5
million, to certain executive officers of the Company. These loans are full
recourse loans and are secured by a pledge of the shares of common stock owned
by such executive officers. The loans provide for interest from 5.7% to 7.25%
and mature no later than June 1, 2000.
NOTE 11--INCOME TAXES
All Company operations are domestic. Income tax expense charged to
continuing operations consisted of the following (in thousands):
FISCAL YEAR
------------------------------------
1996 1995 1994
---------- ---------- ----------
Federal income tax expense (benefit):
Current ................................. $ (7,443) $ 9,772 $ 7,154
Deferred ................................ 15,399 (3,630) (3,794)
---------- ---------- ----------
7,956 6,142 3,360
---------- ---------- ----------
State income tax expense (benefit):
Current ................................. 764 1,060 771
Deferred ................................ (126) (435) 186
---------- ---------- ----------
638 625 957
---------- ---------- ----------
$ 8,594 $ 6,767 $ 4,317
========== ========== ==========
A reconciliation between the federal income tax expense charged to
continuing operations computed at statutory tax rates and the actual income tax
expense recorded follows (in thousands):
FISCAL YEAR
---------------------------------------
1996 1995 1994
---------- ---------- ----------
Federal income tax expense at
the statutory rate ............... $ 7,915 $ 6,124 $ 3,831
State income taxes, net ............ 414 406 797
Permanent differences, net ......... 265 290 (311)
Other, net ......................... -- (53) --
---------- ---------- ----------
$ 8,594 $ 6,767 $ 4,317
========== ========== ==========
As a result of the early retirement of the Senior Discount Debentures and
the replacement of the working capital facility, the Company recorded an
extraordinary charge of $16.1 million, net of applicable income taxes of $9.8
million.
F-24
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The 1996 income tax benefit relating to the extraordinary item is comprised of a
$7.7 million current federal tax benefit, a $0.9 million deferred federal tax
benefit and a $1.2 million state tax benefit.
F-25
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Deferred tax liabilities (assets) consist of the following (in
thousands):
FEBRUARY 1, 1997 FEBRUARY 3, 1996
---------------- ----------------
Gross deferred tax liabilities:
Depreciation and amortization ............ $ 12,903 $ 7,485
Inventory reserves ....................... 3,735 1,406
State income taxes ....................... 495 --
Other .................................... 1,660 1,435
---------------- ----------------
18,793 10,326
---------------- ----------------
Gross deferred tax assets:
Retained Certificates .................... (2,173) (2,502)
Accrued consolidation costs .............. (1,318) (1,478)
Net operating loss carryforwards ......... (2,961) (82)
Original issue discount .................. -- (10,042)
Accrued expenses ......................... (1,607) (990)
Pensions ................................. (2,163) (2,686)
Escalating leases ........................ (1,482) (962)
Charitable contribution carryforward ..... (575) (113)
Accrued payroll costs .................... (1,212) (884)
Accrued store closure costs .............. -- (558)
Other .................................... (403) (780)
---------------- ----------------
(13,894) (21,077)
---------------- ----------------
Deferred tax assets valuation allowance .. -- --
---------------- ----------------
$ 4,899 $ (10,751)
================ ================
As a result of the extraordinary loss on the early retirement of debt
during 1996, the Company has recorded a $17.0 million federal income tax
receivable which is included in other current assets on the consolidated balance
sheet.
F-26
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 12--QUARTERLY FINANCIAL INFORMATION
Unaudited quarterly financial data is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR 1996
-----------------------------------------------
Q1 Q2 Q3 Q4
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales ........................................ $ 163,177 $ 182,750 $ 182,562 $ 248,061
Gross profit ..................................... 52,081 56,623 56,208 79,075
Operating income ................................. 16,045 13,925 12,342 26,258
Income (loss) before extraordinary item .......... 2,652 868 (265) 10,767
Net income (loss) ................................ 2,652 868 (16,071) 10,492
Earnings (loss) per common share data:
Earnings (loss) per common share before
extraordinary item ............................ 0.21 0.07 (0.02) 0.45
Extraordinary item - early retirement of debt .... -- -- (1.12) (0.01)
Earnings (loss) per common share after
extraordinary item ............................ 0.21 0.07 (1.14) 0.44
FISCAL YEAR 1995
-----------------------------------------------
Q1 Q2 Q3 Q4
---------- ---------- ---------- ----------
Net sales ........................................ $ 142,353 $ 154,578 $ 159,161 $ 226,532
Gross profit ..................................... 46,283 46,555 48,659 72,780
Operating income ................................. 14,835 11,074 9,724 25,853
Net income (loss) ................................ 2,438 221 (899) 8,970
Earnings (loss) per common share data:
Earnings (loss) per common share after
extraordinary item ............................ 0.19 0.02 (0.07) 0.70
</TABLE>
NOTE 13--CLASS B COMMON STOCK
Unless otherwise required by law, holders of Class B Common Stock are not
entitled to vote on matters submitted to a vote of stockholders, including the
election of directors. Holders of Class B Common Stock may elect at any time to
convert any or all of such shares into Common Stock, on a share for share basis,
to the extent such holder is not prohibited from owning additional voting
securities by virtue of regulatory restrictions. Upon liquidation, dissolution
or winding up of the Company, the holders of the Class B Common Stock are
entitled to receive pro rata, along with the holders of the Common Stock, the
assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities and subject to the rights of any
holders of Preferred Stock then outstanding.
NOTE 14--COMMITMENTS AND CONTINGENCIES
LITIGATION: The Company is subject to claims and litigation arising in
the normal course of its business. The Company does not believe that any of
these proceedings will have a material adverse effect on its financial position
or its results of operations.
LETTERS OF CREDIT: The Company issues letters of credit to support
certain merchandise purchases which are required to be collateralized. The
Company had outstanding letters of credit totaling $8.0 million at February 1,
1997,
F-27
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
all of which were collateralized by the Credit Agreements (see Note 6). These
letters of credit expire within twelve months of issuance.
CONCENTRATION OF CREDIT RISK: Financial instruments which potentially
subject the Company to concentrations of credit risk are primarily cash,
short-term investments and the accounts receivable transferred to the Trust (see
Note 3). The Company's cash management and investment policies restrict
investments to low risk, highly-liquid securities and the Company performs
periodic evaluations of the relative credit standing of the financial
institutions with which it deals. The credit risk associated with the accounts
receivable transferred to the Trust is limited by the large number of customers
in the Company's customer base. Substantially all of the Company's customers
reside in the central United States.
NOTE 15--SUBSEQUENT EVENT
On March 5, 1997, the Company reached a definitive agreement to merge
with C.R. Anthony Company ("CR Anthony"), a retailer of branded and private
label apparel for the entire family which operated 224 stores in 13 southwestern
and Rocky Mountain states at February 1, 1997. Under the terms of the agreement,
the Company will acquire the common stock of CR Anthony for a value of $8.00 per
share plus $0.01 per share for every $0.05 per share by which the average
closing price of the Company's common stock exceeds $20.00 per share. The
Company's average closing price will be determined based upon ten randomly
selected days out of the twenty trading days ending on the fifth trading day
preceding the closing of the transaction.
The form of consideration (stock/cash mix) to be paid by the Company for
CR Anthony's common stock will also be determined using a formula based upon the
average closing price of the Company's stock. The consideration will be 100%
Company common stock so long as the Company's average closing price is $20.00
per share or higher, and such stock percentage will decline in a linear fashion
to 25% of the consideration if the average closing price of Company common stock
is $15.00 per share. As an example, if the Company's average closing price was
$21.00 per share, CR Anthony's common shareholders would receive a value of
$8.20 per share, 100% of which would be paid in Company common stock (0.39
shares of Company common stock to be exchanged for each share of CR Anthony
common stock). At prices below $15.00 per share, the Company has the option to
terminate the agreement, or to close and pay 0.1333 shares of Company common
stock and an amount in cash equal to the difference between $8.00 per share and
the value of 0.1333 share of Company common stock. The Company is currently
evaluating its financing options for payments to CR Anthony option holders and
stockholders and any one-time costs to be incurred in connection with the merger
of CR Anthony's operations into the Company which could not otherwise be funded
out of existing sources.
The transaction is subject to approval by the shareholders of CR Anthony
and other closing conditions. In addition, the agreement contains provisions
relating to the obligations of the parties in the event of termination of the
agreement. It is expected that the transaction will be completed by mid-year
1997.
F-28
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
MAY 3, MAY 4, FEBRUARY 1,
1997 1996 1997
---------- ---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............... $ 3,649 $ 3,814 $ 3,139
Accounts receivable, less allowance
for doubtful accounts of $100 ......... 5,286 3,409 3,295
Merchandise inventories ................. 86,103 86,321 84,280
Other assets ............................ 2,554 1,769 2,228
Deferred income taxes ................... 2,089 2,323 1,503
---------- ---------- ----------
Total current assets .............. 99,681 97,636 94,445
PROPERTY AND EQUIPMENT, net ................ 17,569 14,876 17,022
DEFERRED INCOME TAXES ...................... 6,960 8,439 6,960
OTHER ASSETS ............................... 281 358 301
---------- ---------- ----------
TOTAL ...................................... $ 124,491 $ 121,309 $ 118,728
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................ $ 20,741 $ 22,392 $ 19,491
Other liabilities ....................... 7,766 7,796 7,208
Accrued compensation .................... 1,645 1,856 2,925
Income taxes payable .................... -- -- 1,182
Current maturities of long-term debt .... 6,365 3,695 93
---------- ---------- ----------
Total current liabilities ......... 36,517 35,739 30,899
LONG-TERM DEBT, less current maturities .... 16,064 18,081 14,742
OTHER LIABILITIES .......................... 766 1,095 1,028
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
50,000,000 shares authorized;
9,035,645, 9,005,245, and
9,035,645 shares ...................... 90 90 90
Additional paid-in capital .............. 57,307 57,216 57,307
Retained earnings ....................... 13,747 9,088 14,662
---------- ---------- ----------
Total stockholders' equity ........ 71,144 66,394 72,059
---------- ---------- ----------
TOTAL ...................................... $ 124,491 $ 121,309 $ 118,728
========== ========== ==========
See notes to consolidated financial statements.
F-29
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THIRTEEN WEEKS ENDED
-----------------------------
MAY 3, 1997 MAY 4, 1996
------------ ------------
NET SALES .................................... $ 64,287 $ 61,190
COST OF GOODS SOLD ........................... 46,300 43,012
------------ ------------
GROSS MARGIN ................................. 17,987 18,178
EXPENSES:
Selling, general and administrative ..... 16,050 15,944
Advertising ............................. 1,658 2,051
Merger costs ............................ 451 --
Depreciation and amortization ........... 984 975
Interest ................................ 345 423
------------ ------------
Total expenses ...................... 19,488 19,393
------------ ------------
LOSS BEFORE INCOME TAXES ..................... (1,501) (1,215)
INCOME TAX BENEFIT ........................... 586 474
------------ ------------
NET LOSS ..................................... $ (915) $ (741)
============ ============
NET LOSS PER SHARE ........................... $ (0.10) $ (0.08)
============ ============
WEIGHTED AVERAGE COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING ............. 9,584,708 9,005,245
============ ============
See notes to consolidated financial statements.
F-30
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
13 WEEKS 13 WEEKS
ENDED ENDED
MAY 3, MAY 4,
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................... $ (915) $ (741)
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization ................... 984 975
Deferred tax benefit ............................ (586) (474)
Gain on sales of property and equipment ......... (1) (12)
Changes in other assets and liabilities:
Accounts receivable ............................. (1,991) (1,056)
Merchandise inventories ......................... (1,823) (1,883)
Other assets .................................... (324) (149)
Accounts payable and other liabilities .......... 364 8,430
Accrued compensation ............................ (1,280) (33)
---------- ----------
Net cash provided by (used in)
operating activities ...................... (5,572) 5,057
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................ (1,514) (500)
Proceeds from sales of property and equipment ... 2 10
---------- ----------
Net cash used in investing activities ....... (1,512) (490)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments)-- Revolving
Credit Agreement .............................. 7,630 (3,375)
Payments of long-term debt ...................... (36) (32)
---------- ----------
Net cash provided by (used in)
financing activities ...................... 7,594 (3,407)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ............ 510 1,160
CASH AND CASH EQUIVALENTS, Beginning of period ....... 3,139 2,654
---------- ----------
CASH AND CASH EQUIVALENTS, End of period ............. $ 3,649 $ 3,814
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ........................................ $ 469 $ 344
Income taxes .................................... $ 1,276 $ 557
See notes to consolidated financial statements.
F-31
<PAGE>
C.R. ANTHONY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF INTERIM REPORTING PRACTICES
BASIS OF PRESENTATION -- The consolidated financial statements include the
results of operations, account balances and cash flows of the Company and its
wholly owned subsidiary (ANCO Transportation, which principally transports
merchandise to Company stores.) All material intercompany accounts and
transactions have been eliminated.
The consolidated balance sheets as of May 3, 1997 and May 4, 1996 and the
statements of operations and cash flows for the thirteen weeks ended May 3, 1997
and May 4, 1996 have been prepared by the Company without audit. In the opinion
of management, all adjustments (consisting only of normal, recurring accruals)
necessary to state fairly the Company's financial position and the results of
operations and cash flows for the thirteen weeks ended May 3, 1997 and May 4,
1996 have been made. Due to the seasonal nature of the business, results for the
interim periods are not necessarily indicative of a full year's operations, and
balances of inventory, receivables, revolving credit agreement borrowings, and
trade payables vary with the seasonal demands of the business.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in connection with the annual consolidated financial statements and
notes thereto.
EARNINGS PER SHARE -- Earnings (loss) per share is computed based upon net
income (loss) divided by the weighted average number of shares of common stock
and common stock equivalents (if dilutive) outstanding during each period. In
February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE, which
establishes standards for computing and presenting earnings per share. SFAS No.
128 is effective for periods ending after December 15, 1997. Management believes
that SFAS No. 128 will not have a significant effect on the Company's
calculation of earnings per share considering its current capital structure.
RECLASSIFICATIONS -- Certain reclassifications have been made to prior year
balances to conform with the classifications of such amounts in the current
period.
RECENTLY ADOPTED ACCOUNTING STANDARDS -- In February 1997, the Financial,
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE.
SFAS No. 129 establishes standards for disclosure of information regarding an
entity's capital structure. The adoption of SFAS No. 129 did not affect the
Company's consolidated financial position or results of operations.
2. MERGER PLAN WITH STAGE STORES, INC.
On March 5, 1997, the Company entered into an Agreement and Plan of Merger
(the "Merger") whereby the Company will be merged with and into Stage Stores,
Inc. ("Stage Stores"), a retailer of apparel in the central United States. In
the Merger, each outstanding share of the Company's common stock will be
acquired for a value of $8.00 per share plus $0.01 per share for every $0.05 per
share by which the average closing price of Stage Stores' common stock exceeds
$20 per share. Stage Stores' average closing price will be determined based on a
randomly-selected ten day period out of the twenty trading days ending on the
fifth trading day preceding the closing of the transaction. The form of
consideration (stock/cash mix) to be paid by Stage Stores for the common stock
of the Company will also be determined using a formula based upon the average
closing price of Stage Stores stock.
The consideration will be 100% Stage Stores common stock so long as its
average closing price is $20.00 per share or higher, and such stock percentage
will decline in a linear fashion to 25% of the consideration if the average
closing price of the Stage Stores stock is $15.00 per share. At prices below
$15.00 per share, Stage Stores has the option to terminate the Merger, and pay
the Company a $3.5 million fee plus expenses, or to close the Merger and pay
0.1333 shares of Stage Stores common stock and an amount in cash equal to the
difference between $8.00 per share and the
F-32
<PAGE>
C.R. ANTHONY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
value of 0.1333 shares of Stage Stores common stock. All options outstanding
under the Company stock option plan (see Note 7) will be canceled as a term of
the Merger and the option holders will be entitled to receive cash equal to the
exchange price for the Company common stock less the exercise price of the
related Company option. In addition to the termination event by Stage Stores as
noted above, if the Merger is terminated by the Company under other certain
conditions, the Company will be required to pay a fee of $3.5 million plus
expenses. In the event that another bidder acquires control of the Company
during the Merger or six months thereafter, Stage Stores can exercise an option
to acquire 19.9% of the Company common stock at $8.00 per share.
The Merger is subject to approval by the stockholders of the Company and
certain other conditions including Stage Stores obtaining adequate financing.
During the periods ended February 1, 1997 and February 3, 1996, a member of the
Board of Directors of the Company was employed by an affiliate of the Financial
advisory firm the Company has engaged to provide corporate advisory services,
including the Merger. Management of the Company expects the Merger transaction
will be completed by mid-year 1997.
F-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
C.R. Anthony Company:
We have audited the accompanying consolidated balance sheets of C.R. Anthony
Company and subsidiary (the "Company"), as of February 1, 1997 and February 3,
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for the fifty-two weeks ended February 1, 1997, the fifty-three
weeks ended February 3, 1996 and the fifty-two weeks ended January 29, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
February 1, 1997 and February 3, 1996, and the results of their operations and
their cash flows for the fifty-two weeks ended February 1, 1997, the fifty-three
weeks ended February 3, 1996 and the fifty-two weeks ended January 29, 1995, in
conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, on March 5,
1997, the Company entered into an Agreement and Plan of Merger with Stage
Stores, Inc.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
March 12, 1997
F-34
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FEBRUARY 1, 1997 FEBRUARY 3, 1996
-------------- --------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................. $ 3,139 $ 2,654
Accounts receivable, less allowance for
doubtful accounts of $100 ................ 3,295 2,353
Merchandise inventories .................... 84,280 84,438
Other assets ............................... 2,228 1,620
Deferred income taxes ...................... 1,503 1,849
-------------- --------------
Total current assets ................ 94,445 92,914
PROPERTY AND EQUIPMENT, net ................... 17,022 15,331
DEFERRED INCOME TAXES ......................... 6,960 8,439
OTHER ASSETS .................................. 301 376
-------------- --------------
TOTAL ......................................... $ 118,728 $ 117,060
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................... $ 19,491 $ 14,562
Other liabilities .......................... 7,208 6,673
Accrued compensation ....................... 2,925 1,889
Income taxes payable ....................... 1,182 522
Current maturities of long-term debt ....... 93 7,069
-------------- --------------
Total current liabilities ........... 30,899 30,715
LONG-TERM DEBT, less current maturities ....... 14,742 18,114
OTHER LIABILITIES ............................. 1,028 1,096
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 50,000,000
shares authorized; 9,035,645 and
9,005,245 shares issued and outstanding
at February 1, 1997 and February 3, 1996,
respectively ............................. 90 90
Additional paid-in capital ................. 57,307 57,216
Retained earnings .......................... 14,662 9,829
-------------- --------------
Total stockholders' equity .......... 72,059 67,135
-------------- --------------
TOTAL ......................................... $ 118,728 $ 117,060
-------------- --------------
See notes to consolidated financial statements
F-35
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 29,
1997 1996 1995
----------- ----------- -----------
NET SALES ............................ $ 288,392 $ 304,451 $ 302,241
COST OF GOODS SOLD ................... 194,875 207,688 205,415
----------- ----------- -----------
GROSS MARGIN ......................... 93,517 96,763 96,826
EXPENSES:
Selling, general and administrative 69,012 73,317 72,188
Advertising ....................... 10,461 12,997 12,599
Depreciation and amortization ..... 4,315 4,862 3,817
Interest .......................... 1,806 2,577 2,165
----------- ----------- -----------
Total expenses ............. 85,594 93,753 90,769
----------- ----------- -----------
INCOME BEFORE INCOME TAXES ........... 7,923 3,010 6,057
INCOME TAX EXPENSE ................... (3,090) (924) (2,362)
----------- ----------- -----------
NET INCOME ........................... $ 4,833 $ 2,086 $ 3,695
----------- ----------- -----------
NET INCOME PER COMMON SHARE .......... $ 0.53 $ 0.23 $ 0.41
----------- ----------- -----------
WEIGHTED AVERAGE COMMON STOCK
AND COMMON STOCK EQUIVALENTS
OUTSTANDING ....................... 9,140,490 9,005,245 9,003,497
----------- ----------- -----------
See notes to consolidated financial statements
F-36
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
COMMON STOCK ADDITIONAL
----------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ ------- -------- -------
BALANCE
JANUARY 31, 1994 ............. 9,000,000 $ 90 $49,137 $ 4,048 $53,275
Issuance of stock ............... 5,245 -- 20 -- 20
Net income ...................... -- -- -- 3,695 3,695
Utilization of
pre-reorganization ........... -- -- 8,059 -- 8,059
deferred tax assets
--------- ------ ------- -------- -------
BALANCE
JANUARY 29, 1995 ............. 9,005,245 90 57,216 7,743 65,049
Net income ...................... -- -- -- 2,086 2,086
--------- ------ ------- -------- -------
BALANCE
FEBRUARY 3, 1996 ............. 9,005,245 90 57,216 9,829 67,135
Issuance of stock ............... 30,400 -- 91 -- 91
Net income ...................... -- -- -- 4,833 4,833
--------- ------ ------- -------- -------
BALANCE
FEBRUARY 1, 1997 ............. 9,035,645 $ 90 $57,307 $ 14,662 $72,059
--------- ------ ------- -------- -------
See notes to consolidated financial statements
F-37
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 29,
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ......................................... $ 4,833 $ 2,086 $ 3,695
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization .................. 4,315 4,862 3,817
Deferred tax expense (benefit) ................. 657 (743) 10
Utilization of pre-reorganization tax assets ... 1,168 1,424 1,080
Gain on sales of property and equipment ........ (18) (9) (67)
Common stock issued as compensation expense .... 91 -- --
Changes in other assets and liabilities:
Accounts receivable ............................ (942) 296 (364)
Merchandise inventories ........................ 158 (8,517) (4,251)
Other assets ................................... (605) (1,146) 627
Accounts payable and other liabilities ......... 5,396 (1,888) 1,588
Accrued compensation ........................... 1,036 (1,072) 135
Income taxes payable ........................... 660 (782) 864
---------- ---------- ----------
Net cash provided by (used in)
operating activities ....................... 16,749 (5,489) 7,134
---------- ---------- ----------
INVESTING ACTIVITIES:
Capital expenditures ............................... (5,868) (4,812) (5,298)
Proceeds from sales of property and
equipment ........................................ 18 33 99
---------- ---------- ----------
Net cash used in investing
activities ................................. (5,850) (4,779) (5,199)
---------- ---------- ----------
FINANCING ACTIVITIES:
Net borrowings (payments) - Revolving
Credit Agreement ................................. (10,185) 24,845 --
Payments of long-term debt ......................... (229) (15,707) (1,164)
Proceeds from issuance of common stock ............. -- -- 20
---------- ---------- ----------
Net cash (used) provided by
financing activities ....................... (10,414) 9,138 (1,144)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................... 485 (1,130) 791
CASH AND CASH EQUIVALENTS,
Beginning of period ................................ 2,654 3,784 2,993
---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
End of period ...................................... $ 3,139 $ 2,654 $ 3,784
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ....................................... $ 1,777 $ 2,685 $ 2,145
Income taxes ................................... 604 1,027 407
</TABLE>
See notes to consolidated financial statements.
F-38
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996
AND JANUARY 29, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
ORGANIZATION - C.R. Anthony Company (the "Company"), an Oklahoma
corporation, is engaged in the operation of a regional chain of retail stores,
with the majority in smaller communities throughout the southwestern and
midwestern United States, offering national brand apparel, including footwear,
for the entire family.
BASIS OF PRESENTATION - The consolidated financial statements include
the results of operations, account balances and cash flows of the Company and
its wholly owned subsidiary (ANCO Transportation, which principally transports
merchandise to Company stores). All material intercompany accounts and
transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts on deposit at financial
institutions and all temporary cash investments purchased with a maturity of
three months or less.
MERCHANDISE INVENTORIES - Inventories are valued at the lower of cost
or market using the retail method for merchandise inventories at stores and the
average cost method for merchandise inventories at the Company's distribution
center. The Company purchased approximately 20% and 19% of its merchandise
inventory from one vendor for the periods ended February 1, 1997 and February 3,
1996.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost
less accumulated depreciation. Property and equipment are depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the lesser of the estimated useful life or the
remaining lease term using the straight-line method. The estimated useful lives
and periods used in computing depreciation and amortization are: buildings - 30
years; fixtures and equipment - 3 to 10 years; transportation and data
processing equipment - 3 to 8 years; and leasehold improvements - 5 to 25 years.
PRE-OPENING EXPENSES - Costs related to the opening of new stores are
expensed as incurred.
INCOME TAXES - The Company recognizes an asset and liability approach
for accounting for income taxes. Deferred income taxes are recognized for the
tax consequences of temporary differences and carryforwards by applying enacted
tax rates applicable to future years to differences between the financial
statement amounts and the tax bases of existing assets and liabilities. A
valuation allowance is to be established if it is more likely than not that some
portion of the deferred tax asset will not be realized.
EARNINGS PER SHARE - Earnings per share is computed based upon net
income divided by the weighted average number of shares of common stock and
common stock equivalents (if dilutive) outstanding during each period. In
February 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, EARNINGS PER
SHARE. The Company believes the impact of SFAS No. 128 will not be material.
LONG-LIVED ASSETS - In March 1995, the FASB issued SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG- LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF. The Company adopted SFAS No. 121 effective February 4, 1996 as
required, which establishes accounting standards for the impairment of
long-lived assets, certain identified intangibles and goodwill related to such
assets. The adoption of SFAS No. 121 did not have a material effect on the
Company's financial position or results of operations.
F-39
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED - In June 1996, The
FASB issued SFAS No. 125, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL
ASSETS AND EXTINGUISHMENTS OF LIABILITIES, and in February 1997, the FASB issued
SFAS No. 129, DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE. The Company
will adopt SFAS Nos. 125 and 129 when required. Management believes that
adoption of these standards will not have a material impact on the Company's
consolidated financial position or results of operations.
Fair value disclosures of financial instruments - The following
disclosure of the estimated fair value of financial instruments is made in
accordance with the requirements of SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE
OF FINANCIAL INSTRUMENTS. The estimated fair value amounts have been determined
by the Company using available market information and appropriate valuation
methodologies. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The Company's financial instruments include the following: cash and
cash equivalents, accounts receivable, accounts payable, accrued compensation,
income taxes payable, and long-term debt. At February 1, 1997 and February 3,
1996, the carrying amounts of all financial instruments as reflected in the
accompanying balance sheets were the same as their estimated fair values.
Long-term debt's carrying amount approximates fair value based upon current
rates offered to the Company for debt with similar terms. The carrying amounts
of all other financial instruments are a reasonable estimate of fair values due
to the short maturities of such items.
Fair value estimates are based upon pertinent information available to
management as of February 1, 1997 and February 3, 1996. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been significantly revalued for purposes of
these financial statements since that date and, therefore, current estimates of
fair value may differ significantly from the amounts presented herein. The
Company held no derivative financial instruments at February 1, 1997 or February
3, 1996.
STOCK OPTION PLAN - The Company adopted SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION ("SFAS No. 123") on February 4, 1996, as required. The
company has elected to continue applying Accounting Principles Board Opinion No.
25 in accounting for its stock-based compensation awards as permitted under SFAS
No. 123. Accordingly, no compensation cost has been recognized in the
accompanying financial statements.
RECLASSIFICATIONS - Certain reclassifications have been made to 1995
and 1996 balances to conform with the classifications of such amounts for the
current period.
2. MERGER PLAN WITH STAGE STORES, INC.
On March 5, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger") whereby the Company will be merged with and into Stage
Stores, Inc. ("Stage Stores"), a retailer of apparel in the central United
States. In the Merger, each outstanding share of the Company's common stock will
be acquired for a value of $8.00 per share plus $0.01 per share for every $0.05
per share by which the average closing price of Stage Stores' common stock
exceeds $20 per share. Stage Stores' average closing price will be determined
based on a randomly-selected ten day period out of the twenty trading days
ending on the fifth trading day preceding the closing of the transaction. The
form of consideration (stock/cash mix) to be paid by Stage Stores for the common
stock of the Company will also be determined using a formula based upon the
average closing price of Stage Stores stock.
The consideration will be 100% Stage Stores common stock so long as its
average closing price is $20.00 per share or higher, and such stock percentage
will decline in a linear fashion to 25% of the consideration if the average
closing price of the Stage Stores stock is $15.00 per share. At prices below
$15.00 per share, Stage Stores has the option to terminate the Merger, and pay
the Company a $3.5 million fee plus expenses, or to close the Merger and pay
0.1333 shares of Stage Stores common stock and an amount in cash equal to the
difference between $8.00 per share and the value of 0.1333 shares of Stage
Stores common stock. All options outstanding under the Company stock option plan
(see Note 7) will be canceled as a term of the Merger and the option holders
will be entitled to receive cash equal to the
F-40
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exchange price for the Company common stock less the exercise price of the
related Company option. In addition to the termination event by Stage Stores as
noted above, if the Merger is terminated by the Company under other certain
conditions, the Company will be required to pay a fee of $3.5 million plus
expenses. In the event that another bidder acquires control of the Company
during the Merger or six months thereafter, Stage Stores can exercise an option
to acquire 19.9% of the Company common stock at $8.00 per share.
The Merger is subject to approval by the stockholders of the Company
and certain other conditions including Stage Stores obtaining adequate
financing. During the periods ended February 1, 1997 and February 3, 1996, a
member of the Board of Directors of the Company was employed by an affiliate of
the Financial advisory firm the Company has engaged to provide corporate
advisory services, including the Merger. Management of the Company expects the
Merger transaction will be completed by mid-year 1997.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
FEBRUARY 1, FEBRUARY 3,
1997 1996
---------- ----------
Land ............................................... $ 214 $ 214
Buildings .......................................... 791 781
Leasehold improvements ............................. 8,094 7,910
Fixtures and equipment ............................. 14,028 12,015
Transportation and data processing equipment ....... 8,647 6,345
---------- ----------
31,774 27,265
Less accumulated depreciation and amortization ..... (14,752) (11,934)
---------- ----------
Total property and equipment, net .................. $ 17,022 $ 15,331
========== ==========
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
FEBRUARY 1, FEBRUARY 3,
1997 1996
---------- ----------
Revolving Credit Agreement ............... $ 14,660 $ 24,845
Tax notes payable ........................ 18 182
Other .................................... 157 156
---------- ----------
14,835 25,183
Less current maturities .................. (93) (7,069)
---------- ----------
Total long-term debt ..................... $ 14,742 $ 18,114
========== ==========
On July 27, 1995, the Company entered into an Amended and Restated Loan
Agreement ("Agreement") maturing July 26, 2000. The Agreement provides for
revolving credit borrowings, letters of credit and $20 million of long-term debt
with a $2 million annual reduction. Available borrowings are based on a
percentage of eligible inventory, as defined, with a maximum of $60 million to
be reduced annually by a $2 million long-term principal payment. The Company
classifies as non-current revolving credit borrowings up to the maximum
long-term portion available for the
F-41
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
next fiscal year ($16 million). The rate of interest on borrowings is at the
index rate plus 2% per annum (7.3% and 7.4% at February 1, 1997 and February 3,
1996, respectively) plus a fee of 0.25% on the unused portion of the facility
payable monthly in arrears. The Agreement is secured by a lien on substantially
all assets of the Company. The Company is required to reduce short-term
borrowings under the Agreement to zero for a 30-day period each fiscal year. The
Agreement requires defined fixed charge and specified inventory turnover ratios
and maintenance of a minimum net worth, and restricts the payment of dividends
and limits the amount of capital expenditures and additional borrowings. At
February 1, 1997, the Company was in compliance with all such requirements.
Tax notes represent miscellaneous tax claims financed at 3.5% interest,
of which the final $18,000 principal payment will be made in fiscal year 1998.
Other long-term debt represents two notes for equipment purchases which
are being repaid with interest at 4.9% and 7.4% in equal monthly installments,
including interest, totaling $6,841.
Future maturities of long-term debt during each of the next five years
are $93,000 in 1998; $705,000 in 1999; $2,013,000 in 2000; $12,013,000 in 2001;
and $11,000 in 2002.
5. LEASES
The Company has operating leases for its store facilities, distribution
center, and certain other equipment. Substantially all of the leases are net
leases which require the payment of property taxes, insurance and maintenance
costs in addition to rental payments. Certain store leases provide for
additional rentals based on a percentage of sales, renewal options for one or
more periods ranging from one to five years and rent escalation clauses.
At February 1, 1997, the future minimum lease payments under operating
leases with rental terms of more than one year are as follows (in thousands):
FISCAL YEAR ENDING
1998 $10,288
1999 8,167
2000 6,089
2001 3,633
2002 2,227
Later years 4,121
-------
$34,525
=======
Rent expense relating to operating leases consists of the following (in
thousands):
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 29,
1997 1995 1995
------------ ------------ ------------
Minimum rentals $ 12,271 $ 12,450 $ 11,623
Contingent rentals 664 899 1,093
F-42
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
Current and deferred income tax expense (benefit) recorded in the
accompanying statements of income for each period are as follows (in
thousands):
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 29,
1997 1995 1995
------------ ------------ ------------
Current:
Federal $ 2,173 $ 1,461 $ 2,202
State 260 206 150
------------ ------------ ------------
2,433 1,667 2,352
------------ ------------ ------------
Deferred:
Federal 517 (690) (166)
State 140 (53) 176
------------ ------------ ------------
657 (743) 10
------------ ------------ ------------
Total expense $ 3,090 $ 924 $ 2,362
============ ============ ============
The effective income tax rate differed from the statutory federal
income tax rate as follows:
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
FEBRUARY 1, FEBRUARY 3, JANUARY 29,
1997 1995 1995
------------ ------------ ------------
Statutory federal income tax rate 34% 34% 34%
State income taxes 5 5 5
General business credits -- (9) (2)
Other -- 1 2
--- --- ---
39% 31% 39%
=== === ===
The tax bases of certain assets and liabilities are different from the
values reflected in the accompanying balance sheets. There were no
valuation allowances at February 1, 1997 and February 3, 1996. The
related deferred tax assets and liabilities created by these temporary
differences are as follows (in thousands):
F-43
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED TAX ASSETS
(LIABILITIES)
-------------------------
FEBRUARY 1, FEBRUARY 3,
1997 1996
---------- ----------
Depreciation ....................................... $ 1,591 $ 1,899
Receivable valuation ............................... (102) (56)
Inventory .......................................... 574 688
Employee benefits .................................. 986 1,041
Deferred lease cost ................................ 35 68
Other .............................................. 21 63
Tax benefit of net operating loss carryforwards .... 4,736 5,963
General business credit carryforwards .............. 622 622
---------- ----------
Total .............................................. $ 8,463 $ 10,288
---------- ----------
The Company has net operating loss deduction carryforwards for tax
purposes of approximately $14,000,000 which arose from pre-organization
operations and will expire in 2007. The Company emerged from Chapter 11
pursuant to a confirmed Plan of Reorganization on August 3, 1992. The
Company's ability to utilize the operating loss for income tax purposes
is limited to an annual deduction of approximately $2,700,000 because
of IRS rules applicable to the terms of the Plan of Reorganization. The
Company has recognized the full tax benefit of the loss carryforwards
as a deferred tax asset for financial statement purposes. In
recognizing $8,059,000 of such tax benefits at January 29, 1995,
management considered the nonrecurring nature of significant expenses
which contributed to the creation of the operating loss carryforwards
and the results of operations subsequent to the consummation of the
Plan of Reorganization. The tax benefits recognized related to
pre-organization deferred tax assets were recorded as a direct addition
to additional paid-in capital.
7. STOCK OPTION PLAN
The C.R. Anthony 1992 Amended and Restated Stock Option Plan (the
"Option Plan"), originally effective August 3, 1992, provides for the
issuance of incentive stock options, nonqualified options, of both, to
any key employee as determined by the Board of Directors, or the
issuance of nonqualified options to nonemployee directors. The Company
has reserved 1,500,000 shares of common stock ("Shares") for issuance
under the Option Plan, and any Shares, subject to options which are
forfeited, will be returned to the Option Plan. The Company had 676,667
and 485,000 exercisable stock options at February 1, 1997 and February
3, 1996, respectively.
F-44
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of activity in the Option Plan follows:
NUMBER OF WEIGHTED
OUTSTANDING AVERAGE
OPTIONS EXERCISE PRICE
--------------- --------------
Options outstanding at January 31, 1994 ... 505,000 $ 4.00
Granted .......................... 230,000 4.50
Expired .......................... (10,000) 4.00
---------------
Options outstanding at January 29, 1995 ... 725,000 4.16
Granted .......................... 395,000 3.00
Exercised ........................ (35,000) 4.00
Forfeited ........................ (33,334) 4.00
Expired .......................... (51,666) 4.00
---------------
Options outstanding at February 3, 1996 ... 1,000,000 3.72
Granted .......................... 82,500 3.00
---------------
Options outstanding at February 1, 1997 ... 1,082,500 3.67
---------------
The options granted will vest at 33.3% per year at the end of each
12-month period following the date of the grant and expire on the tenth
year following the date of grant. The Option Plan will automatically
terminate and no additional options will be granted on the tenth
anniversary of its effective date. The Option Plan provides that all
options will become immediately exercisable upon an involuntary
termination of employment, a substantial diminution of duties, a
reduction in compensation, a change in control (as defined), death or
disability (see Note 2). At February 1, 1997, a summary of the
exercisable options follows:
EXERCISABLE OPTIONS
WEIGHTED AVERAGE -------------------------------------
NUMBER OF OPTIONS REMAINING NUMBER OF WEIGHTED AVERAGE
OUTSTANDING CONTRACTUAL LIFE EXERCISABLE OPTIONS EXERCISE PRICE
- ------------------- ------------------ ----------------- ------------------
477,500 8.8 years 131,667 $ 3.00
545,000 5.9 years 505,000 4.00
60,000 7.1 years 40,000 5.92
- ------------------- ----------------- ------------------
1,082,500 676,667 $ 3.92
=================== ================= ==================
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock-based compensation awards. Accordingly, no
compensation cost has been recognized in the accompanying financial
statements. The following pro forma data is calculated as if
compensation cost for the Company's stock-based compensation awards was
determined based upon the fair value at the grant date consistent with
the methodology prescribed under SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION.
F-45
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
52 WEEKS 53 WEEKS
ENDED ENDED
FEBRUARY 1, FEBRUARY 3,
1996 1996
---------- ----------
Net income as reported (in thousands) .......... $ 4,833 $ 2,086
Pro forma net income (in thousands) ............ $ 4,623 $ 2,008
Net income per common share as reported ........ $ 0.53 $ 0.23
Pro forma net income per common share .......... $ 0.51 $ 0.22
The weighted average fair value at the date of grant for options
granted in fiscal year 1997 and 1996 was $1.54 and $1.51, respectively.
The fair value of the options granted is estimated using the
Black-Scholes option pricing model with the following assumptions: no
dividend yield; volatility of 48.6%; risk-free interest rate of 6.13%
and 6.76% for options granted on September 28, 1995 and June 10, 1996,
respectively; no assumed forfeitures; and an expected life of five
years. The pro forma amounts above are not likely to be representative
of future years because options vest over several years and additional
awards are generally made each year.
8. COMMITMENTS AND CONTINGENCIES
The Company has a contributory 401(k) savings plan covering
substantially all employees. The Company contributed approximately
$279,000, $278,000 and $247,000, respectively, for the fifty-two weeks
ended February 1, 1997, the fifty-three weeks ended February 3, 1996
and the fifty-two weeks ended January 29, 1995, in matching
contributions based upon employees' contributions. The Company's
matching rate is currently 40% of each participants contribution,
limited to 2.0% of each participant's salary.
Effective August 1, 1995, the Company entered into a "Second Amended
and Restated Private Label Retail Credit Services Agreement" with
Citicorp Retail Services, Inc. ("CRS") related to the Company's private
label charge card. The Agreement matures August 1, 1998, with annual
renewal options to August, 2000. The Agreement provides for the sale of
the charge card receivables to CRS on a nonrecourse basis at 100% of
face value, less a stated discount rate. Charge card receivables of
approximately $52,000,000, $55,300,000 and $44,200,000 were sold to CRS
during the fifty-two weeks ended February 1, 1997, the fifty-three
weeks ended February 3, 1996 and the fifty-two weeks ended January 29,
1995, respectively. The Company is also obligated to pay a fee to CRS
for bad debt losses equal to 50% of such losses in excess of 2.25% of
annual private label charge card sales. The former agreement provided
for reimbursement of losses up to 3% of average outstanding accounts
receivable balances. The amount of losses incurred by the Company
pursuant to the current and former agreements for the fifty-two weeks
ended February 1, 1997, the fifty-three weeks ended February 3, 1996
and the fifty-two weeks ended January 29, 1995 were $831,000, $399,000
and $419,000, respectively. The Company records the discount and
accrues for its estimated obligation for bad debt expense at the time
the receivables are sold.
The Company has a Severance Pay Plan for the purpose of attracting and
retaining its employees and providing the employees assurance of the
payment which will be made to them if terminated by the Company without
cause (as defined) upon their termination of employment by the Company.
The Company also has an Executive Severance Compensation Agreement with
certain key executives.
The Company is currently subject to certain litigation in the normal
course of business which, in the opinion of management, will not result
in a material adverse effect on the Company's business, financial
position, or results of operations.
F-46
<PAGE>
C.R. ANTHONY COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company retains certain risks for general liability, workers'
compensation and group health losses. The Company has individual and
aggregate stop loss coverage with insurers for these claims. Management
of the Company believes the recorded reserves of approximately
$2,105,000 at February 1, 1997 are adequate to cover these retained
risks.
At February 1, 1997, the Company was contingently liable for
approximately $2,308,000 for outstanding letters of credit securing
performance of purchase contracts and other guarantees.
F-47
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary.........................................................
Risk Factors...............................................................
The Acquisition............................................................
The Refinancing............................................................
Use of Proceeds............................................................
Capitalization.............................................................
Selected Consolidated Historical Financial Data............................
Unaudited Pro Forma Combined Financial Data................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................
Business...................................................................
Management.................................................................
Description of New Credit Agreement........................................
Description of the Exchange Notes..........................................
The Exchange Offer.........................................................
Certain Federal Income Tax Consequences....................................
Plan of Distribution.......................................................
Legal Matters..............................................................
Independent Auditors.......................................................
Available Information......................................................
Information Incorporated by Reference......................................
Index to Financial Statements..............................................
================================================================================
SPECIALTY RETAILERS, INC.
OFFER TO EXCHANGE ITS SERIES B 8 1/2% SENIOR NOTES DUE 2005 FOR ANY AND
ALL OF ITS OUTSTANDING 8 1/2% SENIOR NOTES DUE 2005 AND TO EXCHANGE ITS
SERIES B 9% SENIOR SUBORDINATED NOTES DUE 2007 FOR ANY AND ALL OF ITS
OUTSTANDING 9% SENIOR SUBORDINATED NOTES DUE 2007
UNCONDITIONALLY GUARANTEED BY STAGE STORES, INC. AND SPECIALTY
RETAILERS, INC. (NV)
PROSPECTUS
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Stage is incorporated under the laws of the State of Delaware. Section 145
of the General Corporation Law of the State of Delaware, INTER ALIA, ("Section
145") provides that a Delaware corporation may indemnify any persons who were,
are or are threatened to be made, parties 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 such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
were or are threatened to be made, a party to any threatened, pending or
completed action or suit by or in the right of the corporation by reason of the
fact that such person was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit, provided such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the corporation's best
interests, provided that no indemnification is permitted without judicial
approval if the officer, director, employee or agent is adjudged to be liable to
the corporation. Where an officer, director, employee or agent is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
SRI is incorporated under the laws of the State of Texas. Section 2.02-1 of
the Texas Business Corporation Act, as amended, INTER ALIA, ("Section 2.02-1")
provides that a Texas corporation may indemnify any person who was, is or is
threatened to be made a named defendant or respondent in a threatened, pending
or completed action suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or proceeding
or any inquiry that could lead to such action, suit or proceeding because the
person 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,
partner, venturer, proprietor, trustee, employee, agent, or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, provided that
it is determined (in accordance with procedures outlined in Section 2.02-1) that
the person (1) conducted himself in good faith; (2) reasonably believed: (a) in
the case of conduct in his official capacity as director, officer, employee or
agent of the corporation, that his conduct was in the corporation's best
interests; and (b) in all other cases, that his conduct was at least not opposed
to the corporation's best interests; and (3) in the case of any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful. The
indemnity may include judgments, penalties (including excise and similar taxes),
fines, settlements, and reasonable (as determined by procedures outlined in
Section 2.02-1) expenses (including court costs and attorneys' fees) actually
incurred by the person in connection with the proceeding. A person may not be so
indemnified, however, in respect of a proceeding (1) in which the person is
found liable on the basis that personal benefit was improperly received by him,
whether or not the benefit resulted from an action taken in the person's
official capacity or (2) in which the person is found liable to the corporation,
except that in such cases, the indemnification (1) is limited to reasonable
expenses actually incurred by the person in connection with the proceeding and
(2) shall not be made in respect of any proceeding in which the person shall
have been found liable for willful or intentional misconduct in the performance
of his duty to the corporation. A corporation must indemnify a director,
officer, employee or agent of the corporation against reasonable expenses
(including court costs and attorneys' fees) incurred by him in connection with
any proceeding a referred to above if he has been wholly successful, on the
merits or otherwise, in the defense of the proceeding.
Specialty NV is incorporated under the laws of the State of Nevada. Section
78.751 of the Nevada General Corporation Law, INTER ALIA, ("Section 78.751")
provides that a Nevada 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, except an action by or in the right of such corporation, by
reason of the fact that he is or was an officer, director, employee or agent of
such corporation, or is or was serving at the request of the corporation as a
director, officer employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in cont or proceeding, if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that his conduct was
unlawful. The termination of any action, suit or proceeding by
II-2
<PAGE>
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and that with respect to
any criminal action or proceeding, he had reasonable cause to believe that his
conduct was unlawful. A Nevada 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 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, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the corporation's
best interests, provided that no indemnification may be made for any claim,
issue or matter or for amounts paid in settlement to the corporation without
judicial approval if the officer, director, employee or agent has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation. Unless ordered by a court or advanced pursuant
to provisions in the articles of incorporation, the bylaws or an agreement made
by the corporation which provide that expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be
paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the corporation, any indemnification must be made by the
corporation only as authorized in the specific case upon a determination (in
accordance with procedures outlined in Section 78.751) that indemnification of
the director, officer, employee or agent is proper under the circumstances. To
the extent that a director, officer, employee or agent of a corporation is
successful on the merits or otherwise in the defense of any action referred to
above, or in defense of any claim, issue or matter therein, he must be
indemnified by the corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense.
Article IX of Stage's Restated Certificate of Incorporation provides, in
substance, for indemnification by Stage of its directors and officers in
accordance with the provisions of the Delaware Act.
Article X of SRI's Restated Articles of Incorporation provides, in
substance, for indemnification by SRI of its directors and officers in
accordance with the provisions of the Texas Act.
Article V of Specialty NV's By-Laws provides, in substance, for
indemnification by Specialty NV of its directors and officers in accordance with
the Nevada Act.
In addition, Stage has purchased insurance coverage under policies which
insure Stage for amounts which Stage is required or permitted to pay as
indemnification of directors and certain officers of Stage and its subsidiaries,
and which insure directors and certain officers of Stage and its subsidiaries
against certain liabilities which might be incurred by them in such capacities
and for which they are not entitled to indemnification by Stage.
II-3
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. EXHIBITS. The following documents are exhibits to the Registration
Statement.
* 2.1 Agreement and Plan of Merger, dated as of March 5, 1997,
between Stage Stores, Inc. and C.R. Anthony Company
(Incorporated by Reference to Exhibit 2.1 of Registration No.
333-27809 on Form S-4).
* 2.2 First Amendment to Agreement and Plan of Merger, dated as of
May 20, 1997, between Stage Stores, Inc. and C.R. Anthony
Company. (Incorporated by reference to Exhibit 2.2 of
Registration No. 333-27809 on Form S-4).
* 3.1 Amended and Restated Certificate of Incorporation of Stage
Stores, Inc. (Incorporated by Reference to Exhibit 3.3 of
Registration No. 333-5855 on Form S-1).
* 3.2 Amended and Restated By-Laws of Stage Stores, Inc.
(Incorporated by Reference to Exhibit 3.4 of Registration No.
333-5855 on Form S-1).
** 3.3 Restated Articles of Incorporation of Specialty Retailers,
Inc.
** 3.4 Amended and Restated By-Laws of Specialty Retailers, Inc.
** 3.5 Articles of Incorporation of Specialty Retailers, Inc. (NV).
** 3.6 By-Laws of Specialty Retailers, Inc. (NV).
** 4.1 Credit Agreement dated as of June 17, 1997 by and among
Specialty Retailers, Inc., Stage Stores, Inc., the banks named
therein, and Credit Suisse First Boston.
** 4.2 Indenture dated as of June 17, 1997 relating to the
$200,000,000 aggregate principal amount of 8 1/2% Senior Notes
due 2005 among Specialty Retailers, Inc., Stage Stores, Inc.
and State Street Bank and Trust Company, and First
Supplemental Indenture dated as of July 2, 1997.
** 4.3 Indenture dated as of June 17, 1997 relating to the
$100,000,000 aggregate principal amount of 9% Senior
Subordinated Notes due 2007 among Specialty Retailers, Inc.,
Stage Stores, Inc. and State Street Bank and Trust Company,
and First Supplemental Indenture dated as of July 2, 1997.
** 4.4 Registration Rights Agreement dated as of June 11, 1997 among
Specialty Retailers, Inc., Credit Suisse First Boston
Corporation, Bear, Stearns & Co. Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation.
* 4.5 Indenture between 3 Bealls Holding Corporation and Bankers
Trust Company, as Trustee, relating to 3 Bealls Holding
Corporation's 9% Subordinated Debentures due 2002
(Incorporated by Reference to Exhibit 4.2 of Registration No.
33-24571 on Form S-4) and First Supplemental Indenture dated
August 2, 1993 (Incorporated by Reference to Exhibit 4.4 of
Registration No. 33-68258 on Form S-4).
* 4.6 Indenture between 3 Bealls Holding Corporation and IBJ
Schroder Bank and Trust Company, as Trustee, relating to 3
Bealls Holding Corporation's 7% Junior Subordinated Debentures
due 2002 (Incorporated by Reference to Exhibit 4.3 of
Registration No. 33-24571 on Form S-4) and First Supplemental
Indenture dated August 2, 1993 (Incorporated by Reference to
Exhibit 4.5 of Registration No. 33-68258 on Form S-4).
* 4.7 Indenture by and between Specialty Retailers, Inc. and The
First National Bank of Boston, as Trustee, relating to the 11%
Series C and Series D Senior Subordinated Notes due 2003 of
Specialty Retailers, Inc. dated July 27, 1995 (including form
of Note), (Incorporated by Reference to Exhibit 4.1 on Form
10-Q of Apparel Retailers, Inc., dated October 28, 1995).
* 4.8 Indenture among SRI Receivables Purchase Co., Inc., Specialty
Retailers, Inc., as Administrative Agent, and Bankers Trust
Company, as Trustee and Collateral Agent, relating to the
12.5% Trust Certificate-Backed Notes of SRI Receivables
Purchase Co., Inc. (including form of note). (Incorporated by
Reference to Exhibit 4.1 on Form 10-Q of Apparel Retailers
Inc., dated May 4, 1996).
II-4
<PAGE>
* 4.9 Amended and Restated Pooling and Servicing Agreement by and
among SRI Receivables Purchase Co., Inc., Specialty Retailers,
Inc. and Bankers Trust (Delaware) dated August 11, 1995
(Incorporated by Reference to Exhibit 4.6 on Form 10-Q of
Apparel Retailers, Inc., dated October 28, 1995).
* 4.10 First Amendment to Amended and Restated Pooling and Servicing
Agreement by and among SRI Receivables Purchase Co., Inc.,
Specialty Retailers, Inc. and Bankers Trust (Delaware) dated
May 30, 1996 (Incorporated by Reference to Exhibit 4.2 on Form
10-Q of Apparel Retailers, Inc., dated May 4, 1996).
* 4.11 Amended and Restated Series 1993-1 Supplement among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) dated May 30, 1996 (Incorporated by
Reference to Exhibit 4.3 on Form 10-Q of Apparel Retailers,
Inc., dated May 4, 1996).
* 4.12 Amended and Restated Series 1993-2 Supplement among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) dated May 30, 1996 (Incorporated by
Reference to Exhibit 4.4 on Form 10-Q of Apparel Retailers,
Inc., dated May 4, 1996).
* 4.13 First Amendment to the Series 1993-2 Supplement and Revolving
Certificate Purchase Agreement by and among Specialty
Retailers, Inc., SRI Receivables Purchase Co., Inc., Bankers
Trust (Delaware) as Trustee for the SRI Receivables Master
Trust, the financial institutions parties thereto and National
Westminster Bank Plc, New York branch dated August 11, 1995
(Incorporated by Reference to Exhibit 4.5 on Form 10- Q of
Apparel Retailers, Inc., dated May 4, 1996).
* 4.14 Amended and Restated Series 1995-1 Supplement by and among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) on behalf of the Series 1995-1
Certificate holders dated May 30, 1996 (Incorporated by
Reference to Exhibit 4.6 on Form 10-Q of Apparel Retailers,
Inc., dated May 4, 1996).
* 4.15 Amended and Restated Receivables Purchase Agreement among SRI
Receivables Purchase Co., Inc. and Originators dated May 30,
1996 (Incorporated by Reference to Exhibit 4.7 on Form 10-Q of
Apparel Retailers, Inc., dated May 4, 1996).
* 4.16 Registration Rights Agreement dated as of May 30, 1996 by and
among SRI Receivables Purchase Co., Inc. and BT Securities
Corporation relating to the sale of SRI Receivables Purchase
Co., Inc. 12.5% Trust Certificate-Backed Notes. (Incorporated
by Reference to Exhibit 10.1 on Form 10-Q of Apparel
Retailers, Inc., dated May 4, 1996).
* 4.17 Certificate Purchase Agreements between SRI Receivables
Purchase Co., Inc. and the Purchases of the Series 1993-1
Offered Certificates (Incorporated by Reference to Exhibit
4.10 of Registration No. 33-68258 on Form S-4).
* 4.18 Revolving Certificate Purchase Agreement between SRI
Receivables Purchase Co., Inc., the Facility Agent and the
Revolving Purchasers with respect to the Class A-R
certificates (Incorporated by Reference to Exhibit 4.11 of
Registration No. 33-68258 on Form S-4).
* 4.19 Certificate Purchase Agreement among SRI Receivables Purchase
Co., Specialty Retailers, Inc. and the Certificate Purchaser
dated August 11, 1995 (Incorporated by Reference to Exhibit
4.9 on Form 10-Q of Apparel Retailers, Inc., dated October 28,
1995).
*** 5.1 Opinion of Kirkland & Ellis.
*** 8.1 Opinion of Kirkland & Ellis re Tax Matters.
* 10.1 Equity Stock Purchase Agreement by and among Specialty
Retailers, Inc., Tyler Capital Fund, L.P. Tyler Massachusetts,
L.P., Tyler International, L.P.-I, Tyler International,
L.P.-II, Bain Venture Capital, Citicorp Capital Investors,
Ltd., Acadia Partners, L.P., Drexel Burnham Lambert
Incorporated, and certain other Purchasers, dated December 29,
1988 (Incorporated by Reference to Exhibit 10.9 of
Registration No. 33- 27714 on Form S-1) and Amendment to
Equity Stock Purchase Agreement dated September 21, 1992 and
August 2, 1993 (Incorporated by Reference to Exhibit 10.4 of
Registration No. 33-68258 on Form S-4).
II-5
<PAGE>
* 10.2 Registration Agreement by and among Specialty Retailers, Inc.,
Tyler Capital Fund, L.P., Tyler Massachusetts, L.P., Tyler
International, L.P.-I, Tyler International, L.P.-II, Bain
Venture Capital, Citicorp Capital Investors, Ltd., Acadia
Partners, L.P., Drexel Burnham Lambert Incorporated, and
certain other Purchasers, dated December 29, 1988
(Incorporated by Reference to Exhibit 10.10 of Registration
No. 33- 27714 on Form S-1) and Amendment to Registration
Agreement dated August 2, 1993 (Incorporated by Reference to
Exhibit 10.5 of Registration No. 33-68258 on Form S-4).
* 10.3 Apparel Retailers, Inc. Stock Option Plan (Incorporated by
Reference to Exhibit 10.13 to Registration No. 33-68258 on
Form S-4).
* 10.4 Employment Agreement between Stage Stores, Inc. and Carl E.
Tooker dated June 12, 1996 (Incorporated by Reference to
Exhibit 10.17 of Registration No. 33-5855 on Form S-1).
* 10.5 Stock Option Agreement between Specialty Retailers, Inc. and
Carl E. Tooker dated June 9, 1993 (Incorporated by Reference
to Exhibit 10.18 to Registration No. 33-68258 on Form S-4).
* 10.6 Purchase Agreement dated July 20, 1995 by and among Specialty
Retailers, Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, relating to the sale of the Company's 11% Series
C Senior Subordinated Notes due 2003 (Incorporated by
Reference to Exhibit 10.1 on Form 10-Q of Apparel Retailers,
Inc., dated October 28, 1995).
* 10.7 Employment Agreement between Mark Shulman and Stage Stores,
Inc. dated June 12, 1996 (Incorporated by Reference to Exhibit
10.23 of Registration No. 333-5855 of Form S-1).
* 10.8 Stock Option Agreement between Mark Shulman and Apparel
Retailers, Inc., dated January 31, 1994 (Incorporated by
Reference to Exhibit 10.2 on Form 10-Q of Apparel Retailers,
Inc., dated April 29, 1995).
* 10.9 Employment Agreement between James Marcum and Stage Stores,
Inc. dated June 12, 1996 (Incorporated by Reference to Exhibit
10.24 of Registration No. 333-5855 of Form S-1).
* 10.10 Employment between Stephen Lovell and STAGE Stores, Inc. dated
June 12, 1996 (Incorporated by Reference to Exhibit 10.25 of
Registration No. 333-5855 of Form S-1).
* 10.11 Employment Agreement between Ron Lucas and Stage Stores, Inc.
dated June 12, 1996 (Incorporated by Reference to Exhibit
10.28 of Registration No. 333-5855 of Form S-1).
* 10.12 Purchase Agreement dated September 2, 1994 by and among Palais
Royal, Inc. and Beall-Ladymon Corporation relating to the sale
of certain assets of Beall-Ladymon Corporation (Incorporated
by Reference to Exhibit 10.1 on Form 10-Q of Apparel
Retailers, Inc., dated July 30, 1994).
* 10.13 Securities Purchase Agreement among Palais Royal, Inc. and
certain selling stockholders of Uhlmans, dated May 9, 1996
(Incorporated by Reference to Exhibit 10.1 on Form 10-Q of
Stage Stores, Inc., dated June 12, 1996).
* 10.14 Termination Option Agreement, dated as of March 5, 1997,
between Stage Stores, Inc. and C.R. Anthony Company
(Incorporated by Reference to Exhibit 10.1 on Form 8-K of
Stage Stores, Inc., dated March 5, 1997).
* 10.15 Stage Stores, Inc. Equity Incentive Plan (Incorporated by
Reference to Exhibit 10.29 of Registration No. 333-5855 of
Form S-1).
** 12.1 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
** 21.1 List of Registrant's Subsidiaries.
** 23.1 Consent of Price Waterhouse LLP (Stage Stores).
** 23.2 Consent of Deloitte & Touche LLP (CR Anthony).
*** 23.3 Consent of Kirkland & Ellis (included in Exhibits 5.1 and 8.1
to this Registration Statement).
II-6
<PAGE>
** 24.1 Powers of Attorney for Specialty Retailers, Inc. (included on
signature page hereto).
** 24.2 Powers of Attorney for Stage Stores, Inc. (included in
signature page hereto).
** 24.3 Powers of Attorney for Specialty Retailers, Inc. (NV)
(included on signature page hereto).
** 25.1 Statement of Eligibility of Trustee on Form T-1 for 8 1/2%
Senior Notes due 2005.
** 25.2 Statement of Eligibility of Trustee on Form T-1 for 9% Senior
Subordinated Notes due 2007.
* 27.1 Financial Data Schedule. (Incorporated by Reference to Exhibit
27.1 on Form 10-Q of Stage Stores, Inc., dated May 3, 1997)
*** 99.1 Form of Letter of Transmittal.
*** 99.2 Form of Notice of Guaranteed Delivery.
*** 99.3 Form of Tender Instructions.
- ----------------------
* Previously Filed
** Filed Herewith
*** To Be Filed by Amendment
b. FINANCIAL STATEMENT SCHEDULES. The following documents are financial
statement schedules to the Registration Statement.
Not Applicable.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(a) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(b)(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act, and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
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;
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue;
II-7
<PAGE>
(d) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in the documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request; and
(e) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being involved therein, that was not
the subject of and included in the Registration Statement when it became
effective.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on July 31, 1997.
SPECIALTY RETAILERS, INC.
By: /s/ CARL TOOKER
Name: Carl Tooker
Title: President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Carl Tooker and James Marcum and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Specialty Retailers, Inc.), to sign any or all amendments (including
post-effective amendments) to this registration statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed on July 31, 1997,
by the following persons in the capacities indicated with respect to Specialty
Retailers, Inc.:
SIGNATURE CAPACITY
--------- --------
/s/ CARL TOOKER President, Chief Executive Officer, and Director
Carl Tooker (Principal Executive Officer)
/s/ JAMES MARCUM Executive Vice President and Chief Financial Officer
James Marcum (Principal Financial and Accounting Officer)
/s/ JOSHUA BECKENSTEIN Director
Joshua Beckenstein
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf, as
guarantor, by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on July 31, 1997.
STAGE STORES, INC.
By: /s/ CARL TOOKER
Name: Carl Tooker
Title: President, Chief Executive
Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Carl Tooker and James Marcum and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Stage Stores, Inc.), to sign any or all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and power of attorney have been signed on July 31, 1997,
by the following persons in the capacities indicated with respect to Stage
Stores, Inc.:
Signature Capacity
--------- --------
/s/ CARL TOOKER President, Chief Executive Officer, and Director
Carl Tooker (Principal Executive Officer)
/s/ JAMES MARCUM Executive Vice President and Chief Financial Officer
James Marcum (Principal Financial and Accounting Officer)
/s/ JOSHUA BECKENSTEIN Director
Joshua Beckenstein
/s/ ADAM KIRSCH Director
Adam Kirsch
/s/ PETER MULVIHILL Director
Peter Mulvihill
/s/ ROBERT HUTH Director
Robert Huth
/s/ RICHARD JOLOSKY Director
Richard Jolosky
/s/ HAL COMPTON Director
Hal Compton
/s/ JOHN J. WIESNER Director
John J. Wiesner
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf, as
guarantor, by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on July 31, 1997.
SPECIALTY RETAILERS, INC. (NV)
By: /s/ LOIS PADGETT
Name: Lois Padgett
Title: President and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lois Padgett, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of Specialty Retailers, Inc. (NV)), to
sign any or all amendments (including post-effective amendments) to this
registration statement and any subsequent registration statement filed pursuant
to Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement and power of attorney have been signed on July 31, 1997, by the
following persons in the capacities indicated with respect to Specialty
Retailers, Inc. (NV):
SIGNATURE CAPACITY
--------- --------
/s/ LOIS PADGETT President and Director
Lois Padgett (Principal Executive Officer)
/s/ MICHAEL MELCHIN Secretary and Director
Michael Melchin
II-11
EXHIBIT 3.3
RESTATED ARTICLES OF INCORPORATION
OF
PALAIS ROYAL, INC.
ARTICLE ONE
Palais Royal, Inc. (the "Corporation"), pursuant to the provisions of
Article 4.07 of the Texas Business Corporation Act (the "Act"), hereby adopts
Restated Articles of Incorporation which accurately copy the Articles of
Incorporation of the Corporation and all amendments thereto that are in effect
to date and as further amended by such Restated Articles of Incorporation as
hereinafter set forth, and which contain no other changes in any provisions
thereof.
ARTICLE TWO
The Restated Articles of Incorporation do not amend the capital structure
of the Corporation. The Articles of Incorporation of the Corporation are amended
by the Restated Articles of Incorporation to change the name of the Corporation,
the address of the registered office of the Corporation, and the registered
agent of the Corporation, and to make further amendments and additions as
follows:
1. Article I of the Corporation's Articles of Incorporation is amended
in its entirety to read as follows:
"ARTICLE I
The name of the Corporation is Specialty Retailers, Inc."
2. In Article VI of the Corporation's Articles of Incorporation, the
word "appeal" is amended to "repeal."
3. Article IX of the Corporation's Articles of Incorporation is amended
in its entirety to read as follows:
"ARTICLE IX
No director of the Corporation shall be liable to the Corporation or
any of its shareholders for monetary damages for an act or omission
in the director's capacity as a director, provided, however, that
the limitation of liability contained in this Article IX
<PAGE>
shall not eliminate or limit the liability of a director to the
extent the director is found liable for:
(1) A breach of the director's duty of loyalty to the
Corporation or its shareholders;
(2) An act or omission not in good faith that constitutes a breach
of duty of the director to the Corporation or an act or
omission that involves intentional misconduct or a knowing
violation of the law;
(3) A transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office; or
(4) An act or omission for which the liability of a director is
expressly provided by an applicable statute.
If the Act and/or the Texas Miscellaneous Corporation Laws Act is
amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Act and/or the Texas Miscellaneous
Corporation Laws Act, as so amended. Any repeal or modification of
the provisions of this Article IX by the shareholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification."
4. Article X of the Corporation's Articles of Incorporation is amended
in its entirety to read as follows:
"ARTICLE X
The Corporation shall indemnify its officers and directors and may
indemnify its other employees or agents to the full extent permitted
by law if any such person 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, arbitrative,
or investigative, any appeal in such an action, suit, or proceeding,
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, partner,
venturer, proprietor, trustee, employee, agent, or similar
functionary of another corporation, partnership, joint venture, sole
2
<PAGE>
proprietorship, trust, or other enterprise, to the fullest extent
authorized or permitted by the Act and any other applicable law, as
the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment),
against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding. Such right of
indemnification shall not be deemed exclusive of any other rights to
which such person may be entitled under any bylaw, agreement, vote
of shareholders, or otherwise."
5. Article XI of the Corporation's Articles of Incorporation is amended
in its entirety to read as follows:
"ARTICLE XI
The post office address of the registered office of the Corporation
in the State of Texas is 10201 South Main Street, Houston, Texas
77025. The name of the registered agent of the Corporation at
such address is Scott A. Woods."
6. Article XII of the Corporation's Articles of Incorporation is
amended in its entirety to read as follows:
"ARTICLE XII
The number of directors of the Corporation may be fixed by the
bylaws. The names and addresses of the individuals who now serve as
directors of the Corporation and will continue to serve until their
successors are duly elected and qualified or until earlier
resignation or removal are:
NAME ADDRESS
Joshua Beckenstein Two Copley Place
Boston, MA 02116
Carl Tooker 10201 South Main Street
Houston, TX 77025"
7. The following Article XIV shall be added to the Corporation's
Articles of Incorporation:
3
<PAGE>
"ARTICLE XIV
Any action required by the Act to be taken at any annual or special
meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be
signed by the holder or holders of shares having not less than the
minimum number of votes that would be necessary to take such action
at a meeting at which the holders of all shares entitled to vote on
the action were present and voted."
ARTICLE THREE
The amendment made by the Restated Articles of Incorporation has been
effected in conformity with the provisions of the Act and such amendment was
duly adopted by the sole shareholder of the Corporation on the 7th day of
February, 1997.
ARTICLE FOUR
The number of shares of the Corporation which were outstanding at the time
of the approval of the Corporation's Restated Articles of Incorporation were
5,000 , all of one class, and the number of shares entitled to vote on the
Corporation's Restated Articles of Incorporation were 5,000. The sole
shareholder of the Corporation has signed a written consent adopting such
Restated Articles of Incorporation pursuant to Article 9.10 of the Texas
Business Corporation Act.
ARTICLE FIVE
The Articles of Incorporation of the Corporation and all amendments and
supplements thereto are hereby superseded in their entirety by the following
Restated Articles of Incorporation which accurately copy the entire text of the
Restated Articles of Incorporation of the Corporation, including all amendments
thereto in effect to date and as further amended by such Restated Articles of
Incorporation, and except as set forth therein there are no other changes in any
provision of the Corporation's Articles of Incorporation:
ARTICLE I
The name of the Corporation is Specialty Retailers, Inc.
ARTICLE II
The nature of business or purpose for which the corporation is organized
is to engage in any lawful act or activity and have all of the general powers
granted to corporations organized under the laws of the State of Texas whether
granted by specific statutory authority or by
4
<PAGE>
constitution of law.
ARTICLE III
The aggregate number of shares which the corporation shall have authority
to issue is one hundred thousand (100,000) shares, all of which shall be Common
Stock, and the par value of each such share shall be $.01.
ARTICLE IV
The period of existence of the corporation shall be perpetual.
ARTICLE V
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of a stated sum which shall be
at least One Thousand Dollars ($1,000.00), consisting of money, labor performed,
or property actually received.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the power to adopt, amend or repeal the by-laws of the corporation is conferred
upon the directors of the corporation.
ARTICLE VII
Shareholders of the Corporation shall have no preemptive right to acquire
additional, unissued, or treasury shares of the Corporation.
ARTICLE VIII
No holder of any class of shares of the corporation shall be entitled to
cumulative voting rights at any time with regard to the election of directors.
ARTICLE IX
No director of the Corporation shall be liable to the Corporation or any
of its shareholders for monetary damages for an act or omission in the
director's capacity as a director, provided, however, that the limitation of
liability contained in this Article IX shall not eliminate or limit the
liability of a director to the extent the director is found liable for:
(1) A breach of the director's duty of loyalty to the Corporation or its
shareholders;
5
<PAGE>
(2) An act or omission not in good faith that constitutes a breach of
duty of the director to the Corporation or an act or omission that
involves intentional misconduct or a knowing violation of the law;
(3) A transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the
scope of the director's office; or
(4) An act or omission for which the liability of a director is
expressly provided by an applicable statute.
If the Act and/or the Texas Miscellaneous Corporation Laws Act is amended
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Act and/or
the Texas Miscellaneous Corporation Laws Act, as so amended. Any repeal or
modification of the provisions of this Article IX by the shareholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
ARTICLE X
The Corporation shall indemnify its officers and directors and may
indemnify its other employees or agents to the full extent permitted by law if
any such person 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, arbitrative, or investigative, any appeal in such an
action, suit, or proceeding, 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, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another
corporation, partnership, joint venture, sole proprietorship, trust, or other
enterprise, to the fullest extent authorized or permitted by the Act and any
other applicable law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding. Such right of indemnification shall not be deemed exclusive of any
other rights to which such person may be entitled under any bylaw, agreement,
vote of shareholders, or otherwise.
ARTICLE XI
The post office address of the registered office of the Corporation in the
State of Texas is 10201 South Main Street, Houston, Texas 77025. The name of the
registered agent of the Corporation at such address is Scott A. Woods.
ARTICLE XII
6
<PAGE>
The number of directors of the Corporation may be fixed by the bylaws. The
names and addresses of the individuals who now serve as directors of the
Corporation and will continue to serve until their successors are duly elected
and qualified or until earlier resignation or removal are:
NAME ADDRESS
Joshua Beckenstein Two Copley Place
Boston, MA 02116
Carl Tooker 10201 South Main Street
Houston, TX 77025"
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
ARTICLE XIV
Any action required by the Act to be taken at any annual or special
meeting of shareholders, or any action which may be taken at any annual or
special meeting of shareholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holder or holders of shares having
not less than the minimum number of votes that would be necessary to take such
action at a meeting at which the holders of all shares entitled to vote on the
action were present and voted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this the 7th
day of February, 1997.
SPECIALTY RETAILERS, INC.
(formerly Palais Royal, Inc.)
By: /s/ JERRY IVIE
Name: Jerry Ivie
Title: Senior Vice President,
Secretary & Treasurer
7
EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
SPECIALTY RETAILERS, INC.
(A TEXAS CORPORATION)
ARTICLE I. OFFICES
SECTION 1.01. REGISTERED OFFICE. The registered office of the
Corporation shall be located at 10201 South Main Street, Houston, Texas 77025,
or such other place as may be designated by the Board of Directors and filed
with the Secretary of State of the State of Texas in accordance with the Texas
Business Corporation, as it may hereafter be amended, restated or codified (the
"TBCA").
SECTION 1.02. PRINCIPAL OFFICE. The principal office shall be located at
such place designated by the Board of Directors from time to time.
SECTION 1.03. OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, within or without the State of Texas, as
the Board of Directors may, from time to time, designate or the business of the
Corporation may require.
ARTICLE II. SHAREHOLDERS' MEETINGS
SECTION 2.01. TIME AND PLACE OF SHAREHOLDERS' MEETINGS. All meetings of
the Shareholders shall be held at the principal office of the Corporation, or at
such other place, within or without the State of Texas, as shall be determined,
from time to time, by the Board of Directors, or unanimously designated by the
Shareholders, and the place at which such meeting shall be held shall be stated
in the notice and call of the meeting. Any meeting is valid wherever held if all
persons entitled to vote at such meeting consent in writing to holding such
meeting where held, whether signed before, during or after such meeting, and if
the consent is filed with the Corporation's Secretary.
SECTION 2.02. THE ANNUAL MEETING. The annual meeting of the Shareholders
of the Corporation, for the election of Directors to succeed those whose terms
expire and for the transaction of such other business as may properly come
before the meeting, shall be held on the first day of October of each year;
provided, however, that if such day shall fall on a legal holiday in the State
of Texas, then the meeting shall be on the next business day thereafter. If the
annual meeting of the Shareholders is not held on the day herein prescribed, the
election of Directors may be held at any meeting thereafter called pursuant to
these Bylaws.
<PAGE>
SECTION 2.03. SPECIAL MEETINGS. Special meetings of the Shareholders may
be called by the President, or if the President is unable to act because of
physical or mental disability, by any Vice President, or by a majority of the
Board of Directors, and shall be called at any time by the President or any Vice
President, or the Secretary or the Treasurer upon the request of Shareholders
owning one-tenth (1/10th) of the outstanding stock of the Corporation entitled
to vote at such meeting. Special meetings of Shareholders shall be held at such
place, within or without the State of Texas, as shall be stated in the notice of
the meeting or waiver thereof. Only business within the purpose or purposes
described in the notice required by the TBCA and Section 2.04 below may be
conducted at a special meeting of the Shareholders.
SECTION 2.04. NOTICE AND PURPOSE OF THE MEETINGS. Written or printed
notice, stating the date, hour and place of any meeting of the Shareholders,
and, in the case of a special meeting, or where otherwise required by the TBCA,
the purpose or purposes for which the meeting is called, signed by the
President, Vice President or Secretary, shall be delivered at least ten (10)
days (or if the purpose, or one of the purposes, of the meeting is to consider a
plan of merger or exchange, at least twenty [20] days), and not more than sixty
(60) days, prior to such meeting, either personally or by mail, to each
Shareholder of the Corporation entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the Shareholder at his address as it appears on
the share transfer records of the Corporation. Except as otherwise expressly
provided by applicable law, no notice of a meeting of Shareholders shall be
required to be given to any Shareholder who shall attend such meeting in person
or by proxy, or who shall, in person or by attorney thereunto authorized, waive
such notice in writing or by telecopy, telegram, cable, radio or wireless,
either before or after such meeting. Except where otherwise provided by
applicable law, notice of any adjourned meeting of the Shareholders of the
Corporation shall not be required to be given. Such further notice shall be
given as may be required by law. The Board of Directors may fix in advance a
date, not exceeding sixty (60) days nor less than ten (10) days (or twenty [20]
days when the meeting is to consider a plan of merger or exchange) preceding the
date of any meeting of Shareholders, as a record date, for the purpose of
determining the Shareholders entitled to notice of, and to vote at, any such
meeting.
SECTION 2.05. QUORUM. With respect to any matter, a quorum shall be
present at any annual or special meeting of Shareholders if Shareholders
representing, either in person or by proxy, a majority of the capital stock of
the Corporation entitled to vote on that matter are at such meeting, except as
otherwise specially provided by law or in the Articles of Incorporation.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed by these
Bylaws for an annual meeting, or fixed by notice or waiver, or waivers of notice
as above-provided for a special meeting, the holders of a majority of the votes
of the shares entitled to vote thereat, present in person or by proxy, may
adjourn the meeting to a future time not less than one (1), nor more than
fourteen (14) days later, and the Secretary shall thereupon give at least one
(1) day's notice by telecopy
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or telephone to each Shareholder entitled to vote who was absent from such
meeting. At any such adjourned meeting at which a quorum may be present, in
person, or by proxy, any business may be transacted which might have been
transacted at the meeting as originally notified or called. The votes of the
holders of a majority of the shares entitled to vote, and thus represented at a
meeting at which a quorum is present, shall be the act of the Shareholders'
meeting, unless the vote of a greater number is required by law. The
Shareholders present at a duly organized meeting may not continue to transact
business until adjournment if there is a withdrawal of enough Shareholders to
leave less than a quorum.
SECTION 2.06. ORGANIZATION. Meetings of the Shareholders shall be
presided over by the President, or if he is not present by a Vice President, or
if neither the President nor a Vice President is present, by a chairman to be
chosen by a majority of the Shareholders who are present in person or by proxy
at the meeting and are entitled to vote. The Secretary of the Corporation, or in
his absence, an Assistant Secretary, shall act as Secretary of every meeting. If
neither the Secretary nor an Assistant Secretary is present, the presiding
officer at the meeting may appoint any person present to act as Secretary of the
meeting.
SECTION 2.07. ORDER OF BUSINESS. At the annual meeting of the
Shareholders, the order of business shall be as follows:
1. Calling meeting to order.
2. Proof of notice of meeting.
3. Reading of Minutes of last previous
annual meeting.
4. Reports of officers.
5. Reports of committees.
6. Election of Directors.
7. Unfinished business.
8. New business.
9. Adjournment.
SECTION 2.08. FIXING RECORD DATE FOR DETERMINATION OF SHAREHOLDERS
ENTITLED TO NOTICE OF, AND TO VOTE AT, SHAREHOLDERS' MEETINGS. (A) For the
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, the Board of Directors may,
by resolution, provide that the share transfer records shall be closed for a
period to be stated in such resolution, not more than sixty (60) days nor less
than ten (10) (or twenty [20] days when the meeting is to consider a plan of
merger or exchange) days preceding such meeting. (B) If the Board of Directors
does not provide for the closing of the share transfer records, relative to a
particular meeting, then, in such event, the record time and date for the
determination of Shareholders entitled to notice of, and to vote at, such
meeting shall be the date upon which notice of the meeting is mailed or the date
upon which a waiver of notice is executed. Unless a record date shall have
previously been fixed or determined
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pursuant to this Section 2.08, whenever action by Shareholders is proposed to be
taken by consent in writing without a meeting of Shareholders, the board of
directors may fix a record date for the purpose of determining Shareholders
entitled to consent to that action, which record date shall not precede, and
shall not be more than ten (10) days after, the date upon which the resolution
fixing the record date is adopted by the board of directors. If no record date
has been fixed by the board of directors and the prior action of the Board of
Directors is not required by the TBCA, the record date for determining
Shareholders entitled to consent to action in writing without a meeting shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office, registered agent, its principal place of business, transfer
agent, registrar, exchange agent, or an officer or agent of the Corporation
having custody of the books in which proceedings of meetings of Shareholders are
recorded. Delivery shall be by hand or by certified or registered mail, return
receipt requested. Delivery to the Corporation's principal place of business
shall be addressed to the President of the Corporation. If no record date shall
have been fixed by the Board of Directors and prior action of the Board of
Directors is required by the TBCA, the record date for determining Shareholders
entitled to consent to action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts a resolution
taking such prior action.
SECTION 2.09. SHAREHOLDERS' LIST. The officer or agent having charge of
the Corporation's Stock Transfer Books shall make, at least ten (10) days before
each meeting of Shareholders, a complete list of the Shareholders entitled to
vote at such meeting or any adjournment thereof. Such list shall be arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the registered office or principal place of business of the
Corporation, and shall be subject to inspection by any Shareholder at any time
during the usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall also be subject to inspection by
any Shareholder during the whole time of the meeting. The original stock
transfer books shall be prima facie evidence as to who are the Shareholders
entitled to examine such list or transfer books and to vote at any meeting of
Shareholders. Failure to comply with the requirements of this Section shall not
affect the validity of any action taken at any meeting of the Shareholders.
SECTION 2.10. VOTING OF SHARES. (A) Each outstanding share, regardless
of class, shall be entitled to one (1) vote on each matter submitted to a vote
at a meeting of Shareholders, except to the extent that the Articles of
Incorporation provide for more or less than one vote per share or (if and to the
extent permitted by the TBCA) limit or deny voting rights to the holders of the
shares of any class or classes and except as otherwise provided by the TBCA. (B)
Treasury shares, shares of the Corporation's stock owned by another corporation
(if the majority of the voting stock of such other corporation is owned or
controlled by the Corporation) and the shares of stock of the Corporation held
by the Corporation in a fiduciary capacity shall not be voted, directly or
indirectly, at any meeting and shall not be counted in determining the
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total number of outstanding shares at any given time. (C) Each Shareholder may
vote either in person or by proxy executed in writing by the Shareholder or his
duly authorized attorney in fact. A telegram, telex, cablegram, telefacsimile,
or similar transmission by the shareholder, or a photographic, photostatic,
facsimile or similar reproduction of a writing executed by the Shareholder,
shall be treated as an execution in writing for purposes of this Section 2.10.
No proxy shall be valid after eleven (11) months from the date of its execution,
unless otherwise provided in the proxy. Each proxy shall be revocable unless
expressly conspicuously provided therein to be irrevocable and unless the proxy
is coupled with an interest. Proxies coupled with an interest include the
appointment as proxy of (1) a pledgee, (2) a person who purchased or agreed to
purchase, or owns or holds an option to purchase, the shares, (3) a creditor of
the Corporation who extended it credit under terms requiring the appointment,
(4) an employee of the Corporation whose employment contract requires the
appointment; or (5) a party to a voting agreement created under Section B,
Article 2.30 of the TBCA. No share of stock which has been transferred on the
books of the Corporation subsequent to the record date determined in accordance
with Section 2.08 hereof shall be voted on by the legal holder thereof at any
election for Directors. (D) At each election for Directors, every Shareholder
entitled to vote at such election shall have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons as there are
Directors to be elected and for whose election he has a right to vote, or unless
expressly prohibited by the Articles of Incorporation, to cumulate his votes by
giving one candidate as many votes as the number of such Directors multiplied by
the number of his shares shall equal, or by distributing such votes on the same
principal among any number of such candidates. Any Shareholder who is authorized
and intends to cumulate his votes as herein authorized shall give written notice
of such intention to the Secretary of the Corporation on or before the day
preceding the election at which such Shareholder intends to cumulate his votes.
All Shareholders may cumulate their votes if any Shareholder gives the written
notice provided for herein or in the TBCA. (E) Shares standing in the name of
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the Bylaws of such corporation may authorize, or in the absence of such
authorization, as the board of directors of such corporation may determine. (F)
Shares held by an administrator, executor, guardian or conservator may be voted
by him so long as such shares forming a part of an estate are in the possession
and forming a part of the estate served by him, either in person or by proxy,
without a transfer of such shares into his name. Shares standing in the name of
a trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without the transfer of said shares
into his name as trustee. (G) Shares standing in the name of a receiver may be
voted by such receiver, and shares held by or under the control of the receiver
may be voted by such receiver, without the transfer thereof into his name if
authority so to do be contained in an appropriate order of the court by which
such receiver was appointed. (H) A Shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
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SECTION 2.11. INSPECTORS OF ELECTION. At all elections of Directors, or
in any other case in which the inspectors may act, two (2) inspectors of
election may be appointed by the Chairman of the meeting except as otherwise
provided by law. If there is a failure to appoint inspectors, or any inspector
appointed be absent or refuses to act, or if his office becomes vacant, the
Shareholders present at the meeting, by per capita vote, may choose temporary
inspectors of the number required. The inspectors of election shall take and
subscribe an oath faithfully to execute the duties of inspectors at such meeting
with strict impartiality, and according to the best of their ability and shall
take charge of the polls and after the vote shall have been taken, shall make a
certificate of the result thereof, but no Director, or candidate for the office
of Director shall be appointed as such inspector. Inspectors shall receive and
take in charge all proxies and ballots and shall decide all questions touching
upon the qualifications of voters, the validity of proxies, and the acceptance
and rejection of votes. In case of a tie vote by the inspectors on any
questions, the presiding officer shall decide. The failure to appoint inspectors
of election shall not invalidate any action taken at any Shareholders' meeting.
SECTION 2.12. METHOD OF VOTING. Except as otherwise required by statute,
the Articles of Incorporation, or by these Bylaws, the affirmative vote of the
holders of a majority of the shares entitled to vote on the matter to be voted
on and represented in person or by proxy at such meeting, if a quorum is
present, shall be the act of the Shareholders. To the extent applicable and not
in conflict herewith, Robert's Rules of Order shall govern the conduct of and
procedure of all Shareholders' meetings.
SECTION 2.13. WAIVER BY UNANIMOUS CONSENT IN WRITING. Unless otherwise
expressly set forth in the Articles of Incorporation, any action required to be
or which may be taken at any annual or special meeting of the Shareholders, may
be taken without meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action to be taken or so taken shall
be signed by all of the Shareholders entitled to vote with respect to the
subject matter thereof. Every written consent signed by the holders of less than
all of the shares entitled to vote with respect to the action that is the
subject of the consent shall bear the date of signature of each Shareholder who
signs the consent. No written consent signed by the holders of less than all the
shares entitled to vote with respect to the action that is the subject of the
consent shall be effective to take the action that is the subject of the consent
unless, within sixty (60) days after the date of the earliest dated consent
delivered to the Corporation in the manner required by this Section 2.13, a
consent or consents signed by the holder or holders of shares having not less
than the minimum number of votes that would be necessary to take the action that
is the subject of the consent are delivered to the Corporation by delivery to
its registered office, its principal place of business, or an officer or agent
of the Corporation having custody of the books in which proceedings of meetings
of Shareholders are recorded. Delivery shall be by hand or certified or
registered mail, return receipt requested. Delivery to the Corporation's
principal place of business shall be addressed to the President of the
Corporation. A telegram, telex, cablegram, telefacsimile or similar transmission
by a Shareholder, or a photographic, photostatic, facsimile or similar
reproduction of a writing signed by a Shareholder, shall be
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regarded as signed by the Shareholder for the purposes of this Section 2.13.
Prompt notice of the taking of any action by Shareholders without a consent by
less than unanimous written consent, if allowed by the corporation's Articles of
Incorporation, shall be given to those Share holders who did not consent in
writing to the action. A consent executed in accordance with this Section 2.13
shall be delivered to the Secretary of the Corporation for inclusion in the
Minute Book of the Corporation.
SECTION 2.14. MEETINGS BY CONFERENCE TELEPHONE. Subject to the
provisions required or permitted by the Texas Business Corporation Act and these
Bylaws for notice of meetings, Shareholders may participate in a meeting of
Shareholders by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other,
and participating in such meetings shall constitute presence in person at such
meeting except where a person participates in such meeting for the express
purpose of objecting to the transaction of any business on the grounds that the
meeting is not lawfully called or convened.
ARTICLE III. BOARD OF DIRECTORS.
SECTION 3.01. POWERS, NUMBER, QUALIFICATIONS AND TERM OF OFFICE. The
powers of the Corporation shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be managed under the direction
of, the Board of Directors, subject to the restrictions imposed by law, by the
Articles of Incorporation, or by these Bylaws.
The number of Directors shall be two (2), but the number of Directors
may be increased or decreased, from time to time, by amendment of these Bylaws.
No decrease shall have the effect of shortening the term of any incumbent
Director.
The Directors shall be elected each year at the annual meeting of the
Shareholders, or at a special meeting of the Shareholders held in lieu of such
annual meeting if the same is not held when provided for in these Bylaws, and
each Director shall be elected to hold office and serve until the annual meeting
of the Shareholders next ensuing after his election and until his successors
shall be elected and shall qualify.
Directors need not be Shareholders nor residents of the State of Texas.
In addition to the powers and authority expressly conferred upon them by
these Bylaws, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the Shareholders. Without prejudice to such general powers
and the other powers conferred by statute, by the Articles of Incorporation and
by these Bylaws, it is hereby expressly declared that the Board of Directors
shall have the following powers:
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1. To purchase, or otherwise acquire for the Corporation, any
property or rights, or privileges which the Corporation is authorized to
acquire, at such price or consideration and generally on such terms and
conditions as they may think fit; and at their discretion to pay therefor either
wholly or partly in money, stock, bonds, debentures or other securities of the
Corporation.
2. To create, make and issue mortgages, bonds, deeds of trust,
trust agreements and negotiable or transferable instruments and securities,
secured by mortgage or otherwise, and to do every other act and thing necessary
to effect the same.
3. To appoint any person or corporation to accept and hold in
trust for the Corporation any property belonging to the Corporation, or in which
it is interested, or for any other purpose, and to execute such deeds and do all
things requisite in relation to any such trust.
4. To delegate any of the powers of the Board in the course of
the current business of the Corporation to any standing or special committee, or
any other officer or agent and to appoint any persons the agents of the
Corporation, with such powers (including the power to sub-delegate), and upon
such terms as they think fit.
5. To determine whether any surplus of the Corporation exists,
and if any exists, what part of the surplus of the Corporation shall be declared
in dividends and paid to the Shareholders, and to direct and determine the use
and disposition of any such surplus.
6. To fix, from time to time, the amount of profits of the
Corporation to be reserved as working capital or for any other lawful purpose.
7. To establish bonus, profit-sharing, or other types of
incentive or compensation plans for the employees (including officers and
directors) of the Corporation, and to fix the amount of profits to be
distributed or shared and to determine the persons to participate in any such
plans and the amount of their respective participations.
8. To enter into contracts of employment, which contracts may be
for a term longer than that for which the Directors are elected.
In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon it, the Board of Directors may exercise all such powers
and do any and all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the laws of the State
of Texas, and the Articles of Incorporation and the Bylaws of the Corporation.
SECTION 3.02. COMMITTEES. The Board of Directors may, in its discretion
but in accordance with the TBCA, by the affirmative vote of the majority of the
whole Board of
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Directors, appoint, from among its members, committees which shall have and
exercise such powers as shall be conferred or authorized by the resolution
appointing them. A majority of any such committee, if the committee be composed
of more than two (2) members, may determine its action and fix a time and place
for its meeting unless the Board of Directors shall otherwise provide. The Board
of Directors shall have power at any time to fill vacancies in, to change the
membership of, or to discharge any such committee. The designation of such
committee and the delegation thereof of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law. Any such committee appointed by the Board of Directors
shall keep regular Minutes of all of its proceedings and shall report the same
to the Board immediately following any such proceedings.
SECTION 3.03. INTEREST OF DIRECTORS OR OFFICERS IN CONTRACTS. No
contract or other transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, solely because the director or
officer is present at or participates in the meeting of the Board or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(i) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction
by the affirmative vote of a majority of the disinterested
directors even though the disinterested directors be less than a
quorum; or
(ii) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
shareholders; or
(iii) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved, or ratified by the Board of
Directors, a committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorized the contract or transaction. Nothing herein contained shall
create liability in the events above-described or prevent the authorization,
ratification or approval of such transactions or contracts in any other manner
permitted by law. This Section shall not be construed to invalidate any contract
or other transaction which would otherwise be valid under the common and
statutory law applicable thereto.
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Any failure of the Shareholders to approve or ratify any such contract,
transaction, or act, when and if submitted, shall not be deemed to invalidate in
any way the same or deprive the Corporation, its Directors, officers or
employees of any of its or their rights to proceed with such transactions,
contract or act.
SECTION 3.04. LIABILITY OF DIRECTORS IN CERTAIN CASES. A Director shall
not be liable for his acts as such if he is excused from liability under Article
2.41 of the TBCA and specifically but without limitation, to the fullest extent
permitted by the TBCA, a Director shall not be liable if, in voting for or
assenting to a distribution, he (a) relied in good faith and with ordinary care
upon the statements, valuations or information referred to Article 2.38-3 of the
TBCA, or upon other information, opinions, reports, or statements, including
financial statements and other financial data, concerning the corporation or
another person, that were prepared or presented by: (1) one or more officers or
employees of the corporation; (2) legal counsel, public accountants, investment
bankers or other persons as to matters the director reasonably believes are
within the person's professional or expert competence; or (3) a committee of the
board of directors of which the director is not a member, (b) acting in good
faith and with ordinary care, considers the assets of the Corporation to be at
least of their book value, or (c) in determining whether the Corporation made
adequate provision for payment, satisfaction or discharge of all of its
liabilities and obligations as provided in Article 6.04 of the TBCA, relied in
good faith and with ordinary care upon financial statements of, or other
information concerning, any person who was or became contractually obligated to
pay, satisfy or discharge some or all of those liabilities or obligations. In
the discharge of any duty imposed or power conferred upon him in his capacity as
a Director, including as a member of a committee of Directors, the Director may
in good faith and with ordinary care rely on information, opinions, reports, or
statements, including financial statements and other financial data, concerning
the corporation or another person, that were prepared or presented by: (x) one
or more officers or employees of the corporation; (y) legal counsel, public
accountants, investment bankers or other persons as to matters the director
reasonably believes are within the person's professional or expert competence;
or (z) a committee of the Board of Directors of which the Director is not a
member. A Director is not relying in good faith within the meaning of the
preceding sentence if the Director has knowledge concerning the matter in
question that makes reliance otherwise permitted by such sentence unwarranted.
SECTION 3.05. RATIFICATION BY SHAREHOLDERS OR DIRECTORS OF CERTAIN ACTS.
The Directors in their discretion may submit any contract or act for approval or
ratification at any Shareholders' meeting, and any contract or act that shall be
approved or be ratified by the vote of a majority of the shares represented in
person or by proxy at such Shareholders' meeting at which there is a quorum,
shall be as valid and binding upon the Corporation and upon all the Shareholders
as if it has been approved or ratified by every Shareholder. Any transaction
questioned in any Shareholder's derivative suit on the ground of lack of
authority, defective or irregular execution, adverse interest of Director,
officer, or Shareholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting may be
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ratified, unless prohibited by law, before or after judgment, by the Board of
Directors or by the Shareholders and, if so ratified, shall have the same force
and effect as if the questioned transaction had been originally duly authorized,
and said ratification shall be binding upon the Corporation and its Shareholders
and shall constitute a bar to any claim or execution of any judgment in respect
of such questioned transaction.
SECTION 3.06. VACANCIES. A particular directorship shall be considered
to be vacant upon the happening of any one of the following events:
(1) Death of the person holding such directorship;
(2) Resignation of the person holding such directorship;
(3) The refusal of the person elected to a directorship to manifest
his assent to serve;
(4) Removal of a Director at a special Shareholders' meeting as
provided in Section 3.07 of these Bylaws;
(5) Disqualification of a Director under any provision of law, the
Articles of Incorporation or these Bylaws.
Any vacancy occurring on the Board of Directors may be filled at a
special or annual meeting of the Board of Directors following the occurrence of
such vacancy. Such vacancy shall be filled by the affirmative vote of a majority
of the remaining Directors, though less than a quorum of the Board of Directors.
A Director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in such directorship. Any directorship to be filled by reason of
an increase in the number of Directors shall be filled by an election at an
annual meeting of Shareholders or at a special meeting of Shareholders called
for that purpose.
SECTION 3.07. REMOVAL OF DIRECTORS. At any meeting of the Shareholders
called expressly for that purpose, any Director or the entire Board of Directors
may be removed, with or without cause, by a vote of the holders of a majority of
the shares then entitled to vote at an election of Directors. Any vacancy or
vacancies in the Board resulting from such removal may be filled by such vote of
such Shareholders, present in person or by proxy, at such Shareholders' meeting
at which a quorum is in attendance. If less than the entire Board is to be
removed, no one of the Directors may be removed if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors, unless the right to cumulate votes is
expressly prohibited by the Articles of Incorporation.
SECTION 3.08. ANNUAL MEETING. Each newly organized Board of Directors
may hold its first meeting for the purpose of organization, election of officers
and the transaction of business, if a quorum be present, immediately after
either the annual meeting of the Shareholders or any
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special meeting of the Shareholders held in lieu thereof, and no notice or
waiver of notice of such meeting shall be necessary for any purpose; or such
meeting may be held at such place and time as may be fixed in a notice of the
meeting (given as though it were to be a special meeting and in accordance with
the provisions of Section 3.11 of Article III), or such meeting may be held at
such place and time as shall be fixed by the consent in writing of all such
Directors.
SECTION 3.09. ELECTION OF OFFICERS. At the first meeting of each newly
elected Board of Directors in each corporate year, at which a quorum shall be
present, the Board of Directors shall proceed to the election of officers of the
Corporation.
SECTION 3.10. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such times and places as shall, from time to time by
resolution, be determined by the Board. Notice of such regular meetings shall
not be required. Such meetings may be held either within or without the State of
Texas.
SECTION 3.11. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the President or by a Vice President
or by the Secretary or by a majority of the Directors at the time being in
office.
The Secretary shall, and in the event of his absence, failure, refusal,
or omission to do so, any officer of the Corporation may, give notice of any
special meeting of the Board of Directors, by telegraphing, telecopying, mailing
or delivering the same at least three (3) days before the date of the meeting to
each Director. Unless otherwise indicated in the notice or waiver of notice
thereof, any and all business, of any nature or character, may be transacted at
any special meeting of the Board. Each special meeting shall be held at the
principal office of the Corporation or at such other place, within or without
the State of Texas, as may be designated in the notice or waiver or waivers of
notice thereof, unless and until the Board of Directors shall, by resolution,
designate a place or places where special meetings of the Board are to be held;
and thereafter, special meetings of the Board shall be held at such place or
places so long as such resolution shall continue in force and effect.
At any meeting of the Board of Directors at which every Director shall
be present, even though held without notice or waiver or waivers of notice and
wherever held, any and all business of any nature or character may be transacted
unless otherwise provided by statute. Attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting to the transaction of any
business, on the ground that the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting, unless otherwise required herein.
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SECTION 3.12. QUORUM. A majority of the number of Directors fixed by, or
in the manner provided in, the Articles of Incorporation or these Bylaws shall
constitute a quorum for the transaction of all business unless a greater number
is required by law or the Articles of Incorporation or herein. If at any meeting
of the Board of Directors there be less than a quorum present, then the
Directors present may adjourn the meeting from time to time without notice,
other than by announcement at the meeting. At any such adjourned meeting at
which a quorum may be present, the Directors may transact any and all business
submitted, or proposed to be submitted, to the originally called meeting or any
adjournment or adjournments thereof. The act of a majority of the Directors
present at a meeting at which a quorum or more than a quorum is in attendance
shall constitute the act of the Board of Directors, unless the act of a greater
number is required by law, by the Articles of Incorporation, or by these Bylaws.
SECTION 3.13. DISTRIBUTIONS AND SHARE DIVIDENDS. (A) The Board of
Directors may, at any regular or special meeting, declare, and the Corporation
may pay, distributions or share dividends, on its outstanding shares, subject to
the provisions of Article 2.38 and Article 2.38-1 of the Texas Business
Corporation Act (as they may be hereafter amended, codified or renumbered) and
the Articles of Incorporation. (B) Subject to the provisions of the laws of the
State of Texas and the Articles of Incorporation, the Board of Directors shall
have full power to determine whether any, and if any, what part of any, funds
legally available for payment of distributions shall be declared in
distributions and paid to the Shareholders, the division of the whole or any
part of such funds of the Corporation shall rest wholly within the lawful
discretion of the Board of Directors, and it shall not be required at any time
against such discretion, to divide or pay any part of such funds among or to the
Shareholders as dividends or otherwise; and the Board of Directors may, by
resolution, fix a sum which may be set aside or reserved over and above the
capital paid in to the Corporation as working capital for the Corporation or as
a reserve for any proper purpose, and from time to time may increase, diminish
and vary the same in its absolute judgment and discretion.
SECTION 3.14. ORDER OF BUSINESS. At meetings of the Board of Directors,
business shall be transacted in such order as from time to time may be
determined by the presiding officer of such meeting unless otherwise overruled
by resolution of the Board of Directors.
At the meetings of the Board of Directors, the President, or in his
absence, any Vice President who is also a Director, shall preside, and in the
absence of the President or such Vice President, a Chairman shall be chosen by
the Board from among the Directors present.
The Secretary, or in his absence any Assistant Secretary, of the
Corporation shall act as Secretary of all meetings of the Board of Directors,
but in the absence of the Secretary or an Assistant Secretary, the presiding
officer may appoint any person to act as Secretary of the meeting.
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SECTION 3.15. COMPENSATION OF DIRECTORS. No stated salary shall be paid
Directors, as such, for their services, but by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attending each regular or special meeting of any such Board; provided, that
nothing herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 3.16. WAIVER BY UNANIMOUS CONSENT IN WRITING. Unless otherwise
restricted by the Articles of Incorporation, any action required to be or which
may be taken at a meeting of the Directors or a committee thereof, may be taken
without meeting if a consent in writing, setting forth the action to be taken or
so taken, is signed by all of the Directors or committee members, as the case
may be, entitled to vote with respect to the subject matter thereof. Such
consent shall have the same force and effect as a unanimous vote at a meeting
and may be stated as such in any document or instrument filed with the Secretary
of State of the State of Texas, and shall be delivered to the Secretary of the
Corporation for inclusion in the Minute Book of the Corporation.
SECTION 3.17. MEETINGS BY TELEPHONE CONFERENCE. Subject to the
provisions required or permitted by the Texas Business Corporation Act and the
provisions of the Articles of Incorporation or hereof for notice of meetings,
the Directors or a committee thereof may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other, and participation in such meetings shall constitute presence in
person at such meeting, except where a person participates in a meeting for the
express purpose of objecting to the transaction of any business on the grounds
that the meeting is not lawfully called or convened.
ARTICLE IV. OFFICERS
SECTION 4.01. NUMBER OF OFFICERS. The officers of the Corporation shall
include a President and a Secretary. Any two (2) or more offices may be held by
the same person.
SECTION 4.02. ELECTION AND APPOINTMENT. Immediately after the annual
election of Directors, if a majority of the persons so elected as Directors be
then present in person, or if not, then at the first meeting of the Board of
Directors thereafter, the Directors shall choose by a majority vote of those
present, a quorum being present, a President and Secretary and any other
officers as they elect to appoint, including, but not limited to, a Treasurer
and one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers.
Each such officer shall hold office until the first meeting of the Board of
Directors following the next annual meeting of the Shareholders, and until his
respective successor shall be duly elected and shall qualify, or until his
death, resignation, disqualification or removal in the manner herein provided.
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SECTION 4.03. REMOVAL AND RESIGNATION. Any officer, agent, or member of
any Committee elected or appointed by the Board of Directors may be removed by
the Board of Directors whenever, in its judgment, the best interest of the
Corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the persons so removed. Election or
appointment of an officer or agent or member of a committee shall not of itself
create contract rights. Any officer of the Corporation may resign at any time by
giving written notice to the Board of Directors; any officer other than the
President or the Secretary of the Corporation may also resign at any time by
giving written notice to the President or the Secretary of the Corporation. Any
resignation shall take effect on the later of the date of receipt of such notice
or at the time specified therein, and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.04. VACANCY. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors by majority vote of the Directors present, a quorum being present,
for the unexpired portion of the term, and any officer so elected shall hold
office until his successor shall be duly elected and shall qualify.
SECTION 4.05. THE PRESIDENT. The President shall be the principal
executive officer of the Corporation and shall, in general, supervise the
control of all of the business and affairs of the Corporation. He shall preside
at all meetings of the Shareholders and of the Board of Directors. He shall
sign, with the Secretary or an Assistant Secretary, if any shall have been
appointed and be required to join in the execution according to such instrument,
any deeds, mortgages, bonds, contracts or other instruments which the Board of
Directors has authorized to be executed, except in cases where execution thereof
shall be expressly delegated by the Board of Directors to some other officer or
agent of the Corporation, or shall be required by law to be otherwise signed or
executed; shall, subject to the approval of the Board of Directors, appoint and
remove, employ and discharge and prescribe the duties and fix the compensation
of all agents, employees, and clerks of the Corporation other than the duly
appointed officers; supervise all the officers, agents and employees of the
Corporation; and in general he shall perform all duties incident to the office
of President. The Board of Directors may from time to time enlarge upon or
diminish the powers and duties of the President and other officers.
SECTION 4.06. THE VICE PRESIDENT. In the absence of the President or in
the event of his inability or refusal to act, the Vice President, if any (or in
the event there be more than one Vice President, the Vice Presidents in the
order designated, or in the absence of any designations, then, in the order of
their tenure as a vice president of the Corporation), shall perform the duties
of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President shall
perform such other duties as, from time to time, may be assigned to him by the
President or by the Board of Directors. As to any third party, any action taken
by a Vice President in the performance of the duties of the President shall be
conclusive evidence of the absence, inability or refusal to act of the President
at the time such action was taken.
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SECTION 4.07. THE SECRETARY. The Secretary shall:
(a) Keep the Minutes of the Shareholders' and of the Board of
Directors' meetings in one or more books provided for that purpose;
(b) Attend to the giving and serving of all notices in
accordance with the provisions of these Bylaws or as required by law;
(c) Serve as custodian of the corporate records and of the seal
of the Corporation and see that the seal of the Corporation is affixed
to all certificates for shares prior to the issuance thereof, and to all
documents, the execution of which on behalf of the Corporation under its
seal is duly authorized in accordance with and required by the
provisions of these Bylaws, or of the laws of the State of Texas.
(d) Keep a register of the post office address of each
Shareholder;
(e) Sign with the President certificates for shares of the
Corporation;
(f) In general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to
him by the President or by the Board of Directors.
SECTION 4.08. THE ASSISTANT SECRETARIES. The Assistant Secretaries, if
any, in the order of their seniority in such office, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary; and shall perform such other duties as the President, the Secretary
or the Board of Directors may prescribe.
SECTION 4.09. THE TREASURER. The Treasurer, if any, if required by the
Board of Directors, shall give a bond for the faithful performance of his duties
in such sum and with such surety or sureties as the Board of Directors shall
determine. He shall:
(a) Have charge and custody of and be responsible for all funds
and securities of the Corporation, receive and give receipts for monies
due and payable to the Corporation from any source whatsoever, and
deposit all sums in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board of
Directors;
(b) In general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to
him by the President or by the Board of Directors.
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SECTION 4.10. ASSISTANT TREASURERS. The Assistant Treasurers, if any, in
the order of their seniority in such office, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of the Treasurer;
and shall perform such other duties as the President, the Treasurer or the Board
of Directors may prescribe.
SECTION 4.11. RETURNS AND STATEMENTS. It shall be the duty of each
officer of this Corporation to make and file any and all returns, reports,
lists, or statements required by law to be made and filed by him, and to make
full reports to the Board of Directors respecting the affairs of the Corporation
in his charge whenever he may be requested to do so.
SECTION 4.12. ABSENCE OR INABILITY TO ACT. In the case of the absence or
inability to act of any officer of the Corporation or of any person herein
authorized to act in his place, the Board of Directors may, from time to time,
delegate the powers or duties of such officer to any other officer, to any
Director, or to any other person it may select.
SECTION 4.13. APPOINTMENT OF OTHER OFFICERS. The Board of Directors may
appoint such other officers and agents as it shall deem necessary or expedient,
who shall hold their office for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors.
SECTION 4.14. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
SECTION 4.15. PERFORMANCE BONDS FOR OFFICERS. The Board of Directors
may, by resolution, require any or all officers to give bonds to the
Corporation, with sufficient surety or sureties, conditioned for the faithful
performance of the duties of their respective offices, and to comply with such
other conditions as may, from time to time, be required by the Board of
Directors.
SECTION 4.16. VOTING SECURITIES OWNED BY THE CORPORATION. Unless
otherwise ordered by the Board of Directors, the President, or in the event of
his inability or refusal to act, the Vice President designated herein or by the
Board of Directors to act in the absence of the President, shall have full power
and authority on behalf of the Corporation to attend, act and vote at any
meetings of security holders of any corporation in which the Corporation may
hold securities, and at such meetings shall possess and may exercise any and all
rights and powers incident to the ownership of such securities, and which, as
the owner thereof, the Corporation may have possessed and exercised, if present.
The Board of Directors, by resolution from time to time, may confer like powers
upon any person or persons to the exclusion of or in addition to the party set
forth herein.
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SECTION 4.17. RELIANCE BY OFFICERS. In the discharge of any duty imposed
or power conferred upon an officer of the Corporation, the officer may in good
faith and ordinary care rely on information, opinions, reports, or statements,
including financial statements and other financial data, concerning the
Corporation or another person, that were prepared or presented by: (a) one or
more other officers or employees of the Corporation, including members of the
Board of Directors; or (b) legal counsel, public accountants, investment bankers
or other persons as to matters the officer reasonably believes are within the
person's professional or expert competence. An officer is not relying in good
faith within the meaning of this Section if the officer has knowledge concerning
the matter in question that makes reliance otherwise permitted by this Section
unwarranted.
ARTICLE V. CERTIFICATES OF STOCK
SECTION 5.01. FORM AND TRANSFERS. The interest of each Shareholder of
the Corporation shall be evidenced by a certificate or certificates for shares
of stock, in such form and style, printed or otherwise, as may be determined by
the Board of Directors. Such certificates shall be signed by the President or a
Vice President together with the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer, and shall be sealed with the seal of the
Corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the Corporation. Each certificate shall state on the
face thereof that the Corporation is organized under the laws of the State of
Texas, the name of the person to whom issued, the number and class of shares and
the designation of the series, if any, which such certificate represents, and
the par value of each share represented by such certificate, or a statement that
such shares are without par value. All certificates surrendered to the
Corporation for transfer shall be canceled and no new certificates shall be
issued until the former certificate for a like number of shares shall have been
surrendered and canceled, except that in the case of a lost, destroyed, or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the Corporation as the Board of Directors may prescribe.
SECTION 5.02. TRANSFER OF SHARES. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the holder of record
thereof, or by his legal representa tive or by his attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary of the
Corporation, or with the transfer clerk or transfer agent appointed as in Sec
tion 5.05 of this Article provided, on surrender of the certificate or
certificates for such shares properly endorsed and otherwise in compliance with
Section 8.401 of the Texas Business and Commerce Code. The person in whose name
shares stand on the books of the Corporation shall be deemed the owner thereof
for all purposes with respect to the Corporation, provided that whenever any
transfer of shares shall be made for collateral security, and not absolutely,
such fact, if known to the Secretary of the Corporation, shall be so expressed
in the entry of transfer. The Board may, from time to time, make such additional
rules and regulations as it may deem
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expedient, not inconsistent with these Bylaws and Chapter 8 of the Texas
Business and Commerce Code, concerning the issue, transfer and registration of
certificates of shares of the stock of the Corporation.
SECTION 5.03. SALE OF STOCK TO EMPLOYEES AND KEY MANAGEMENT PERSONNEL.
The Board of Directors is authorized to enter into buy and sell agreements or
stock repurchase agreements with respect to shares of stock sold to employees
and key management personnel of the Corporation, reserving the right to the
Corporation to reacquire and repurchase said shares in the event he ceases to be
employed by the Corporation, in the event of the employee's death and in the
event the employee wishes to dispose of his shares while still an employee.
SECTION 5.04. FACSIMILE SIGNATURES AND SEALS. The certificates of stock
shall be signed by the President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with
the seal of the Corporation, and such signature and seal may be a facsimile,
engraved or printed. When any such certificates are countersigned by a transfer
agent, or a transfer clerk, or registered by a registrar, either of which is
other than the Corporation itself or an employee of the Corporation, the
signature of the President or the Vice President, and the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer, upon such
certificate may be facsimile, engraved or printed. In case any such officer who
has signed or whose facsimile signature shall have been placed upon such
certificate shall have ceased to be such before said certificate is issued, it
may be issued by the Corporation with the same effect as if he were such officer
at the date of its issuance.
SECTION 5.05. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint one or more transfer agents and/or one or more registrars and may
require all certificates of stock to bear the signature or signatures of any of
them.
SECTION 5.06. CLOSING OF TRANSFER BOOKS. The Board of Directors shall
have the power to close the stock transfer books of the Corporation for a period
of not exceeding sixty (60) days nor less than ten (10) days before any
Shareholders' meeting, or before the last day on which the consent or dissent of
Shareholders may be effectively expressed for any purpose without a meeting, or
before a date fixed for the payment of any dividend or for the delivery of
evidences of rights or evidences of interest arising out of any change,
conversion or exchange of the capital stock, as the time at which Shareholders
entitled to notice of, and to vote at, such meeting or whose consent or dissent
is required or may be expressed for any purpose, or entitled to receive any such
dividend, distribution, right or interest, shall be determined; and all persons
who are holders of record of voting stock at such time, and not others, shall be
entitled to notice of, and to vote at, such meeting or to express their consent
or dissent, as the case may be, and only Shareholders of record at the time so
fixed shall be entitled to receive such dividend, distribution, rights or
interests.
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SECTION 5.07. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. No
certificate for shares of stock in the Corporation shall be issued in place of
any certificate alleged to have been lost, destroyed or stolen, except upon
production of such evidence of such loss, destruction or theft, and upon the
giving of a satisfactory bond of indemnity to the Corporation and/or the
transfer agent, in such amount and upon such terms and secured by such surety,
as the Board of Directors may, in its discretion require.
ARTICLE VI. FISCAL YEAR
The fiscal year of the Corporation shall be as determined by resolution
of the Board of Directors. The Board of Directors may terminate the first fiscal
year of the Corporation at any time, by resolution.
ARTICLE VII. CORPORATE SEAL
The Corporate seal of the Corporation shall have the corporate name of
the Corporation engraved on the margin thereof, so as to make an impression.
ARTICLE VIII. AMENDMENTS
Unless reserved exclusively to the Shareholders in whole or in part by
the Articles of Incorporation or the TBCA or unless the Shareholders in
amending, repealing or adopting a particular bylaw expressly provide that the
Board of Directors may not amend or repeal that bylaw, the power to alter,
amend, or repeal the Bylaws or adopt new Bylaws shall be vested in the Board of
Directors, subject to repeal or change by action of the Shareholders. Unless the
Articles of Incorporation or a bylaw adopted by the Shareholders provides
otherwise as to all or some portion of these Bylaws, the Shareholders may amend,
repeal or adopt the Corporation's Bylaws even though the Bylaws may also be
amended, repealed or adopted by the Board of Directors.
ARTICLE IX. MISCELLANEOUS PROVISIONS
SECTION 9.01. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 9.02. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
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SECTION 9.03. NOTICE AND WAIVER OF NOTICE. Whenever under the provisions
of the Bylaws notice is required to be given to any Director or Shareholder,
such notice shall not be construed to mean personal notice, but such notice may
be given in writing, by mail, by depositing same in the post office or letter
box in a postpaid sealed envelope, or by telegraph, telecopy or cable, addressed
to each Director or Shareholder at such address as appears on the books of the
Corporation, or, in default of other address, to such Director or Shareholder at
the general post office in the City of Houston, Texas, and such notice shall be
deemed to be given at the time when the same shall be thus mailed or sent.
Notwithstanding any provision of these Bylaws to the contrary, any
notice required or authorized to be given under these Bylaws may be waived in
writing, or by telegraph, telecopy, radio or cable, signed by the person or
persons entitled to such notice, whether such waiver be given or executed before
or after the meeting for which notice would otherwise be required or authorized,
or before or after the time stated in such waiver or waivers, and such waiver in
every instance shall be and be deemed to be, valid and equivalent to actual
personal notice by the person or persons who executed the same or gave the
waiver by telegraph, telecopy, radio or cable.
SECTION 9.04. CHECKS. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation, and all notes or other
evidences of indebtedness of the Corporation, shall be signed on behalf of the
Corporation and in such manner as shall, from time to time, be determined by
resolution of the Board of Directors; provided that no employee on leave of
absence from the service of the Corporation shall be authorized to sign any
check, draft, or other order for the payment of money out of the funds of the
Corporation.
SECTION 9.05. BOOKS AND RECORDS. The Corporation shall keep books and
records of account and shall keep minutes of the proceedings of the
Shareholders, Board of Directors and each committee of the Board of Directors.
The Corporation shall keep in its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of the
original issuance of shares issued by the Corporation and a record of each
transfer of those shares that have been presented to the Corporation for
registration of transfer. Such records shall contain the names and addresses of
all past and current shareholders of the Corporation and the number and class or
series of shares issued by the Corporation held by each of them. Any books,
records, minutes and share transfer records may be in written form or in any
other form capable of being converted into written form within a reasonable
time. Any person who shall have been a Shareholder of record for at least six
(6) months immediately preceding his demand, or who is the holder of record of
at least five (5%) percent of all the outstanding shares of the Corporation, and
every Director, upon written demand stating the purpose thereof, shall have the
right, at any reasonable time, for any proper purpose, to inspect all books,
records of account, minutes and share transfer records of the Corporation and
also of its wholly-owned subsidiaries, domestic or foreign. Such inspection may
be made in person or by agent or attorney, and the right of inspection includes
the right to make extracts.
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SECTION 9.06. PERSONS AND NUMBERS. Wherever appropriate in the
construction of these Bylaws, pronouns of the masculine gender shall include
persons of the female sex; the singular number shall include the plural, and the
plural the singular.
SECTION 9.07. SECTION HEADINGS. The headings or captions of the Articles
and Sections of these Bylaws are inserted for convenience of reference only and
shall not be deemed to be a part hereof or used in the construction or
interpretation hereof.
SECTION 9.08. CONSTRUCTION AND INTERPRETATION. The place of these
Bylaws, their status and their forum, shall be at all times in the State of
Texas; and these Bylaws shall be governed by the Laws of the State of Texas as
to all matters relating to their validity, construction and interpretation. In
the event that any court of competent jurisdiction shall adjudge to be invalid
or unlawful any clause, sentence, paragraph, subsection, section or article of
these Bylaws, such judgment or decree shall not affect, impair, invalidate or
nullify the remainder of these Bylaws, or any other provision hereof, but the
effect of such judgment or decree shall be confined to the clause, sentence,
paragraph, subsection, section or article so adjudged to be invalid or unlawful.
22
EXHIBIT 3.5
ARTICLES OF INCORPORATION
OF
SPECIALTY RETAILERS, INC. (NV)
FIRST: The name of this corporation is Specialty Retailers, Inc. (NV)
SECOND: The street address of the resident agent where process may be
served on the corporation in the State of Nevada is 502 East John Street, Carson
City, Nevada 89706. The name of the resident agent at such address is CSC
Services of Nevada, Inc.
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the under the General Corporation Law of the State of Nevada;
FOURTH: The total authorized capital stock of the corporation is 1000
shares of Common Stock, par value $.01 per share.
FIFTH: The governing board of this corporation shall be known as
directors, and the number of directors, and the number of directors may from
time to time be increased or decreased in such manner as shall be provided in
the by-laws of this corporation, provided that the number of directors shall not
be reduced less than one unless there is less than one stockholder.
SIXTH: The number of directors which shall constitute the first board
shall be two (2). The name and address of each of the members of the first board
is as follows:
NAME ADDRESS
Lois Padgetti 2101 Broadway
Yankton, South Dakota 57078
Michael Melchin Space 10C Super City Mall
Sanborn & North Main Street
Mitchell South Dakota 57301
SIXTH: The capital stock, after the amount of the subscription price, or
par value, has been paid in, shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH: The name and post office address of the incorporator signing the
articles of incorporation is as follows:
<PAGE>
NAME POST OFFICE ADDRESS
David N. Britsch c/o Kirkland & Ellis
153 E. 53rd Street, 39th Floor
New York, New York 10022
EIGHTH: The corporation is to have perpetual existence.
NINTH: In furtherance and not in limitation of the powers conferred by
statue, the board of directors is expressly authorized, subject to the by-laws,
if any, adopted by the shareholders, to make, alter or amend the by-laws of the
corporation.
TENTH: Meetings of stockholders may be held outside of the State of Nevada
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the corporation.
ELEVENTH: This corporation reserves the right to amend, alter, change or
repeal any provision contained in the articles of incorporation, in the manner
now or hereafter prescribed, and all rights conferred upon stockholders herein
are granted subject to this reservation.
I, THE UNDERSIGNED, being the sole incorporator herein before named for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Nevada, do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 24th day of June, 1997.
/S/ DAVID N. BRITSCH
David N. Britsch, Sole Incorporator
State of New York)
County of New York)ss
On this 24th day of June, 1997, before me the undersigned officer
personally appeared David N. Britsch to me personally known and known to me to
be the same person whose name is signed to the foregoing instrument and
acknowledged the execution therefor for the use and purpose therein setforth.
IN WITNESS WHEREOF I have hereunto set my hand and official seal.
/S/ SHERYL MILLER
Notary Public
My Commission Expires FEBRUARY 27, 1999
EXHIBIT 3.6
BYLAWS
OF
SPECIALTY RETAILERS, INC. (NV)
(a Nevada corporation)
-------------
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a VicePresident and by the Treasurer or an
Assistant Treasurer or the Secretary of an Assistant Secretary of the
corporation or by agents designated by the Board of Directors, certifying the
number of shares owned by him in the corporation and setting forth any
additional statements that may be required by the General Corporation Law of the
State of Nevada (General Corporation Law). If any such certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, a facsimile of the signature of the officers, the transfer
agent or the transfer clerk or the registrar of the corporation may be printed
or lithographed upon the certificate in lieu of the actual signatures. If any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any certificate or certificates shall cease
to be such officer or officers of the corporation before such certificate or
certificates shall have been delivered by the corporation, the certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be such officer or officers of the corporation.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, the certificates
representing stock of any such class or series shall set forth thereon the
statements prescribed by the General Corporation Law. Any restrictions on the
transfer or registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
<PAGE>
against in on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation is not obliged to but
may execute and deliver a certificate for or including a fraction of a share. In
lieu of executing and delivering a certificate for a fraction of a share, the
corporation may proceed in the manner prescribed by the provisions of Section
87.205 of the General Corporation Law.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes, if any, due
thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the directors may fix, in advance, a record date, which
shall not be more than sixty days nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no record date
is fixed, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which the meeting is held; the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is express; and
the record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at any meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used in these By-laws in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of record of
outstanding shares of stock when the corporation is authorized to issue only one
class of shares of stock, and said reference is also intended to include any
outstanding share or shares of stock and any holder or holders of record of
outstanding shares of stock of any class upon which or upon whom the Articles of
Incorporation confers such rights where there are two or more classes or series
of shares of stock
- 2 -
<PAGE>
or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the articles of incorporation may provide for more than one
class or series of shares of stock, one or more of which are limited or denied
such rights thereunder; provided, however, that no such right shall vest in the
event of an increase or a decrease in the authorized number of shares of stock
of any class or series which is otherwise denied voting rights under the
provision of the Articles of Incorporation.
6. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the proceeding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Nevada, as the directors may, from time to
time, fix.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Notice of all meetings shall be in
writing and signed by the President or a Vice-President, or the Secretary, or an
Assistant Secretary, or by such other person or persons as the directors must
designate. The notice must state the purpose or purposes for which the meeting
is called and the time when, and the place, where it is to be held. A copy of
the notice must be either delivered personally or mailed postage prepaid to each
stockholder not less than ten nor more than sixty days before the meeting. If
mailed, it must be directed to the stockholder at his address as it appears upon
the records of the corporation. Any stockholder may waive notice of any meeting
by a writing signed by him, or his duly authorized attorney, either before or
after the meeting; and whenever notice of any kind is required to be given under
the provisions of the General Corporation Law, a waiver thereof in writing and
duly signed whether before or after the time stated therein, shall be deemed
equivalent thereto.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a VicePresident, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
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<PAGE>
- PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in any manner described in, or
otherwise authorized by, the provisions of Section 78.355 of the General
Corporation Law.
- INSPECTORS. The directors, in advance of any meeting, may, but
need not, appoint one or more inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not appointed, the
persons presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him
or them and execute a certificate of any fact found by him or them
- QUORUM. Stockholders holding at least a majority of the voting
power are necessary to constitute a quorum at a meeting of stockholders for the
transaction of business unless the action to be taken at the meeting shall
require a greater proportion. The stockholders present may adjourn the meeting
despite the absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to
one vote. In the election of directors, a plurality of the votes cast shall
elect. Any other action shall be authorized by stockholders who hold at least a
majority of the voting power and are present at a meeting at which a quorum is
present, except where the General Corporation Law, the Articles of
Incorporation, or these Bylaws prescribe a different percentage of votes and/or
a different exercise of voting power. In the election of directors, voting need
not be by ballot; and, except as otherwise may be provided by the General
Corporation Law, voting by ballot shall not be required for any other action.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as may
otherwise be provided by the General Corporation Law, any action required or
permitted to be taken at a meeting of the stockholders may be taken without a
meeting if a written consent thereto is signed by stockholders holding at least
a majority of the voting power; provided that if a different proportion of
voting power is required for such an action at a meeting, then that proportion
of written consents is required. In no instance where action is authorized by
written consent need a meeting of stockholders be called or noticed. Any written
consent shall be subject to the
- 4 -
<PAGE>
requirements of Section 78.320 of the General Corporation Law and of any other
applicable provision of law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by the Board of Directors of the corporation. The
Board of Directors shall have authority to fix the compensation of the members
thereof for services in any capacity. The use of the phrase "whole Board"herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. Each director must be at least 18
years of age. A director need not be a stockholder or a resident of the State of
Nevada. The initial Board of Directors shall consist of 2 persons. Thereafter
the number of directors constituting the whole board shall be at least one.
Subject to the foregoing limitation and except for the first Board of Directors,
such number may be fixed from time to time by action of the stockholders. The
number of directors may be increased or decreased by action of the stockholders.
3. ELECTION AND TERM. Directors may be elected in the manner
prescribed by the provisions of Sections 78.320 through 78.335 of the General
Corporation Law of Nevada. The first Board of Directors shall hold office until
the first election of directors by stockholders and until their successors are
elected and qualified or until their earlier resignation or removal. Any
director may resign at any time upon written notice to the corporation.
Thereafter, directors who are elected at an election of directors by
stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until the next election of
directors by stockholders and until their successors are elected and qualified
or until their earlier resignation or removal.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
State of Nevada as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
- 5 -
<PAGE>
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice if any need not be given to a director or to any
member of a committee of directors who submits a written waiver of notice signed
by him before or after the time stated therein.
- QUORUM AND ACTION. A majority of the whole Board shall constitute
a quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as the Articles of Incorporation or
these Bylaws may otherwise provide, and except as otherwise provided by the
General Corporation Law, the act of directors holding a majority of the voting
power of the directors, the directors present at a meeting at which a quorum is
present, is the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Members of the Board or of any committee which may be designated by
the Board may participate in a meeting of the Board or of any such committee, as
the case may be, by means of a telephone conference or similar method of
communication by which all persons participating in the meeting hear each other.
Participation in a meeting by said means constitutes presence in person at the
meeting.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed
for cause or without cause in accordance with the provisions of the General
Corporation Law.
6. COMMITTEES. Whenever its number consists of two or more, the
Board of Directors may designate one or more committees which have such powers
and duties as the Board shall determine. Any such committee, to the extent
provided in the resolution or resolutions of the Board, shall have and may
exercise the powers and authority of the Board of Directors in the management of
the business and affairs of the corporation and may authorize the seal or stamp
of the corporation to be affixed to all papers on which the corporation desires
to place a seal or stamp. Each committee must include at least one director. The
Board of Directors may appoint natural person who are not directors to serve on
committees.
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<PAGE>
7. WRITTEN ACTION. Any action required or permitted to be taken at a
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if, before or after the action, a written consent thereto is
signed by all the members of the Board or of the committee, as the case may be.
ARTICLE III
OFFICERS
1. The corporation shall have a President, a Secretary, and a
Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers and
agents with such titles as the resolution choosing them shall designate. Each of
any such officers must be natural persons and must be chosen by the Board of
Directors or chosen in the manner determined by the Board of Directors.
2. QUALIFICATIONS. Except as may otherwise be provided in the
resolution choosing him, no officer other than the Chairman of the Board, if
any, and the Vice-Chairman of the Board, if any, need be a director.
Any person may hold two or more offices, as the directors may
determine.
3. TERM OF OFFICE. Unless otherwise provided in the resolution
choosing him, each officer shall be chosen for a term which shall continue until
the meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor shall have been chosen or until his
resignation or removal before the expiration of his term.
Any officer may be removed, with or without cause, by the Board of
Directors or in the manner determined by the Board.
Any vacancy in any office may be filled by the Board of Directors or
in the manner determined by the Board.
4. DUTIES AND AUTHORITY. All officers of the corporation shall have
such authority and perform such duties in the management and operation of the
corporation as shall be prescribed in the resolution designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions or instruments may be inconsistent therewith.
- 7 -
<PAGE>
ARTICLE IV
REGISTERED OFFICE
The location of the initial registered office of the corporation in
the State of Nevada is the address of the initial resident agent of the
corporation, as set forth in the original Articles of Incorporation.
The corporation shall maintain at said registered office a copy,
certified by the Secretary of State of the State of Nevada, of its Articles of
Incorporation, and all amendments thereto, and a copy, certified by the
Secretary of the corporation, of these Bylaws, and all amendments thereto. The
corporation shall also keep at said registered office a stock ledger or a
duplicate stock ledger, revised annually, containing the names, alphabetically
arranged, of all persons who are stockholders of the corporation, showing their
places of residence, if known, and the number of shares held by them
respectively or a statement setting out the name of the custodian of the stock
ledger or duplicate stock ledger, and the present and complete post office
address, including street and number, if any, where such stock ledger or
duplicate stock ledger is kept.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
1. NATURE OF INDEMNITY. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the corporation to the fullest extent which it is empowered to do so by the
General Corporation Law of the State of Nevada, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment) against all expense, liability and loss (including attorneys' fees
actually and reasonably incurred by such person in connection with such
proceeding and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation. The
right to indemnification conferred in this Article V shall be a contract right
and, subject to Sections 2 and 5 hereof, shall include the right to be paid by
the corporation the expenses incurred in defending any such proceeding in
- 8 -
<PAGE>
advance of its final disposition. The corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
2. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within 30 days, upon the written request of the
director or officer. If a determination by the corporation that the director or
officer is entitled to indemnification pursuant to this Article V is required,
and the corporation fails to respond within sixty days to a written request for
indemnity, the corporation shall be deemed to have approved the request. If the
corporation denies a written request for indemnification or advancing of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within 30 days, the right to indemnification or advances as granted by
this Article V shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Nevada for the
corporation to indemnify the claimant for the amount claimed, but the burden of
such defense shall be on the corporation. Neither the failure of the corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Nevada, nor an actual determination by
the corporation (including its board of directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
3. NONEXCLUSIVITY OF ARTICLE V. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
4. INSURANCE. The corporation may purchase and maintain insurance on its
own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
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<PAGE>
5. EXPENSES. Expenses incurred by any person described in Section 1 of
this Article V in defending a proceeding shall be paid by the corporation in
advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the board of directors deems
appropriate.
6. EMPLOYEES AND AGENTS. Persons who are not covered by the foregoing
provisions of this Article V and who are or were employees or agents of the
corporation, or who are or were serving at the request of the corporation as
employees or agents of another corporation, partnership, joint venture, trust or
other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
7. CONTRACT RIGHTS. The provisions of this Article V shall be deemed to be
a contract right between the corporation and each director or officer who serves
in any such capacity at any time while this Article V and the relevant
provisions of the General Corporation Law of the State of Nevada or other
applicable law are in effect, and any repeal or modification of this Article V
or any such law shall not affect any rights or obligations then existing with
respect to any state of facts or proceeding then existing.
8. MERGER OR CONSOLIDATION. For purposes of this Article V, references to
"the corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Article V with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
ARTICLE VI
CORPORATE SEAL OR STAMP
The corporate seal or stamp shall be in such form as the Board of
Directors may prescribe.
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<PAGE>
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BYLAWS
The power to amend, alter, and repeal these Bylaws and to make new
Bylaws shall be vested in the stockholders.
- 11 -
EXHIBIT 4.1
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
SPECIALTY RETAILERS, INC.,
as Borrower
STAGE STORES, INC.,
as Guarantor
THE BANKS NAMED HEREIN,
and
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent, Collateral Agent, Swingline Bank, and L/C Bank
Dated as of June 17, 1997
$200,000,000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS .....................................................1
Section 1.1 Definitions.............................................1
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES ..........................23
Section 2.1 Expansion Loans........................................23
Section 2.2 Revolving Loans and Swingline Loans....................24
Section 2.3 Notice of Borrowing....................................25
Section 2.4 Disbursement of Funds..................................25
Section 2.5 Evidence of Indebtedness; Notes........................26
Section 2.6 Interest...............................................27
Section 2.7 Interest Periods.......................................28
Section 2.8 Minimum Amount of Eurodollar Loans.....................28
Section 2.9 Conversion or Continuation.............................28
Section 2.10 Voluntary and Mandatory Reductions of Commitments
and Swingline Loan Commitment........................28
Section 2.11 Voluntary Prepayments.................................29
Section 2.12 Mandatory Prepayments.................................29
Section 2.13 Application of Prepayments............................30
Section 2.14 Method and Place of Payment...........................31
Section 2.15 Fees..................................................31
Section 2.16 Interest Rate Unascertainable, Increased
Costs, Illegality....................................31
Section 2.17 Funding Losses........................................33
Section 2.18 Increased Capital.....................................33
Section 2.19 Taxes.................................................34
Section 2.20 Action of Affected Banks and Swingline Bank...........35
Section 2.21 Use of Proceeds.......................................35
Section 2.22 Letters of Credit.....................................35
Section 2.23 Notice of Issuance; Agreement to Issue................36
Section 2.24 Payment of Amounts Drawn Under Letters of Credit......37
Section 2.25 Payment by Banks......................................38
Section 2.26 Compensation..........................................38
Section 2.27 Additional Payments; Illegality.......................39
Section 2.28 Obligations Absolute..................................39
Section 2.29 Indemnification; Nature of L/C Banks' Duties..........40
Section 2.30 Increase of Total Revolving Loan Commitment...........41
Section 2.31 Borrowing Subsidiaries................................41
SECTION 3. CONDITIONS PRECEDENT ...........................................41
Section 3.1 Conditions Precedent to Initial Loans..................41
Section 3.2 Conditions Precedent to All Loans......................45
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................47
Section 4.1 Corporate Status.......................................47
Section 4.2 Corporate Power and Authority..........................47
Section 4.3 No Violation...........................................47
Section 4.4 Litigation.............................................47
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Section 4.5 Financial Statements; Financial Condition; etc.........48
Section 4.6 Solvency...............................................48
Section 4.7 Projections............................................48
Section 4.8 Material Adverse Change................................48
Section 4.9 Use of Proceeds; Margin Regulations....................48
Section 4.10 Governmental Approvals................................48
Section 4.11 Security Interests and Liens..........................48
Section 4.12 Tax Returns and Payments..............................48
Section 4.13 ERISA.................................................49
Section 4.14 Investment Company Act; Public Utility
Holding Company Act..................................49
Section 4.15 Representations and Warranties in
Transaction Documents................................49
Section 4.16 True and Complete Disclosure..........................49
Section 4.17 Corporate Structure; Capitalization...................49
Section 4.18 Environmental Matters.................................50
Section 4.19 Insurance.............................................50
Section 4.20 Patents, Trademarks, etc..............................51
Section 4.21 Ownership of Property.................................51
Section 4.22 No Default............................................51
Section 4.23 Licenses, etc.........................................51
Section 4.24 Compliance With Law...................................51
Section 4.25 No Burdensome Restrictions............................51
Section 4.26 Labor Matters.........................................51
SECTION 5. AFFIRMATIVE COVENANTS...........................................52
Section 5.1 Information Covenants..................................52
Section 5.2 Books, Records and Inspections.........................55
Section 5.3 Maintenance of Insurance...............................55
Section 5.4 Taxes..................................................55
Section 5.5 Corporate Franchises...................................55
Section 5.6 Compliance with Law....................................56
Section 5.7 Performance of Obligations.............................56
Section 5.8 Maintenance of Properties..............................56
Section 5.9 Further Assurances.....................................56
Section 5.10 Required Appraisals...................................57
Section 5.11 Receivables Program Refinancings......................57
SECTION 6. NEGATIVE COVENANTS..............................................57
Section 6.1 Financial Covenants....................................57
Section 6.2 Indebtedness...........................................59
Section 6.3 Liens..................................................60
Section 6.4 Restriction on Fundamental Changes.....................61
Section 6.5 Sale of Assets.........................................61
Section 6.6 Contingent Obligations.................................62
Section 6.7 Dividends..............................................62
Section 6.8 Advances, Investments and Loans........................62
Section 6.9 Transactions with Affiliates...........................63
Section 6.10 Limitation on Voluntary Payments and Modifications
of Certain Documents.................................63
Section 6.11 Changes in Business...................................64
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Section 6.12 Certain Restrictions..................................64
Section 6.13 Sales and Leasebacks..................................64
Section 6.14 Plans.................................................64
Section 6.15 Limitation on Dispositions of Subsidiary Stock........64
Section 6.16 Fiscal Year; Fiscal Quarter...........................64
SECTION 7. EVENTS OF DEFAULT...............................................65
Section 7.1 Events of Default......................................65
Section 7.2 Rights and Remedies....................................67
SECTION 8. THE ADMINISTRATIVE AGENT AND COLLATERAL AGENT...................67
Section 8.1 Appointment............................................67
Section 8.2 Delegation of Duties...................................68
Section 8.3 Exculpatory Provisions.................................68
Section 8.4 Reliance by Agent......................................68
Section 8.5 Notice of Default......................................68
Section 8.6 Non-Reliance on Agent and Other Banks..................69
Section 8.7 Indemnification........................................69
Section 8.8 Agent in its Individual Capacity.......................69
Section 8.9 Successor Agent........................................70
SECTION 9. MISCELLANEOUS...................................................70
Section 9.1 Payment of Expenses, Indemnity, etc...................70
Section 9.2 Right of Setoff.......................................71
Section 9.3 Notices...............................................71
Section 9.4 Successors and Assigns; Participation; Assignments....72
Section 9.5 Amendments and Waivers................................73
Section 9.6 No Waiver; Remedies Cumulative........................74
Section 9.7 Sharing of Payments...................................74
Section 9.8 Governing Law; Submission to Jurisdiction.............74
Section 9.9 Counterparts..........................................75
Section 9.10 Effectiveness.........................................75
Section 9.11 Headings Descriptive..................................75
Section 9.12 Marshalling; Recapture................................75
Section 9.13 Severability..........................................75
Section 9.14 Survival..............................................75
Section 9.15 Domicile of Loans.....................................76
Section 9.16 Limitation of Liability...............................76
Section 9.17 Calculations; Computations............................76
Section 9.18 Waiver of Trial by Jury...............................76
Section 9.19 Nature of Borrowers' Obligations......................76
SECTION 10. PARENT GUARANTY................................................78
Section 10.1 The Parent Guaranty...................................78
Section 10.2 Bankruptcy............................................78
Section 10.3 Nature of Liability...................................78
Section 10.4 Independent Obligation................................78
Section 10.5 Authorization.........................................79
Section 10.6 Reliance..............................................79
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PAGE
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Section 10.7 Subordination.........................................79
Section 10.8 Waiver................................................80
Section 10.9 Maximum Liability.....................................80
Annex 1 -- Banks and Commitments
Schedule I -- Guarantors
Schedule II -- Mortgaged Properties
Schedule III -- Receivables Program Documents
Schedule IV -- Refinanced Debt
Schedule V -- Existing Letters of Credit
Schedule 4.8 -- Events Having Material Adverse Change
Schedule 4.10 -- Governmental Approvals
Schedule 4.13 -- ERISA Plans
Schedule 4.17 -- Subsidiaries; Capital Stock
Schedule 4.18 -- Environmental Matters
Schedule 4.19 -- Insurance
Schedule 4.21 -- Real Property
Schedule 4.26 -- Labor Matters
Schedule 6.2 -- Existing Indebtedness
Schedule 6.3 -- Existing Liens
Schedule 6.6 -- Existing Contingent Obligations
Schedule 6.9 -- Affiliate Transactions
Exhibit A -- Form of Notice of Borrowing
Exhibit B -- Form of Expansion Note
Exhibit C -- Form of Revolving Note
Exhibit D -- Form of Swingline Note
Exhibit E-1 -- Form of Notice of Conversion
Exhibit E-2 -- Form of Notice of Continuation
Exhibit F -- Form of Letter of Credit Request
Exhibit G -- Form of Security Agreement
Exhibit H -- Form of Pledge Agreement
Exhibit I -- Form of Mortgage
Exhibit J -- Form of Subsidiary Guaranty
Exhibit K-1 -- Form of Legal Opinion of Kirkland & Ellis, Counsel
to Loan Parties
Exhibit K-2 -- Form of Legal Opinion of Local Counsel to the Loan Parties
Exhibit L -- Form of Compliance Certificate
Exhibit M -- Form of Excess Cash Flow Certificate
Exhibit N -- Form of Transfer Supplement
Exhibit O -- Form of Commitment Increase Supplement
Exhibit P -- Form of Division Sales Analysis
Exhibit Q -- Form of Assumption Agreement
Exhibit R -- Form of Intercompany Note
Exhibit S -- Form of Solvency Certificate
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CREDIT AGREEMENT, dated as of June 16, 1997, among SPECIALTY
RETAILERS, INC., a Texas corporation (the "Borrower"), STAGE STORES, INC., a
Delaware corporation (the "Parent"), the Banks (such term and each other
capitalized term used herein having the meaning assigned to such term in Section
1), CREDIT SUISSE FIRST BOSTON, as Swingline Bank (the "Swingline Bank"), and
CREDIT SUISSE FIRST BOSTON, acting in its capacity as agent for the Banks (in
such capacity, the "Administrative Agent") and in its capacity as collateral
agent for the Banks (in such capacity, the "Collateral Agent").
The Borrower has requested that the Banks extend credit to the
Borrower to enable the Borrower (i) to borrow on a reducing revolver basis the
Expansion Loans in an aggregate principal amount not to exceed $100,000,000,
(ii) to borrow on a revolving basis Revolving Loans in an aggregate principal
amount at any time outstanding not to exceed $100,000,000 on the Closing Date
and up to $125,000,000 in the event the Total Revolving Loan Commitment is
increased pursuant to Section 2.30, (iii) to borrow on a revolving basis
Swingline Loans in an aggregate principal amount at any time not to exceed the
Swingline Loan Commitment and (iv) to have issued for its account Letters of
Credit in a stated amount not to exceed at any time outstanding $50,000,000;
provided that the aggregate outstanding amount of Revolving Loans, Swingline
Loans and Letter of Credit Outstandings shall not at any time exceed
$100,000,000 on the Closing Date and up to $125,000,000 in the event the Total
Revolving Loan Commitment is increased pursuant to Section 2.30.
The proceeds of the Expansion Loans will be used together with the
proceeds of the Senior Notes and Senior Subordinated Notes (a) to finance up to
$75 million of the purchase price of the Acquisition, (b) to pay the related
fees and expenses incurred in connection therewith, and (c) for Permitted
Acquisitions and other general corporate purposes of the Borrower. The proceeds
of the Revolving Loans will be used for working capital and for general
corporate purposes (including the purchase of C.R. Anthony Company receivables).
Accordingly, the Borrower, the Parent, the Banks, the L/C Banks, the
Swingline Bank, the Administrative Agent and the Collateral Agent hereby agree
as follows:
SECTION 1. DEFINITIONS.
SECTION 1.1 DEFINITIONS. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural number the singular.
"Acquisition" shall mean the consummation by the Borrower of the
purchase of C.R. Anthony Company and the other transactions contemplated by the
Acquisition Documents.
"Acquisition Documents" shall mean the Merger Agreement and all
agreements and instruments executed and delivered in connection therewith.
"Administrative Agent" shall mean Credit Suisse First Boston acting
in its capacity as administrative agent for the Banks and any successor agent
appointed in accordance with Section 8.9.
"Adjusted Leverage Ratio" shall mean on any day the ratio on such
day of (i) Consolidated Total Debt on such day determined on a Pro Forma Basis
to (ii) Consolidated Adjusted EBITDA for the four consecutive quarters of the
Parent (taken as one accounting period) most recently ended.
"Administrative Agent's Office" shall mean the office of the
Administrative Agent located at Eleven Madison Avenue, New York, New York,
10010, or such other office as the Administrative Agent may hereafter designate
in writing as such to the other parties hereto.
<PAGE>
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to (i) vote 10% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning provided in Section 8.1.
"Agreement" shall mean this Credit Agreement as the same may from
time to time hereafter be modified, supplemented, restated, or amended.
"Anticipated Reinvestment Amount" shall mean, with respect to any
Reinvestment Election exercised with respect to an Eligible Asset Sale, the
amount specified in the Reinvestment Notice delivered by the Borrower in
connection therewith as the amount of the Net Cash Proceeds from the related
Eligible Asset Sale that the Borrower intends to use to purchase, construct or
otherwise acquire Reinvestment Assets.
"Asset Sale" shall mean the sale, transfer or other disposition
(whether voluntary or involuntary) by the Parent or any of its Subsidiaries
(including, without limitation, by way of the damage, destruction or
condemnation thereof) to any Person other than any Loan Party of (a) any capital
stock of any Subsidiary of the Parent or any of its Subsidiaries; (b)
substantially all the assets of any geographic or other division or line of
business of the Parent or any of its Subsidiaries; or (c) any other asset or
assets (excluding inventory and other assets purchased for sale to others in the
ordinary course of business and sales of Receivables pursuant to the Receivables
Program) of the Parent or any of its Subsidiaries, PROVIDED that (i) any asset
sale included in clause (c) above shall be deemed not to be an "Asset Sale"
until the aggregate amount of all such sales after the Closing Date by the
Parent and its Subsidiaries, taken together, that have not previously become
Asset Sales under this Agreement equals or exceeds $1,000,000, (ii) any asset
sale or series of related asset sales described in clause (c) above having a
value less than $100,000 shall not be deemed an "Asset Sale" for purposes of
this Agreement and (iii) any sale of (x) the aircraft owned by the Borrower, (y)
any asset sale or series of asset sales related to the sale of the C.R. Anthony
Company corporate headquarters building located in Oklahoma City, Oklahoma or
the sale of equipment located at the C.R. Anthony Company distribution center
located in Oklahoma City, Oklahoma and (z) the sale of not more than five
leasehold interests per year relating to stores closed in the ordinary course of
business (so long as the value of each such leasehold interest does not exceed
$500,000), shall be deemed not to be an "Asset Sale" hereunder.
"Authorized Officer" shall mean with respect to any Person such
Person's Chairman, President or Principal Financial Officer.
"Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes, together with all rules promulgated in connection therewith.
"Banks" shall mean the Persons listed on Annex 1 hereto and the
Persons which from time to time become a party hereto in accordance with Section
9.4(c).
"Base Rate" shall mean, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the
2
<PAGE>
inability of the Administrative Agent to obtain sufficient quotations in
accordance with the terms thereof, the Base Rate shall be determined without
regard to clause (b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in the
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective on the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively, without notice to the Borrower.
"Base Rate Loans" shall mean Loans made and/or being maintained at a
rate of interest based upon the Base Rate. Each Swingline Loan shall be
maintained only as a Base Rate Loan.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower's Share of Excess Cash Flow" shall mean the amount of
Excess Cash Flow, determined on a cumulative basis from February 2, 1997 through
the last day of the fiscal year most recently ended prior to the date of
determination, that is not required to be applied to the prepayment of the Loans
and Swingline Loans pursuant to Section 2.12(c) MINUS the amount thereof
previously applied to make additional Capital Expenditures pursuant to Section
6.1(d).
"Borrowing" shall mean the incurrence of (x) one Type of Loan of one
Facility from all the Banks on a given date (or resulting from conversions or
continuations on a given date), having in the case of Eurodollar Loans the same
Interest Period or (y) a Swingline Loan from the Swingline Bank.
"Borrowing Subsidiary" means any wholly-owned Subsidiary of the
Parent (other than the Borrower and its Subsidiaries) so designated by the
Parent and the Borrower pursuant to Section 2.31.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in New York City a legal holiday or a day on which banking institutions are
authorized or required by law or other government actions to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
for U.S. dollar deposits in the London Interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, the sum of
expenditures (whether paid in cash or accrued as a liability, including the
portion of Capital Leases originally incurred during such period that is
capitalized on the consolidated balance sheet of the Parent and its
Subsidiaries) by the Parent and its Subsidiaries during such period that, in
conformity with GAAP, are included in "capital expenditures", "additions to
property, plant or equipment" or comparable items in the consolidated financial
statements of the Parent and its Subsidiaries.
"Capital Lease" shall mean (i) any lease of property, real or
personal, the obligations under which are capitalized on the consolidated
balance sheet of the Parent and its Subsidiaries, and (ii) any other such lease
to the extent that the then present value of the minimum rental commitment
thereunder should, in accordance with GAAP, be capitalized on a balance sheet of
the lessee.
"Capital Lease Obligations" shall mean all obligations of the Parent
and its Subsidiaries under or in respect of Capital Leases.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 365 days from the date of acquisition, (ii) time deposits and certificates
of deposit of any Bank or any domestic commercial bank of recognized standing
having capital and surplus in excess of $500,000,000 with maturities
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<PAGE>
of not more than 365 days from the date of acquisition, (iii) fully secured
repurchase obligations with a term of not more than 7 days for underlying
securities of the types described in clause (i) entered into with any bank
meeting the qualifications specified in clause (ii) above, and (iv) commercial
paper issued by the parent corporation of any Bank or any domestic commercial
bank of recognized standing having capital and surplus in excess of $500,000,000
and commercial paper rated at least A-1 or the equivalent thereof by Standard &
Poor's or at least P-1 or the equivalent thereof by Moody's and in each case
maturing within 270 days after the date of acquisition.
"Change of Control" shall mean (a) the Parent shall cease to own,
beneficially and of record, 100% of the outstanding capital stock of the
Borrower, (b) any Person or group of Persons (within the meaning of Section 13
or 14 of the Exchange Act) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under the Exchange Act) of 35% or more of the outstanding shares of any class of
outstanding common stock of the Parent, (c) Continuing Directors shall cease to
constitute a majority of the board of directors of the Parent. "Continuing
Director" shall mean at any date a member of the Parent's board of directors who
was either a member of such board on the Closing Date or was nominated for
election to such board by at least two-thirds of the Continuing Directors then
in office or (d) a "Change of Control" as defined in either the Senior Note
Indenture or the Senior Subordinated Note Indenture.
"Cleanup" shall mean all actions required to: (a) cleanup, remove,
treat or remediate Materials of Environmental Concern in the indoor or outdoor
environment, (b) prevent the Release of Materials of Environmental Concern so
that they do not migrate, endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment, (c) perform pre-remedial studies
and investigations and post-remedial monitoring and care, or (d) respond to any
government requests for information or documents in any way relating to cleanup,
removal, treatment or remediation or potential cleanup, removal, treatment or
remediation of Materials of Environmental Concern in the indoor or outdoor
environment.
"Closing Date" shall mean the date on which the conditions precedent
set forth in Section 3.1 have been satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute, together with all rules and regulations
promulgated in connection therewith.
"Collateral" shall mean all property and interests in property now
owned or hereafter acquired in or upon which a Lien has been or is purported or
intended to have been granted to the Collateral Agent under any of the Security
Documents and shall also include the Mortgaged Properties.
"Collateral Agent" shall mean Credit Suisse First Boston acting in
its capacity as collateral agent for the Secured Creditors under the Security
Documents and any successor collateral agent appointed in accordance with
Section 8.9.
"Commitment" shall mean, for each Bank at any given time, the sum of
such Bank's Expansion Loan Commitment and its Revolving Loan Commitment.
"Commitment Fee" shall have the meaning set forth in Section
2.15(b).
"Compliance Certificate" shall mean a certificate of the Principal
Financial Officer of the Borrower in the form of Exhibit L hereto and delivered
pursuant to Section 5.1(f) hereto.
"Consolidated Adjusted EBITDA" shall mean, for any period, the
Consolidated EBITDA for such period determined on a Pro Forma Basis.
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<PAGE>
"Consolidated Cash Interest Expense" shall mean, for any period,
Consolidated Interest Expense for such period MINUS the amount of such
Consolidated Interest Expense not paid or payable in cash.
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash and Cash Equivalents) of the Parent and its Subsidiaries
at such time, determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities (other than the current portion of all long-term
Indebtedness) of the Parent and its Subsidiaries at such time, determined on a
consolidated basis in accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum, without
duplication, of (i) Consolidated Net Income for such period PLUS (ii)
Consolidated Interest Expense for such period PLUS (iii) federal and state
income taxes deducted in calculating Consolidated Net Income for such period,
PLUS (iv) to the extent deducted in the calculation of Consolidated Net Income
for such period, depreciation and amortization expense, all determined on a
consolidated basis for the Parent and its Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charges" shall mean, without duplication, for
any period, the sum of (i) all Consolidated Interest Expense for such period,
PLUS (ii) scheduled payments due in the next succeeding four quarters for
principal of the Expansion Loans and other Indebtedness (including the principal
component of Capital Leases but excluding amounts due on the Final Maturity
Date), PLUS (iii) Consolidated Rental Expense PLUS (iv) all federal and state
income taxes paid or payable in cash during such period, all as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any fiscal period of
the Parent, the total interest expense (including, without limitation, interest
expense attributable to Capital Leases in accordance with GAAP) of the Parent
and its Subsidiaries for such period, MINUS all interest earnings received by
the Parent and its Subsidiaries in cash during such period, in each case
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" for any period, means the net income (or
loss) of the Parent and its Subsidiaries on a consolidated basis for such period
(taken as a single accounting period) determined in accordance with GAAP
provided that there shall be excluded (a) the income (or loss) of any Person in
which any other Person (other than the Borrower or any of its wholly owned
Subsidiaries or any directors holding qualifying shares) has a joint interest,
except to the extent of the amount of divi dends or other distributions actually
paid to the Borrower or any of its wholly owned Subsidiaries by such Person
during such period, (b) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with the Borrower
or any of its Subsidiaries or that Person's assets are acquired by the Borrower
or any of its Subsidiaries, (c) the income of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Subsidiary, (d) any after tax
gains or losses attributable to Asset Sales and (e) (to the extent not included
in clauses (a) through (d) above) any net extraordinary gains or net non-cash
extraordinary losses.
"Consolidated Net Tangible Assets" shall mean, at any particular
time, the aggregate amount of all assets (less applicable reserves and other
properly deductible items) after deducting therefrom all goodwill, trade names,
trademarks, patents, unamortized debt issue costs (to the extent included in
said aggregate amount of assets) and other like intangibles, as set forth on the
most recent consolidated balance sheet of the Parent and its Subsidiaries and
computed in accordance with GAAP. "Consolidated Rental Expense" shall mean for
any period all rents accrued during such period under operating leases under
which the Parent or any of its Subsidiaries is the lessee, as determined on a
consolidated basis in accordance with GAAP.
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<PAGE>
"Consolidated Rental Expense" shall mean for any period all rents
accrued during such period under operating leases under which the parent or
any of its Subsidiaries is the lessee, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Debt" shall mean, at any time, all Indebtedness
of the Parent and its Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Senior Debt" shall mean, at any time, all
Indebtedness of the Parent and its Subsidiaries other than the Senior
Subordinated Notes and Indebtedness which by its terms is expressly subordinated
to the Obligations and all other senior obligations of the Parent and its
Subsidiaries.
"Consolidated Working Capital" shall mean at any time an amount
equal to Consolidated Current Assets minus Consolidated Current Liabilities at
such time.
"Contingent Obligation" as to any Person shall mean any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("Primary Obligations") of any other Person (the
"Primary Obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such Primary Obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such Primary Obligation or (y) to maintain working
capital or equity capital of the Primary Obligor or otherwise to maintain the
net worth or solvency of the Primary Obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such Primary Obligation of the ability of the Primary Obligor to make payment of
such Primary Obligation or (iv) otherwise to assure or hold harmless the owner
of such Primary Obligation against loss in respect thereof; PROVIDED, HOWEVER,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the Primary Obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith.
"Credit Event" shall have the meaning provided in Section 3.2.
"Credit Exposure" shall have the meaning provided in Section 9.4(b).
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Default Rate" shall have the meaning provided in Section 2.6(c).
"Dividends" shall have the meaning provided in Section 6.7.
"Domestic Lending Office" shall mean, as to any Bank, the office of
such Bank designated as such on Annex 1, or such other office designated by such
Bank from time to time by written notice to the Administrative Agent and the
Borrower.
"Eligible Asset Sale" shall mean any Asset Sale, the Net Cash
Proceeds of which shall not exceed 5% of Consolidated Net Tangible Assets at the
time of such sale in the case of any individual Asset Sale or 10% of
Consolidated Net Tangible Assets in the aggregate for all such Asset Sales.
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"Environmental Affiliate" shall mean, with respect to any Person,
any other Person whose liability for any Environmental Claim such Person has or
may have retained, assumed or otherwise become liable for (contingently or
otherwise), either contractually or by operation of law.
"Environmental Approvals" shall mean any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" shall mean, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by any other
Person alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"Environmental Laws" shall mean all federal, state, local and
foreign laws and regulations relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including without limitation,
laws and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Equity Issuance" shall mean any issuance or sale by the Parent or
any of its Subsidiaries of any shares of capital stock or other equity
securities of such Person, or any obligations convertible into or exchangeable
for, or giving any Person a right, option or warrant to acquire such securities
or such convertible or exchangeable obligations, other than (a) sales or
issuances to the Parent or any of its wholly owned Subsidiaries and (b) sales or
issuances of common stock or options to manage ment or employees of the Parent
or any of its Subsidiaries under any employee stock option or stock purchase
plan or plan established pursuant to Section 401(k) of the Code in existence
from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated in connection therewith. Section references to ERISA are to ERISA,
as in effect at the date of this Agreement and any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Controlled Group" means a group consisting of any ERISA
Person and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with such Person
that, together with such Person, are treated as a single employer under
regulations of the PBGC.
"ERISA Person" shall have the meaning set forth in Section 3(9) of
ERISA for the term "person."
"ERISA Plan" means any Plan that (i) is a Multiemployer Plan or (ii)
has Unfunded Benefit Liabilities in excess of $500,000.
"Eurodollar Lending Office" shall mean, as to any Bank, the office
of such Bank designated as such on Annex 1, or such other office designated by
such Bank from time to time by written notice to the Administrative Agent and
the Borrower.
"Eurodollar Loans" shall mean Loans made and/or being maintained at
a rate of interest based upon the Eurodollar Rate.
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"Eurodollar Rate" shall mean, for any Interest Period for each
Eurodollar Loan, an interest rate per annum equal to the rate determined by the
Administrative Agent at approximately 11:00 a.m. (London time) two Business Days
before the first day of such Interest Period by reference to the British
Bankers' Association Interest Settlement Rates for deposits in dollars (as set
forth by any services selected by the Administrative Agent which has been
nominated by the British Bankers' Association as an authorized information
vendor for the purpose of displaying such rates) for a period equal to the
relevant Interest Period; PROVIDED that, to the extent that an interest rate is
not ascertainable pursuant to the foregoing provisions of this definition, the
"Eurodollar Rate" shall be the interest rate per annum determined by the
Administrative Agent to be the average (rounded upward to the nearest whole
multiple of one-sixteenth of one percent (0.0625%) per annum, if such average is
not such a multiple) of the rates per annum at which deposits in dollars are
offered to major banks in the London interbank market in London, England by the
Reference Banks at approximately 11:00 a.m. (London time) two Business Days
before the first day of such Interest Period for such Interest Period.
"Event of Default" shall have the meaning provided in Section 7.
"Excess Cash Flow" shall mean, with respect to any fiscal period of
the Borrower, an amount equal to (i) Consolidated Net Income for such fiscal
period, PLUS (ii) depreciation and amortization expense to the extent deducted
in determining Consolidated Net Income for such fiscal period, PLUS (iii)
Consolidated Interest Expense (other than Consolidated Cash Interest Expense)
during such fiscal period, PLUS (or MINUS) (iv) any increase (or decrease) in
deferred taxes during such fiscal period, PLUS (or MINUS) (v) decreases (or
increases) in Consolidated Working Capital from the last day of the preceding
fiscal period to the last day of such fiscal period (excluding, however,
decreases in Consolidated Working Capital to the extent such decreases are
attributable to Asset Sales), MINUS (vi) the aggregate amount paid or payable in
cash by the Borrower and its Subsidiaries during such fiscal period for Capital
Expenditures permitted pursuant to Section 6.1(d) (except to the extent financed
with Capital Leases, the proceeds of purchase money Indebtedness, insurance
proceeds, Retained Equity Proceeds or the Borrower's Share of Excess Cash Flow
and except to the extent already deducted in the calculation of Excess Cash Flow
for any prior period), MINUS (vii) all scheduled principal repayments and
voluntary prepayments of the Loans made during such fiscal period, but only to
the extent accompanied by a permanent reduction in the Expansion Loan Commitment
or Revolving Loan Commitment, as the case may be, MINUS (viii) all regularly
scheduled principal payments made during such fiscal period in respect of other
Indebtedness to the extent such Indebtedness and payments are permitted to be
incurred and made hereunder MINUS (ix) the aggregate amount actually paid in
cash by the Parent and its Subsidiaries for Permitted Acquisitions (except to
the extent financed with the proceeds of any Indebtedness, including the Loans,
or any Equity Issuance).
"Excess Cash Flow Certificate" shall mean a certificate of the
Principal Financial Officer of the Borrower in the form of Exhibit M hereto and
delivered pursuant to Section 5.1(f) hereof.
"Existing Credit Agreement" shall mean the collective reference to
the two Amended and Restated Revolving Credit Agreements, each dated January 31,
1997, by and among Specialty Retailers, Inc., Palais Royal, Inc., The First
National Bank of Boston and the other lending institutions party thereto and The
First National Bank of Boston, as Agent.
"Existing Notes" shall mean the Existing Senior Notes and the
Existing Senior Subordinated Notes.
"Existing Senior Notes" shall mean the Borrower's 10% Senior Notes
due 2000.
"Existing Senior Subordinated Notes" shall mean the Borrower's
Series B and Series D 11% Senior Subordinated Notes due 2003.
8
<PAGE>
"Expansion Loan" shall have the meaning provided in Section 2.1.
"Expansion Loan Commitment" shall mean at any time, for any Bank,
the amount set forth opposite such Bank's name in Annex 1 hereto under the
heading "Expansion Loan Commitment", as the same may be reduced from time to
time pursuant to Section 2.1(a), 2.10 or 9.4(c).
"Expansion Note" shall have the meaning provided in Section 2.5(b).
"Facility" shall mean either the Expansion Loans or the Revolving
Loans.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by the Administrative Agent
from three Federal funds brokers of recognized standing selected by it.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System as constituted from time to time.
"Fees" shall mean all fees and other amounts payable pursuant to the
Loan Documents including, without limitation, the fees payable pursuant to
Sections 2.15 and 2.26.
"Fee Letter" shall mean the letter between the Borrower and Credit
Suisse First Boston relating to the payment of certain fees and expenses in
connection with the transactions contemplated hereby.
"Final Maturity Date" shall mean June 14, 2002.
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date hereof and consistent with those utilized in
the preparation of the financial statements referred to in Section 4.5.
"Guaranteed Creditors" shall mean and include each of the
Administrative Agent, the Collateral Agent, the L/C Banks and the Banks to the
extent such party constitutes a Secured Creditor under the Security Documents.
"Guaranteed Obligations" shall mean (i) the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of the
principal of and interest on each Note issued by the Borrower or any Borrowing
Subsidiary to each Bank, and Loans made, under this Agreement and all
reimbursement obligations with respect to Letters of Credit, together with all
the other obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code or any similar provision, would
become due) and liabilities (including, without limitation, indemnities, fees
and interest thereon) of the Borrower or any Borrowing Subsidiary to such Bank
now existing or hereafter incurred under, arising out of or in connection with
this Agreement or any other Loan Document and the due performance and compliance
with all the terms, conditions and agreements contained in the Loan Documents by
the Borrower or any Borrowing Subsidiary and (ii) the full and prompt payment
when due (whether by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) of each Guarantor owing under the Parent
Guaranty or the Subsidiary Guaranty.
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<PAGE>
"Guarantor" shall mean the Parent and each Material Subsidiary of
the Borrower or the Parent specified on Schedule I hereto and any Material
Subsidiary of the Borrower or the Parent which shall have executed and delivered
a Subsidiary Guaranty pursuant to Section 5.9(c) hereof, other than the
Receivables Subsidiary.
"Indebtedness" of any Person shall mean, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables on terms of 90 days or
less incurred in the ordinary course of business of such Person), (ii) all
indebtedness of such Person evidenced by a note, bond, debenture or similar
instrument, (iii) the principal component of all Capital Lease Obligations of
such Person, (iv) the face amount of all letters of credit issued for the
account of such Person and, without duplication, all unreimbursed amounts drawn
thereunder, (v) all indebtedness of any other Person secured by any Lien on any
property owned by such Person, whether or not such indebtedness has been
assumed, (vi) all Contingent Obligations of such Person, (vii) all net payment
obligations of such Person under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
and similar agreements) and currency swaps and similar agreements and (viii) 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 thereunder upon a default are
limited to repossession or sale of such property) .
"Intercompany Note" shall mean a promissory note issued by the
Parent to the Borrower substantially in the form of Exhibit R hereto evidencing
the loans, if any, made by the Borrower to the Parent pursuant to Section 6.8
(b)(ii) hereof.
"Interest Period" shall mean with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending on the numerically corresponding calendar day in the
calendar month that is one, two, three or six months thereafter, as
selected by the Borrower in its Notice of Borrowing, Notice of
Conversion or Notice of Continuation, as the case may be, given with
respect thereto; and
(ii) thereafter, each period commencing on the last day
of the next preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three or six months thereafter, as
selected by the Borrower by irrevocable notice to the Administrative
Agent not less than three Business Days prior to the last day of the
then current Interest Period with respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(A) if any Interest Period pertaining to a Eurodollar
Loan would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business
Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(B) no Interest Period in respect of Expansion Loans
shall extend beyond any date upon which a scheduled reduction of the
Expansion Loan Commitments will be required pursuant to Section 2.10
if the aggregate principal amount of Expansion Loans having Interest
Periods extending beyond such date will exceed the aggregate
principal amount of the Expansion Loan Commitments after giving
effect to such scheduled reduction;
(C) any Interest Period that would otherwise extend
beyond the Final Maturity Date shall end on the Final Maturity Date;
and
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<PAGE>
(D) any Interest Period pertaining to a Eurodollar Loan
that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month.
"Investment" shall have the meaning provided in Section 6.8.
"L/C Bank" shall mean Credit Suisse First Boston and any other Bank
or Banks designated by the Borrower who agree to serve as a L/C Bank hereunder
and are reasonably acceptable to the Administrative Agent.
"L/C Cash Collateral Account" shall mean the cash collateral account
established pursuant to the Security Agreement in favor of the Collateral Agent
for the benefit of the Secured Creditors.
"L/C Sublimit" shall mean $50,000,000.
"Lending Office" shall mean (i) with respect to any Bank, a
collective reference to such Bank's Eurodollar Lending Office and Domestic
Lending Office and (ii) with respect to the Swingline Bank, its Domestic Lending
Office.
"Letter of Credit" shall mean each Trade Letter of Credit and each
Standby Letter of Credit, as the case may be.
"Letter of Credit Exposure" shall mean, at any time, with respect to
any Bank, the product of its Pro Rata Share of the then Letter of Credit
Outstandings.
"Letter of Credit Outstandings" shall mean, with respect to Letters
of Credit, as at any date of determination, the sum of (a) the maximum aggregate
amount which at such date of determination is available to be drawn (assuming
the conditions for drawing thereunder have been met) under all Letters of Credit
then outstanding, PLUS (b) the aggregate amount of all drawings under Letters of
Credit honored by the applicable L/C Bank not theretofore reimbursed by the
Borrower (it being understood that for purposes of any request for a Loan
pursuant to Section 2.24, there shall be excluded from the amount determined in
accordance with the preceding clause (b) an amount equal to the proceeds of such
Loan).
"Letter of Credit Request" shall mean a Letter of Credit Request
substantially in the form of Exhibit F hereto.
"Leverage Ratio" shall mean on any day the ratio on such day of (i)
Consolidated Total Debt on such day to (ii) Consolidated EBITDA for the four
consecutive fiscal quarters of the Parent (taken as one accounting period) most
recently ended.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, charge, lien (statutory or other), or
preference, priority or other security agreement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same effect as
any of the foregoing and the filing of any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of any
jurisdiction, domestic or foreign.
"Loans" shall mean and include the Revolving Loans and the Expansion
Loans.
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<PAGE>
"Loan Documents" shall mean this Agreement, the Notes, the
Subsidiary Guaranty, each Letter of Credit and the Security Documents and any
other documents or instruments executed or delivered in connection therewith,
together with all amendments, restatements and modifications thereto or thereof.
"Loan Party" shall mean and include the Borrower, any Borrowing
Subsidiary, the Parent and each Guarantor.
"Margin Percentage" shall mean at any time that percentage (a) to be
added to the Base Rate or the Eurodollar Rate, as appropriate, pursuant to
Section 2.6, for purposes of determining the per annum rate of interest
applicable from time to time to Base Rate Loans or Eurodollar Loans and (b) to
be used in computing the Commitment Fee pursuant to Section 2.15 and the Letter
of Credit fees pursuant to Section 2.26, which in each case on any date shall be
the applicable percentage set forth under the appropriate column below opposite
the category in which the Adjusted Leverage Ratio, determined (subject to the
last sentence hereof) as of the end of the most recent fiscal quarter for which
financial statements and Compliance Certificates are required to have been
delivered under Section 5.1(a), (b) and (f) (whether or not such financial
statements and Compliance Certificates for any subsequent quarter shall in fact
have been delivered):
================================================================================
Adjusted Commitment Eurodollar Base Rate
Leverage Fee Percentage Margin Margin
Ratio
- --------------------------------------------------------------------------------
equal to or less than
Category 1 2.0 to 1.0 0.25% 1.00% 0.00%
- --------------------------------------------------------------------------------
equal to or less than
Category 2 3.0 to 1.0 0.375% 1.50% 0.50%
and more than 2.0 to 1.0
- --------------------------------------------------------------------------------
equal to or less than
Category 3 3.50 to 1.0 0.50% 1.75% 0.75%
and more than 3.0 to 1.0
- --------------------------------------------------------------------------------
equal to or less than
Category 4 4.0 to 1.0 0.50% 2.00% 1.00%
and more than 3.50 to 1.0
- --------------------------------------------------------------------------------
Category 5 more than 4.0 to 1.0 0.50% 2.25% 1.25%
================================================================================
PROVIDED that, notwithstanding the foregoing, (i) from the Closing Date until a
Compliance Certificate for the most recently ended fiscal quarter has been
received, the Margin Percentage shall be determined by reference to Category 4
and (ii) at any time during which the Borrower has failed to deliver the
financial statements and Compliance Certificates described in Section 5.1(a),
(b) and (f) with respect to a fiscal quarter or fiscal year in accordance with
the provisions thereof, or at any time during which an Event of Default shall
have occurred and shall be continuing, the Margin Percentage shall be determined
by reference to Category 5. Each change in the Margin Percentage shall be
applicable with respect to the Commitment Fees, Letter of Credit fees pursuant
to Section 2.26 and outstanding Expansion Loans, Revolving Loans and Swingline
Loans on the Business Day after the date on which the Administrative Agent shall
have received the financial statements and Compliance Certificates required to
be delivered pursuant to Section 5.1(a), (b) and (f) PROVIDED, HOWEVER, that on
the effective date of the Acquisition and any Permitted Acquisition, the
Borrower shall be required to deliver an additional Compliance Certificate
(together with pro forma financial statements) which calculates the Adjusted
Leverage Ratio as of such date after giving effect to the Acquisition or such
Permitted Acquisition and any other Permitted Acquisition occurring during such
period and any change in the Margin Percentage shall become effective on the
Business Day after the date of delivery of such additional Compliance
Certificate.
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<PAGE>
"Margin Stock" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" shall mean a material adverse effect upon
(i) the business, operations, properties, assets, prospects or condition
(financial or otherwise) of the Parent and its Subsidiaries taken as a whole or
(ii) the ability of any Loan Party to perform, or of the Administrative Agent,
any L/C Bank, the Swingline Bank, the Collateral Agent or any of the Banks to
enforce, any of the Obligations.
"Material Real Estate"" shall mean with respect to any real estate
acquired by any Loan Party or any of its Subsidiaries after the date hereof any
real estate, valued at the greater of cost and fair market value, which (i) has
a value in the case of any individual or contiguous properties, equal to or
greater than $3,000,000 and (ii) in the case of any individual or contiguous
properties having a value in excess of $1,000,000 but less than $3,000,000, has
a value in excess of $10,000,000 when aggregated with all other real estate
described in this clause (ii).
"Materials of Environmental Concern" shall mean and include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products.
"Material Subsidiary" means, as of any date, any Subsidiary of the
Parent (other than the Borrower), either alone or together with its
Subsidiaries, that has assets with a fair market value of $250,000 or more as of
the last day of the most recently ended fiscal quarter of the Parent or annual
revenues (or annualized revenues in the case of any Person that has not been a
Subsidiary of the Parent for a full year) of $1,000,000 or more as of the most
recently ended fiscal quarter of the Parent.
"Maximum Amount" shall have the meaning set forth in Section 6.1(d).
"Merger Agreement" shall mean the Agreement and Plan of Merger,
dated March 5, 1997, as amended as of May 20, 1997, between Stage Stores, Inc.
and C.R. Anthony Company, together with all schedules and exhibits referred to
therein, each in the form delivered to the Administrative Agent and the Banks on
the Closing Date, without giving effect to any amendment, modification or waiver
thereof effected without the written consent of the Banks.
"Moody's" shall mean Moody's Investors Service, Inc. or any of its
successors.
"Mortgaged Properties" shall mean the distribution center owned by
the Borrower and described on Schedule II.
"Mortgages" shall have the meaning set forth in Section 3.1(a)(v).
"Multiemployer Plan" shall mean a Plan which is a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale,
the cash payments (including cash payments received by way of insurance
proceeds, deferred payment pursuant to a note receivable or otherwise, but only
as and when so received) received therefrom, net of (i) bona fide direct costs
of sale (including payment of (x) the outstanding principal amount of, premium
or penalty, if any, and interest on any Indebtedness (other than Loans or
Swingline Loans) secured by or required to be repaid under the terms thereof as
a result of such Asset Sale and (y) reasonable fees associated with such Asset
Sale paid to Persons that are not Affiliates of the Parent and (ii) income taxes
paid or reasonably estimated to be payable in the year such Asset Sale occurs or
in the following year as a result thereof) and (b) with respect to any
incurrence or
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<PAGE>
disposition of Indebtedness or any Equity Issuance, the cash proceeds received
therefrom net of underwriting commissions or placement fees and expenses
directly incurred in connection therewith.
"Notes" shall mean and include each Revolving Note, each Expansion
Note and the Swingline Note.
"Notice of Borrowing" shall mean a notice of borrowing in the form
of Exhibit A hereto.
"Notice of Conversion" shall mean a notice of conversion in the form
of Exhibit E-1 hereto.
"Notice of Continuation" shall mean a notice of continuation in the
form of Exhibit E-2 hereto.
"Obligations" shall mean all obligations, liabilities and
indebtedness of every nature of the Borrower, any Borrowing Subsidiary and the
Guarantors from time to time owing to the Administrative Agent, the Collateral
Agent, any Bank, the Swingline Bank or any L/C Bank under or in connection with
this Agreement or any other Loan Document.
"Parent" shall have the meaning provided in the first paragraph of
this Agreement.
"Parent Guaranty" shall mean the guaranty of the Parent pursuant to
Section 10.
"Participant" shall have the meaning provided in Section 9.4(b).
"Participating Bank" shall have the meaning provided in Section
2.23(b).
"Payment Date" shall mean the last Business Day of each March, June,
September and December of each year.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Permitted Acquired Indebtedness" shall mean Indebtedness of any
Subsidiary of the Parent or the Borrower acquired pursuant to a Permitted
Acquisition, which Indebtedness existed at the time of the consummation of any
such acquisition and was not created in contemplation thereof (and the
provisions of which were not altered in contemplation thereof), so long as (x)
the Parent or the Borrower and its other respective Subsidiaries (other than the
Subsidiary being so acquired) have no liability with respect to any such
Indebtedness other than the assumption of any such Indebtedness in connection
with a merger of such Subsidiary with, or the acquisition of all or
substantially all of the assets of such Person by, the Borrower or any
Subsidiary of the Parent or the Borrower and (y) any Liens securing such
Indebtedness apply only to assets of the Subsidiary so acquired (and so long as
additional assets of such Subsidiary are not granted as security following, or
in contemplation of, the respective Permitted Acquisition).
"Permitted Acquisition" shall mean the acquisition by the Parent or
the Borrower of assets constituting part of or an entire business, division or
product line of any Person not already a Subsidiary of the Parent or the
Borrower, as the case may be, or of 100% (or such lesser amount as shall be
necessary to immediately consummate a statutory "short-form" merger under the
laws of the relevant jurisdiction and which merger is thereafter immediately
consummated) of the capital stock of any such Person, which Person shall, as a
result of such acquisition, become a Subsidiary; provided that the Acquisition
shall constitute a Permitted Acquisition and provided further that an
acquisition shall only be a Permitted Acquisition if the following terms and
conditions shall be satisfied:
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<PAGE>
(a) (i) the consideration paid by the Parent or the
Borrower, as the case may be, consists of cash (including proceeds
of Expansion Loans) or common stock, the issuance of Indebtedness
otherwise permitted in Section 6.2 and the assumption/acquisition of
any Permitted Acquired Indebtedness (calculated at face value)
relating to such business, division or product line of any Person
which is permitted to remain outstanding in accordance with the
requirements of Section 6.2;
(ii) the assets acquired, or the business of the Person
whose stock is acquired shall (A) be in the same line of business or
reasonably incidental thereto as the business of the Parent or the
Borrower, as the case may be, and (B) be merged with or into the
Borrower or any Subsidiary of the Borrower or the Parent or become a
direct Subsidiary of the Borrower or any Subsidiary of the Borrower
or the Parent;
(iii) in the case of the acquisition of 100% of the
capital stock of any Person, such Person shall own no capital stock
of any other Person unless such Person owns 100% of the capital
stock of such other Person or such Investment is otherwise permitted
by Section 6.8(h);
(iv) no Default or Event of Default shall be in
existence at the time of the consummation of the proposed Permitted
Acquisition or immediately after giving effect thereto;
(v) the Parent or the Borrower, as the case may be,
shall have given the Administrative Agent at least 13 Business Days'
prior written notice of any Permitted Acquisition for which the
consideration to be paid is in excess of $25,000,000 or at least 8
Business Days' prior written notice of any Permitted Acquisition for
which the consideration to be paid is equal to or less than
$25,000,000 (such notices to include the compliance calculations
referred to in clauses (vi) and (vii) below and a brief business
description of the Permitted Acquisition and copies of which notices
the Administrative Agent shall promptly furnish to the Banks);
(vi) calculations are made by the Parent or the
Borrower, as the case may be, of compliance with the covenants
contained in Section 6.1 on a Pro Forma Basis for the period of four
consecutive fiscal quarters (taken as one accounting period) most
recently ended prior to the date of such Permitted Acquisition
(each, a "Calculation Period"), as if the respective Permitted
Acquisition (as well as all other Permitted Acquisitions theretofore
consummated after the first day of such Calculation Period) had
occurred on the first day of such Calculation Period, and such
recalculations shall show that such financial covenants would have
been complied with if the Permitted Acquisition had occurred on the
first day of such Calculation Period (for this purpose, if the first
day of the respective Calculation Period occurs prior to the Closing
Date, calculated as if the covenants contained in said Section 6.1
had been applicable from the first day of the Calculation Period);
provided that for the purposes of this clause (vi) and clause (vii)
below the Adjusted Leverage Ratio demonstrated by such
recalculations must be equal to or less than 4.0:1 from the Closing
Date until the third anniversary of the Closing Date and must be
equal to or less than 3.75:1 at any time thereafter;
(vii) based on good faith projections prepared by the
Borrower for the period from the date of the consummation of the
Permitted Acquisition to the date which is one year thereafter, the
level of financial performance measured by the covenants set forth
in Section 6.1 shall be better than or equal to such level as would
be required to provide that no Default or Event of Default would
exist under the financial covenants contained in Section 6.1 as
compliance with such covenants would be required through the date
which is one year from the date of the consummation of the
respective Permitted Acquisition;
(viii) the Administrative Agent shall have been
satisfied in its reasonable discretion that the proposed Permitted
Acquisition could not reasonably be expected to result in
15
<PAGE>
materially increased tax, ERISA, environmental or other contingent
liabilities with respect to the Parent, the Borrower or any of their
respective Subsidiaries;
(ix) all representations and warranties contained herein
and in the other Loan Documents shall be true and correct in all
material respects with the same effect as though such
representations and warranties had been made on and as of the date
of such Permitted Acquisition (both before and after giving effect
thereto), unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and
correct in all material respects as of such earlier date;
(x) the Parent or the Borrower, as the case may be,
provides to the Administrative Agent as soon as available but not
later than 5 Business Days after the execution thereof, a copy of
any executed purchase agreement or similar agreement with respect to
such Permitted Acquisition;
(xi) the Parent or the Borrower, as the case may be,
shall have delivered to the Administrative Agent an officer's
certificate executed by an Authorized Officer of the Borrower,
certifying to the best of his knowledge, compliance with the
requirements of preceding clauses (iv) through (vii), inclusive,
(ix), and containing the calculations required by the preceding
clauses (vi) and (vii); and
(xii) if the total cash purchase price (including
Indebtedness assumed) of any acquisition exceeds $50,000,000, the
Administrative Agent and the Required Banks shall have given their
prior written consent thereto.
(b) At the time of each Permitted Acquisition involving
the creation or acquisition of a Subsidiary of the Borrower or the
Parent, or the acquisition of capital stock or other equity interest
of any Person by the Borrower or the Parent, all capital stock or
other equity interests thereof created or acquired in connection
with such Permitted Acquisition shall be pledged for the benefit of
the Secured Creditors pursuant to the Pledge Agreement.
(c) The Borrower shall cause each Subsidiary which it or
the Parent forms to effect, or it or the Parent acquires pursuant
to, a Permitted Acquisition to comply with, and to execute and
deliver, all of the documentation required by, Sections 2.31 and
5.9, to the satisfaction of the Administrative Agent.
(d) The consummation of each Permitted Acquisition shall
be deemed to be a representation and warranty by the Parent and the
Borrower that the certifications by the Borrower (or by one or more
of its Authorized Officers) required by clause (a) above are true
and correct and that all conditions thereto have been satisfied and
that such Permitted Acquisition is permitted in accordance with the
terms of this Agreement, which representation and warranty shall be
deemed to be a representation and warranty for all purposes
hereunder, including, without limitation, Sections 3 and 7.
"Permitted Subordinated Debt" shall mean unsecured subordinated
Indebtedness of the Borrower if (i) such Indebtedness has no amortization or
required sinking fund payments and a final maturity no earlier than, and
subordination provisions no more onerous or restrictive on the Borrower and no
less favorable to the Banks in any respect deemed material by the Required Banks
than, those terms and provisions of the Senior Subordinated Notes, (ii) the
interest rate payable in respect of such Indebted ness shall be a market
interest rate as of the time of the incurrence thereof and shall not, in case of
Indebtedness bearing interest at a floating rate, exceed the rate of interest
payable on the Loans and Swingline Loans, (iii) each of the covenants, events of
default and other provisions thereof shall be customary for issuances of similar
indebtedness by companies in a similar financial condition to the Borrower in
accordance with prevailing market conditions
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<PAGE>
in effect at the time of the issuance thereof and in any event shall be no more
onerous or restrictive on the Borrower than those contained in the Senior
Subordinated Notes and (iv) the Net Cash Proceeds thereof shall have been
applied to the prepayment of the Loans to the extent provided in Section
2.12(b).
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or agency,
department or instrumentality thereof.
"Plan" means any employee benefit plan covered by Title IV of ERISA,
the funding requirements of which:
(a) were the responsibility of the Borrower or a member
of its ERISA Controlled Group at any time within the five years
immediately preceding the date hereof,
(b) are currently the responsibility of the Borrower or
a member of its ERISA Controlled Group, or
(c) hereafter become the responsibility of the Borrower
or a member of its ERISA Controlled Group,
including any such plans as may have been, or may hereafter be, terminated for
whatever reason.
"Pledge Agreement" shall have the meaning provided in Section
3.1(a)(iv).
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its Prime Rate in
effect at its principal office in New York City. The Prime Rate is a reference
rate and is not intended to be the lowest rate of interest charged by the
Administrative Agent in connection with extensions of credit. Each change in the
Prime Rate shall be effective on the date such change is publicly announced as
being effective without notice to the Borrower, any Borrowing Subsidiary or any
Guarantor.
"Principal Financial Officer" shall mean, with respect to any
Person, such Person's Chief Financial Officer, Treasurer or Assistant Treasurer.
"Pro Forma Basis" shall mean, in connection with any calculation of
the Adjusted Leverage Ratio, Consolidated Adjusted EBITDA or compliance with any
financial covenant or financial term, the calculation thereof after giving
effect on a PRO FORMA basis to (i) if the relevant period to be tested includes
any period occurring prior to the Closing Date, the consummation of the
Transactions as if same had occurred on the first day of such period, (ii) the
incurrence of any Indebtedness (other than the Loans, except to the extent same
is incurred to finance the Transactions, to refinance other outstanding
Indebtedness or to finance Permitted Acquisitions) after the first day of the
relevant Calculation Period as if such Indebtedness had been incurred (and the
proceeds thereof applied) on the first day of the relevant Calculation Period,
(iii) the permanent repayment of any Indebtedness after the first day of the
relevant Calculation Period as if such Indebtedness had been retired or redeemed
on the first day of the relevant Calculation Period and (iv) the Permitted
Acquisitions, if any, then being consummated as well as any other Permitted
Acquisitions consummated after the first day of the relevant Calculation Period
and on or prior to the date of the respective Permitted Acquisitions then being
effected, with the following rules to apply in connection therewith:
(a) all Indebtedness (x) incurred or issued after the first
day of the relevant Calculation Period shall be deemed to have been incurred or
issued (and the proceeds thereof applied) on the first day of the respective
Calculation Period and remain outstanding through the date of determination (and
thereafter
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in the case of projections pursuant to clause (vii) of the definition of
Permitted Acquisition and (y) permanently retired or redeemed after the first
day of the relevant Calculation Period shall be deemed to have been retired or
redeemed on the first day of the respective Calculation Period and remain
retired through the date of determination (and thereafter in the case of
projections pursuant to clause (vii) of the definition of Permitted
Acquisition);
(b) all Indebtedness assumed to be outstanding pursuant to the
preceding clause (i) shall be deemed to have borne interest or dividends at (x)
the rate applicable thereto, in the case of fixed rate indebtedness or (y) the
rates which would have been applicable thereto during the respective period when
same was deemed outstanding, in the case of floating rate Indebtedness (although
interest or dividends expense with respect to any Indebtedness actually
outstanding during the respective period shall be calculated using the actual
rates applicable thereto during such period); provided that for purposes of the
calculations pursuant to clause (vii) of the definition of Permitted
Acquisition, all Indebtedness (whether actually outstanding or deemed
outstanding) bearing interest at a floating rate of interest shall be tested on
the basis of the rates applicable at the time the determination is made pursuant
to said provisions; and
(c) in making any determination of Consolidated Adjusted
EBITDA, (i) in the case of the acquisition of 100% of the stock of a Person, pro
forma effect shall be given to the Transactions and any Permitted Acquisition
for the periods described above, taking into account, cost savings and expenses
which would otherwise be accounted for as an adjustment pursuant to Article 11
of Regulation S-X under the Securities Act of 1933, as amended and as in effect
on the Closing Date, as if such cost savings or expenses were realized on the
first day of the relevant Calculation Period and (ii) in the case of an asset
purchase, pro forma effect shall be given to the Transactions and any Permitted
Acquisition for the period described above, taking into account, cost savings
and expenses reasonably estimated to be realized based upon the good faith
estimates of management, as if such cost savings and expenses were realized on
the first day of the relevant Calculation Period; and
(d) the amounts to be used in calculating the Consolidated
Adjusted EBITDA for any period for the purposes of giving effect to the
Acquisition for each of the fiscal quarters ending on November 2, 1996, February
2, 1997 and May 2, 1997 shall be $3,978,000, $9,984,000 and $2,761,000,
respectively, and for the fiscal quarter ending on August 2, 1997 shall be the
consolidated EBITDA for such quarter for C.R. Anthony Company (the "CRA EBITDA")
PLUS $2,393,000, reflecting pro-forma cost savings. The CRA EBITDA for the
fiscal quarter ending on August 2, 1997 shall be the actual consolidated EBITDA
for C.R. Anthony Company for such period before the Acquisition PLUS the
Consolidated EBITDA for such period after the Acquisition adjusted to exclude
(to the extent included in either CRA EBITDA or Consolidated EBITDA) (i) option
payments calculated in accordance with the Merger Agreement and (ii) purchase
accounting adjustments including severance costs, contract buyouts, mark-down
accruals, lease payments, transaction fees and other purchase accounting
accruals, not to exceed a total of $30,000,000.
"Pro Rata Share" as to any Bank shall mean a fraction (expressed as
a percentage), the numerator of which shall be the aggregate amount of such
Bank's Commitments and the denominator of which shall be the Total Commitment.
"Purchasing Banks" shall have the meaning provided in Section
9.4(c).
"Receivables" means accounts, general intangibles or other rights to
payment from obligors arising from extensions of credit to obligors, together
with any finance charges or other fees or charges related thereto, and any
related assets which are transferred under the Receivables Program Documents.
"Receivables Program" shall mean the receivables securitization
program conducted by the Borrower, the Receivables Subsidiary and any other
special purpose receivables Subsidiary that may be formed
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or become a Subsidiary in the future pursuant to the Receivables Program
Documents as in effect from time to time in accordance with the terms hereof.
"Receivables Program Documents" shall mean the documents listed on
Schedule III hereto, and all other documentation, agreements and instruments
entered into in connection therewith or pursuant to any other receivables
financing program created in the future, as the same may hereafter be amended,
modified, supplemented or refinanced from time to time in accordance with the
provisions hereof and thereof.
"Receivables Subsidiary" shall mean the collective reference to (i)
SRI Receivables Purchase Company, Inc., a Delaware corporation, (ii) any other
Subsidiary established by the Parent or the Borrower in connection with the
Receivables Program and whose sole business is to implement and carry out such
Receivables Program and (iii) any Subsidiary of the Borrower that is a bank
formed for the sole purpose, and whose sole business is, financing any credit
card program implemented by the Borrower.
"Reference Banks" shall mean Credit Suisse First Boston, Union Bank
of California and Deutsche Bank.
"Refinanced Debt" shall mean the Indebtedness of the Borrower and
its Subsidiaries identified on Schedule IV hereto, including without limitation
the Existing Credit Agreement, the Existing Senior Notes and the Existing Senior
Subordinated Notes to be repaid in full (or, in the case of the Existing Notes,
not less than the amounts specified in Section 3.1(w)) on the Closing Date with
the proceeds of the initial Loans, the Senior Notes and the Senior Subordinated
Notes.
"Regulation D" shall mean Regulation D of the Federal Reserve Board
as from time to time in effect and any successor to all or any portion thereof.
"Regulation G" shall mean Regulation G of the Federal Reserve Board
as from time to time in effect and any successor to all or a portion thereof.
"Regulation T" shall mean Regulation T of the Federal Reserve Board
as from time to time in effect and any successor to all or a portion thereof.
"Regulation U" shall mean Regulation U of the Federal Reserve Board
from time to time in effect and any successor to all or a portion thereof.
"Regulation X" shall mean Regulation X of the Federal Reserve Board
as from time to time in effect and any successor to all or a portion thereof.
"Reinvestment Assets" shall mean any assets to be employed in the
business of the Borrower and its Subsidiaries as conducted on the date hereof.
"Reinvestment Election" shall have the meaning provided in Section
2.12(a).
"Reinvestment Notice" shall mean a written notice signed by an
authorized officer of the Borrower stating that the Borrower, in good faith,
intends and expects to use all or a specified portion of the Net Cash Proceeds
of an Eligible Asset Sale to purchase, construct or otherwise acquire
Reinvestment Assets.
"Reinvestment Prepayment Amount" shall mean, with respect to any
Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date
relating thereto by which (a) the Anticipated Reinvestment Amount in respect of
such Reinvestment Election exceeds (b) the aggregate amount thereof expended by
the Borrower and its Subsidiaries to acquire Reinvestment Assets.
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"Reinvestment Prepayment Date" shall mean, with respect to any
Reinvestment Election, the earliest of (i) the date, if any, upon which the
Administrative Agent, on behalf of the Required Banks, shall have delivered a
written termination notice to the Borrower, provided that such notice may only
be given while an Event of Default exists, (ii) the date occurring one year
after such Reinvestment Election and (iii) the date on which the Borrower shall
have determined not to, or shall have otherwise ceased to, proceed with the
purchase, construction or other acquisition of Reinvestment Assets with the
related Anticipated Reinvestment Amount.
"Release" shall mean any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, and surface or subsurface
strata) or into or out of any property, including the movement of Materials of
Environmental Concern through or in the air, soil, surface water, groundwater or
property.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA (other than a Reportable Event as to which the provision of 30 days notice
to the PBGC is waived under applicable regulations), or is the occurrence of any
of the events described in Section 4068 or 4063(a) of ERISA.
"Required Appraisal" shall have the meaning provided in Section
5.10.
"Required Banks" shall mean Banks holding more than 50% of the
principal amount of Loans outstanding or, if no Loans are outstanding, more than
50% of the Total Commitments.
"Restricted Payment" shall mean (i) the authorization, declaration
or payment of any Dividend by the Parent or any of its Subsidiaries or (ii) the
making of any payment by the Borrower or any of its Subsidiaries to the Parent,
including, without limitation, any payments under the Tax Sharing Agreement.
"Retained Equity Proceeds" shall mean at any time the cumulative
amount of Net Cash Proceeds received by the Borrower from Equity Issuances to
the extent such Net Cash Proceeds are not required to be applied to the
prepayment of the Loans and Swingline Loans pursuant to Section 2.12(e) MINUS
the amount thereof previously applied to make additional Capital Expenditures
pursuant to Section 6.1(d).
"Revolving Loan Commitment" shall mean at any time, for any Bank,
the amount set forth opposite such Bank's name on Annex 1 hereto under the
heading "Revolving Loan Commitment," as such amount may be reduced from time to
time pursuant to Sections 2.10 or 9.4(c).
"Revolving Loans" shall have the meaning provided in Section 2.2(a).
"Revolving Note" shall have the meaning provided in Section 2.5(b).
"Secured Creditors" shall mean the Administrative Agent, the
Collateral Agent, the Banks, the Swingline Bank and the L/C Banks.
"Secured Obligations" shall mean all Obligations owed by the Loan
Parties to the Administrative Agent, the Collateral Agent, the L/C Banks, the
Swingline Bank and the Banks.
"Security Agreement" shall have the meaning provided in Section
3.1(a)(iii) hereof.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement and the Mortgages.
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"Senior Notes" shall mean the 82% Notes due 2005 issued by the
Borrower pursuant to the Senior Note Indenture.
"Senior Note Documents" shall mean the Senior Note Indenture, the
Senior Notes and the Purchase Agreement, dated June 11, 1997, among the Parent,
the Borrower, Credit Suisse First Boston Corporation, Bear, Stearns & Co. Inc,
and Donaldson, Lufkin & Jenrette Securities Corporation.
"Senior Note Indenture" shall mean the Indenture dated as of June
17, 1997 between the Borrower and the Senior Note Trustee pursuant to which the
Borrower issued the Senior Notes.
"Senior Note Trustee" shall mean State Street Bank and Trust
Company, in its capacity as trustee under the Senior Note Indenture.
"Senior Subordinated Notes" shall mean the 9% Notes due 2007 issued
by the Borrower pursuant to the Senior Subordinated Note Indenture.
"Senior Subordinated Note Documents" shall mean the Senior
Subordinated Note Indenture, the Senior Subordinated Notes and the Purchase
Agreement, dated June 11, 1997, among the Parent, the Borrower, Credit Suisse
First Boston Corporation, Bear, Stearns & Co. Inc, and Donaldson, Lufkin &
Jenrette Securities Corporation.
"Senior Subordinated Note Indenture" shall mean the Indenture dated
as of June 17, 1997 between the Borrower and the Senior Subordinated Note
Trustee pursuant to which the Borrower issued the Senior Subordinated Notes.
"Senior Subordinated Note Trustee" shall mean State Street Bank and
Trust Company in its capacity as trustee under the Senior Subordinated Note
Indenture.
"Solvent" as to any Person shall mean that (i) the sum of the assets
of such Person, both at a fair valuation and at present fair salable value, will
exceed its liabilities, including contingent liabilities, (ii) such Person will
have sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (iii) such Person has not incurred
debts, and does not intend to incur debts, beyond its ability to pay such debts
as they mature. For purposes of this definition, "debt" means any liability on a
claim, and "claim" means (x) a right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y)
a right to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, disputed, undis puted,
secured, or unsecured. With respect to any such contingent liabilities, such
liabilities shall be computed at the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability net of reasonably expected
reimbursements.
"Standard & Poor's" shall mean Standard & Poor's Rating Services, a
division of the McGraw-Hill Companies, Inc. or any of its successors.
"Standby Letter of Credit" shall mean each irrevocable letter of
credit issued pursuant to Section 2.22 under which the issuing L/C Bank agrees
to make payments for the account of the Borrower, on behalf of the Borrower, in
respect of obligations of the Borrower incurred pursuant to contracts made or
performances undertaken or like matters relating to contracts to which the
Borrower is or proposes to become a party in the ordinary course of the
Borrower's business.
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"Standby Letter of Credit Outstandings" shall mean the Letter of
Credit Outstandings as determined with respect only to Standby Letters of
Credit.
"Standby L/C Sublimit" shall have the meaning provided in Section
2.22.
"Subsidiary" of any Person shall mean and include (i) any
corporation 50% or more of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture, limited liability company or other entity in which such Person,
directly or indirectly through Subsidiaries, is either a general partner or has
a 50% or more equity interest at the time.
"Subsidiary Guaranty" shall have the meaning provided in Section
3.1(a)(vi).
"Swingline Bank" shall have the meaning provided in the introductory
paragraph hereof.
"Swingline Loan" shall mean a swingline loan made by the Swingline
Bank pursuant to Section 2.2.
"Swingline Loan Commitment" shall mean the commitment of the
Swingline Bank to make Swingline Loans hereunder as set forth in clause (d) of
Section 2.2, as the same may be reduced from time to time in accordance with the
terms of this Agreement.
"Swingline Loan Maturity Date" shall mean, as to any Swingline Loan,
the earlier of the Final Maturity Date and any Business Day at the option of the
Swingline Bank if (a) the aggregate principal amount of Swingline Loans is equal
to or exceeds $5,000,000 or (b) a Default has occurred and is continuing.
"Swingline Note" shall have the meaning provided in Section 2.5(b).
"Tax Sharing Agreement" shall mean a tax sharing agreement among the
Parent, the Borrower and its Subsidiaries, in form and substance satisfactory to
the Required Banks.
"Tender Offer" shall mean the offers commenced by Borrower on May 8,
1997, to purchase all of Borrower's Existing Senior Notes and Existing Senior
Subordinated Notes and the related consent solicitations to eliminate all of the
restrictive covenants contained in the indentures governing any Existing Notes
that remain outstanding.
"Termination Event" shall mean (i) a Reportable Event, or (ii) the
initiation of any action by the Borrower, any member of the Borrower's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an underfunded ERISA
Plan (determined on a Plan termination basis) or the treatment of an amendment
to an underfunded ERISA Plan (determined on a Plan termination basis) as a
termination under ERISA, or (iii) the institution of proceedings by the PBGC
under Section 4042 of ERISA to terminate an ERISA Plan or to appoint a trustee
to administer any ERISA Plan.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of all of the Banks at such time.
"Total Expansion Loan Commitment" shall have the meaning set forth
in Section 2.1(a).
"Total Revolving Loan Commitment" shall have the meaning set forth
in Section 2.2(a).
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"Trade Letter of Credit" shall mean each commercial documentary
letter of credit issued by an L/C Bank for the account of the Borrower pursuant
to Section 2.22 for the purchase of goods in the ordinary course of the
Borrower's business or any letter of credit issued by an L/C Bank in support of
a commercial documentary letter of credit issued by any other bank prior to the
Closing Date (including the existing documentary letters of credit described on
Schedule V hereto) or within three months thereafter.
"Trade Letter of Credit Outstandings" shall mean the Letter of
Credit Outstandings as determined with respect only to Trade Letters of Credit.
"Transaction Costs" shall mean all costs and expenses paid or
payable by any Loan Party relating to the Transactions including, without
limitation, investment banking fees, financing fees, prepayment or related fees
incurred in connection with the refinancing of the Refinanced Debt, advisory
fees, appraisal fees, legal fees and accounting fees.
"Transaction Documents" shall mean the Loan Documents, the Senior
Note Documents, the Senior Subordinated Note Documents, the Receivables Program
Documents, the Tax Sharing Agreement, and the Acquisition Documents.
"Transactions" shall mean each of the transactions contemplated by
the Transaction Documents.
"Transferee" shall have the meaning provided in Section 9.4(d).
"Transfer Supplement" shall have the meaning provided in Section
9.4(c).
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., a Base Rate Loan or a Eurodollar Loan.
"Unfunded Benefit Liabilities" means with respect to any Plan at any
time, the amount (if any) by which (i) the actuarial present value of all
benefit liabilities under such Plan as defined in Section 4001(a)(16) of ERISA,
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such Plan
(on the basis of assumptions utilized by such Plan for minimum funding purposes
under ERISA).
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES.
SECTION 2.1 EXPANSION LOANS. (a) Subject to and upon the terms and
conditions herein set forth, each Bank severally and not jointly agrees at any
time and from time to time on and after the Closing Date and prior to the Final
Maturity Date, to make revolving loans (collectively, "Expansion Loans") to the
Borrower, which Expansion Loans shall not exceed in aggregate principal amount
at any time outstanding the Expansion Loan Commitment of such Bank at such time.
The sum of the Expansion Loan Commitments of all of the Banks (the "Total
Expansion Loan Commitment") on the Closing Date shall be $100,000,000. The
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Expansion Loans of each Bank shall be maintained at the option of the Borrower
as Base Rate Loans and/or Eurodollar Loans, in accordance with the provisions
hereof.
(b) Expansion Loans may be voluntarily prepaid pursuant to Section
2.11, and, subject to the other provisions of this Agreement, any amounts so
prepaid may be reborrowed. Each Bank's Expansion Loan Commitment shall expire,
and each Expansion Loan shall mature on, the Final Maturity Date, without
further action on the part of the Banks or the Administrative Agent.
(c) Each Borrowing of Expansion Loans shall be in the aggregate
minimum amount of $3,000,000 or any integral multiple of $100,000 in excess
thereof.
SECTION 2.2 REVOLVING LOANS AND SWINGLINE LOANS. (a) Subject to and
upon the terms and conditions herein set forth, each Bank severally and not
jointly agrees, at any time and from time to time on and after the Closing Date
and prior to the Final Maturity Date, to make revolving loans (collectively,
"Revolving Loans") to the Borrower or any Borrowing Subsidiary, which Revolving
Loans shall not exceed in aggregate principal amount at any time outstanding the
Revolving Loan Commitment of such Bank at such time; provided that no Revolving
Loan shall be made if, after giving effect thereto and the use of the proceeds
thereof, the sum of (i) the outstanding principal amount of Revolving Loans,
(ii) the Letter of Credit Outstandings, and (iii) the outstanding principal
amount of Swingline Loans would exceed the Total Revolving Loan Commitment. The
sum of the Revolving Loan Commitments of all of the Banks (the "Total Revolving
Loan Commitment") on the Closing Date shall be $100,000,000 and may increase to
up to $125,000,000 subject to the terms and conditions of Section 2.30. The
Revolving Loans of each Bank shall be maintained at the option of the Borrower
as Base Rate Loans or Eurodollar Loans, in accordance with the provisions
hereof.
(b) Revolving Loans may be voluntarily prepaid pursuant to Section
2.11, and, subject to the other provisions of this Agreement, any amounts so
prepaid may be reborrowed. Each Bank's Revolving Loan Commitment shall expire,
and each Revolving Loan shall mature on, the Final Maturity Date, without
further action on the part of the Banks or the Administrative Agent.
(c) Each Borrowing of Revolving Loans shall be in the aggregate
minimum amount of $3,000,000 or any integral multiple of $100,000 in excess
thereof.
(d) On the terms and subject to the conditions and relying upon the
representations and warranties herein set forth, the Swingline Bank agrees, at
any time and from time to time from and including the Closing Date to but
excluding the earlier of the Final Maturity Date and the termination of the
Total Revolving Loan Commitment or Swingline Loan Commitment in accordance with
the terms hereof, to make Swingline Loans to the Borrower in an aggregate
principal amount at any time outstanding not to exceed the lesser of (i)
$10,000,000 and (ii) the excess of the Total Revolving Loan Commitments, as the
same may have been reduced from time to time pursuant to the terms of this
Agreement, over the sum of (A) the aggregate principal amount of the Revolving
Loans outstanding at such time and (B) the Letter of Credit Outstandings at such
time. Each Swingline Loan shall at all times be a Base Rate Loan. The Swingline
Bank shall make each Swingline Loan available to the Borrower by means of a
credit to an account designated by the Borrower in writing to the Swingline Bank
by 3:00 p.m. (New York City time) on the date such Swingline Loan is requested
to be made pursuant to paragraph (e) below. Within the limits set forth in the
first sentence of this paragraph, the Borrower may borrow, pay or prepay and
reborrow Swingline Loans on or after the Closing Date and prior to the Final
Maturity Date on the terms and subject to the conditions and limitations set
forth herein.
(e) The Borrower shall give the Administrative Agent and the
Swingline Bank telephonic, written or telecopy notice (in the case of telephonic
notice, such notice shall be promptly confirmed
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by telecopy) not later than 12:30 p.m. (New York City time) on the day of a
proposed Swingline Loan. Such notice shall be delivered on a Business Day, shall
be irrevocable and shall refer to this Agreement and shall specify the requested
date (which shall be a Business Day) and amount of such Swingline Loan.
(f) Upon the occurrence of an Event of Default, or on the applicable
Swingline Loan Maturity Date, the Swingline Bank may by written or telecopy
notice given to the Administrative Agent not later than 11:00 a.m. (New York
City time) on any Business Day require the Banks to purchase all or any portion
of the Swingline Loans outstanding. Such notice shall specify the aggregate
amount of Swingline Loans to be purchased and the Administrative Agent shall
promptly upon receipt of such notice give notice to each Bank, specifying in
such notice to each Bank such Bank's Pro Rata Share of such Swingline Loan or
Swingline Loans. Each Bank shall pay to the Administrative Agent, not later than
2:00 p.m., (New York City time), on the date of such notice, such Bank's Pro
Rata Share of the principal amount of such Swingline Loan or Swingline Loans.
Each such payment shall for all purposes hereunder be deemed to be a Base Rate
Revolving Loan (it being understood that (i) each Bank's obliga tion to make
such payment is absolute and unconditional and shall not be affected by any
event or circumstance whatsoever, including the occurrence of any Default or
Event of Default or the failure of any condition precedent set forth in Section
3 to be satisfied, and (ii) each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever). The Administrative Agent shall
promptly advise the Borrower of any notice received from the Swingline Bank
pursuant to this paragraph (f).
(g) The Borrower may prepay any Swingline Loan in whole or in part
at any time without premium or penalty, PROVIDED that the Borrower shall have
given the Administrative Agent and the Swingline Bank written or telecopy notice
(or telephonic notice promptly confirmed in writing or by telecopy) of such
prepayment not later than 12:30 p.m. (New York City time) on the Business Day
designated by the Borrower for such prepayment.
SECTION 2.3 NOTICE OF BORROWING. (a) Whenever the Borrower or any
Borrowing Subsidiary desires to borrow Revolving Loans or the Borrower desires
to borrow Expansion Loans hereunder, the Borrower shall give the Agent at the
Administrative Agent's Office prior to 11:00 a.m., (New York City time), at
least one Business Day's prior telecopy or telephonic notice (promptly confirmed
in writing) of each Base Rate Loan, and at least three Business Days' prior
telecopy or telephonic notice (promptly confirmed in writing) of each Eurodollar
Loan to be made hereunder. Each such notice (a "Notice of Borrowing") shall be
irrevocable, shall be in the form of Exhibit A hereto, and in any event shall
specify (i) the aggregate principal amount of the requested Loans, (ii) whether
such Loans shall be Expansion Loans or Revolving Loans, (iii) the date of
Borrowing (which shall be a Business Day), and (iv) whether such Loans shall
consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the
initial Interest Period to be applicable thereto provided that no Notice of
Borrowing with respect to a Eurodollar Loan shall be delivered during any period
when a Default or Event of Default shall have occurred and be continuing.
(b) Promptly after receipt of a Notice of Borrowing, the
Administrative Agent shall provide each Bank with the details of the Notice of
Borrowing and inform each Bank as to its Pro Rata Share of the Loans requested
thereunder.
SECTION 2.4 DISBURSEMENT OF FUNDS. (a) No later than 12:00 p.m. (New
York City time), on the date specified in each Notice of Borrowing, each Bank
will make available its Pro Rata Share of the Loans requested to be made on such
date, in U.S. dollars and immediately available funds, at the Administrative
Agent's Office. Promptly after the Administrative Agent's receipt of the
proceeds of such Loans, the Administrative Agent will make available to the
Borrower or the relevant Borrowing Subsidiary by depositing in the Borrower's or
such Borrowing Subsidiary's account designated in writing to the Administrative
Agent the aggregate of the amounts so made available in the type of funds
actually received; PROVIDED that to the extent such Loan is being made pursuant
to Section 2.24, the Administrative Agent shall distribute
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the proceeds directly to the L/C Bank which has honored the Letter of Credit
drawing in respect of which such Loan is being made.
(b) Unless the Administrative Agent shall have been notified by any
Bank prior to the date of a Borrowing that such Bank does not intend to make
available to the Administrative Agent its portion of the Loans to be made on
such date, the Administrative Agent may assume that such Bank has made such
amount available to the Administrative Agent on such date and the Administrative
Agent in its sole discretion may, in reliance upon such assumption, make
available to the Borrower or the relevant Borrowing Subsidiary a corresponding
amount. If such corresponding amount is not in fact made available to the
Administrative Agent by such Bank and the Administrative Agent has made such
amount available to the Borrower or the relevant Borrowing Subsidiary, the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Bank. If such Bank does not pay such corresponding amount
forthwith upon the Administrative Agent's demand therefor, the Administrative
Agent shall promptly notify the Borrower or the relevant Borrowing Subsidiary
and the Borrower or such relevant Borrowing Subsidiary shall immediately repay
such corresponding amount to the Administrative Agent. The Administrative Agent
shall also be entitled to recover from such Bank or the Borrower or such
relevant Borrowing Subsidiary, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower or such
relevant Borrowing Subsidiary to the date such corresponding amount is recovered
by the Administrative Agent, at a rate per annum equal to (a) in the case of the
Borrower or such relevant Borrowing Subsidiary, the then applicable rate of
interest, calculated in accordance with Section 2.6, for the respective Loans,
and (b) in the case of any Bank, the Federal Funds Effective Rate. Nothing
herein shall be deemed to relieve any Bank from its obligation to fulfill its
commitments hereunder or to prejudice any rights which the Borrower or such
relevant Borrowing Subsidiary may have against any Bank as a result of any
default by such Bank hereunder. Notwithstanding anything contained herein or in
any other Loan Document to the contrary, the Administrative Agent may apply all
funds and proceeds of Collateral available for the payment of any Obligations
first to repay any amount owing by any Bank to the Administrative Agent as a
result of such Bank's failure to fund its Loans hereunder.
SECTION 2.5 EVIDENCE OF INDEBTEDNESS; NOTES. (a) Each Bank and
Swingline Bank shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness to such Bank and Swingline Bank
resulting from each Loan and Swingline Loan from time to time, including the
amounts of principal and interest payable and paid to such Bank and Swingline
Bank from time to time under this Agreement. The Administrative Agent shall
maintain accounts in which it will record (i) the amount of each Loan and
Swingline Loan made hereunder, the Type of each Loan and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Borrower to each Bank and Swingline Bank
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Bank's and Swingline Bank's Pro Rata Share
thereof. The entries made in the accounts maintained pursuant to this Section
2.5(a) shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided however, that the failure of any Bank,
Swingline Bank or the Administrative Agent to maintain such accounts or any
error therein shall not in any manner affect the obligations of the Borrower to
repay the Loans and Swingline Loans in accordance with their terms.
(b) Notwithstanding the foregoing, if requested by any Bank or the
Swingline Bank, the Borrower's or any Borrowing Subsidiary's obligation to pay
the principal of, and interest on, each Bank's or Swingline Bank's Loans or
Swingline Loans, as the case may be, shall be evidenced by (i) in the case of
such Bank's Expansion Loans, a promissory note (an "Expansion Note") duly
executed and delivered by the Borrower substantially in the form of Exhibit B
hereto in a principal amount equal to such Bank's Expansion Loan Commitment with
blanks appropriately completed in conformity herewith, (ii) in the case of such
Bank's Revolving Loans, a promissory note (a "Revolving Note") duly executed and
delivered by the Borrower or such Borrowing Subsidiary substantially in the form
of Exhibit C hereto in a principal amount equal to such
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Bank's Revolving Loan Commitment, with blanks appropriately completed in
conformity herewith and (iii) in the case of the Swingline Bank's Swingline
Loans, a promissory note (a "Swingline Note") duly executed and delivered by the
Borrower substantially in the form of Exhibit D hereto in a principal amount
equal to such Swingline Bank's Swingline Loan Commitment. Each Note issued to a
Bank shall (x) be payable to such Bank or Swingline Bank, (y) be dated the
Closing Date, and (z) mature on the Final Maturity Date.
(c) Each Bank and Swingline Bank is hereby authorized, at its
option, either (i) to endorse on the schedule attached to each of its Expansion
Note, Revolving Note or Swingline Note (or on a continuation of such schedule
attached to such Note and made a part thereof) an appropriate notation
evidencing the date and amount of each Expansion Loan, Revolving Loan or
Swingline Loan, as the case may be, evidenced thereby and the date and amount of
each principal and interest payment in respect thereof, or (ii) to record such
Expansion Loans, Revolving Loans or Swingline Loans and such payments in its
books and records. Such schedule or such books and records, as the case may be,
shall constitute prima facie evidence of the accuracy of the information
contained therein. Failure to make any such endorsements or recordations or any
error in any such endorsements or notations shall not affect the Borrower's or
any Borrowing Subsidiary's obligations in respect of any Loans hereunder.
SECTION 2.6 INTEREST. (a) The Borrower and each Borrowing Subsidiary
agrees to pay interest in respect of the unpaid principal amount of each Base
Rate Loan from the date of the making of such Loan until such Loan shall be paid
in full at a rate per annum which shall be equal to the sum of the applicable
Margin Percentage plus the Base Rate in effect from time to time, such rate to
change as and when the Base Rate changes.
(b) The Borrower and each Borrowing Subsidiary agrees to pay
interest in respect of the unpaid principal amount of each Eurodollar Loan from
the date of the making of such Loan until such Loan shall be paid in full at a
rate per annum which shall be equal to the sum of the applicable Margin
Percentage plus the relevant Eurodollar Rate.
(c) In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the outstanding principal amount of all
Loans and Swingline Loans and overdue interest in respect of all Loans and
Swingline Loans and interest thereon, shall bear interest at a rate per annum
(the "Default Rate") equal to the greater of (i) the sum of (x) two percent (2%)
and (y) the Base Rate Margin Percentage for Category 5 and (ii) the rate which
is two percent (2%) in excess of the interest rate otherwise applicable
hereunder to such principal amount in effect from time to time.
(d) Interest on each Loan and Swingline Loan shall accrue from and
including the date of the Borrowing thereof to but excluding the date of any
repayment thereof (provided that any Loan and Swingline Loan borrowed and repaid
on the same day shall accrue one day's interest) and shall be payable (i) in
respect of each Base Rate Loan other than a Swingline Loan, quarterly in arrears
on each Payment Date, (ii) in respect of each Swingline Loan, on the first to
occur of each Payment Date or the Swingline Loan Maturity Date, (iii) in respect
of each Eurodollar Loan, on the last day of each Interest Period applicable to
such Loan and, in the case of an Interest Period of six months, on the date
occurring three months from the first day of such Interest Period and on the
last day of such Interest Period, and (iv) in the case of all Loans and
Swingline Loans, on any prepayment or conversion (on the amount prepaid or
converted); provided that if such Loans or Swingline Loans are Base Rate Loans,
interest accrued on such Loans and Swingline Loans shall be paid quarterly in
arrears on each Payment Date, at maturity (whether by acceleration or otherwise)
and, after such maturity, on demand.
(e) The Administrative Agent shall, upon determining the Eurodollar
Rate for any Interest Period, promptly notify the Borrower and the Banks
thereof.
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(f) The Reference Banks shall provide to the Administrative Agent
the information to be provided by them under the definition of "Eurodollar Rate"
in accordance with the terms hereof.
SECTION 2.7 INTEREST PERIODS. (a) The Borrower shall, in each Notice
of Borrowing, Notice of Conversion or Notice of Continuation in respect of the
making of, conversion into or continuation of a Eurodollar Loan, select the
Interest Period applicable to such Eurodollar Loan.
(b) If upon the expiration of any Interest Period for any Eurodollar
Loan which is a Committed Loan, the Borrower has failed to elect a new Interest
Period to be applicable to the respective Eurodollar Loan as provided above, the
Borrower shall be deemed to have elected to convert such Eurodollar Loans into
Base Rate Loans effective as of the expiration date of such current Interest
Period.
SECTION 2.8 MINIMUM AMOUNT OF EURODOLLAR LOANS. All borrowings,
conversions, continuations, payments, prepayments and selection of Interest
Periods hereunder shall be made or selected so that, after giving effect
thereto, (i) the aggregate principal amount of any Borrowing comprised of
Eurodollar Loans shall not be less than $3,000,000 or an integral multiple of
$100,000 in excess thereof, and (ii) there shall be no more than 15 Borrowings
comprised of Eurodollar Loans outstanding at any time.
SECTION 2.9 CONVERSION OR CONTINUATION. (a) Subject to the other
provisions hereof, the Borrower shall have the option (i) to convert at any time
all or any part of outstanding Base Rate Loans (other than Swingline Loans)
which comprise part of the same Borrowing to Eurodollar Loans, (ii) to convert
all or any part of outstanding Eurodollar Loans which comprise part of the same
Borrowing to Base Rate Loans, on the expiration date of the Interest Period
applicable thereto, or (iii) to continue all or any part of outstanding
Eurodollar Loans which comprise part of the same Borrowing as Eurodollar Loans
for an additional Interest Period, on the expiration of the Interest Period
applicable thereto; PROVIDED that no Loan may be continued as, or converted
into, a Eurodollar Loan when any Default or Event of Default has occurred and is
continuing.
(b) In order to elect to convert or continue a Loan under this
Section 2.9, the Borrower shall deliver an irrevocable Notice of Continuation or
a Notice of Conversion to the Administrative Agent no later than 11:00 a.m.,
(New York City time), (i) at least one Business Day in advance of the proposed
conversion date in the case of a conversion to a Base Rate Loan and (ii) at
least three Business Days in advance of the proposed conversion or continuation
date in the case of a conver sion to, or a continuation of, a Eurodollar Loan.
Each Notice of Conversion or Notice of Continuation shall be in the forms of
Exhibits E-1 and E-2 hereto and in any event shall specify (w) the requested
conversion or continuation date (which shall be a Business Day), (x) the amount
and Facility of the Loan to be converted or continued, (y) whether a conversion
or continuation is requested, and (z) in the case of a conversion to, or a
continuation of, a Eurodollar Loan, the requested Interest Period. Promptly
after receipt of a Notice of Conversion or Notice of Continuation under this
Section 2.9(b), the Administrative Agent shall notify each Bank of the details
thereof.
SECTION 2.10 VOLUNTARY AND MANDATORY REDUCTIONS OF COMMITMENTS AND
SWINGLINE LOAN COMMITMENT. (a) Upon at least three Business Days' prior
irrevocable written notice (or telephonic notice promptly confirmed in writing)
to the Administrative Agent (which notice the Administrative Agent shall
promptly transmit to each of the Banks), the Borrower shall have the right,
without premium or penalty, to permanently reduce (x) each Bank's Pro Rata Share
of all or part of the Total Expansion Loan Commitment, (y) each Bank's Pro Rata
Share of all or part of the Total Revolving Loan Commitment and (z) the
Swingline Bank's Swingline Loan Commitment, provided that any such partial
reductions shall be (A) in the case of the Total Revolving Loan Commitment or
Total Expansion Loan Commitment, a minimum aggregate amount of $3,000,000 or any
integral multiple
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of $100,000 in excess thereof (or any lesser amounts if the Total Revolving Loan
Commitment or Total Expansion Loan Commitment shall be reduced in full) and (B)
in the case of the Swingline Loan Commitment, a minimum aggregate amount of
$500,000 or any integral multiple of $100,000 in excess thereof (or any lesser
amounts if the Swingline Loan Commitment shall be reduced in full).
(b) Simultaneously with any required prepayment of the Expansion
Loans in accordance with the provisions of Sections 2.12 (other than Section
2.12(g) and 2.12(h)) and 2.13, each Bank's Expansion Loan Commitment shall be
permanently reduced by such Bank's Pro Rata Share of the amount of such
prepayment; PROVIDED that no such reduction of the Expansion Loan Commitments
(including the reduction pursuant to clause (c) below) shall be required to the
extent such reduction would cause the Total Expansion Loan Commitments to be
less than $50,000,000.
(c) On June 17, 2001 the Total Expansion Loan Commitment shall be
reduced by $25,000,000 MINUS the aggregate amount of reductions to the Expansion
Loan Commitments made pursuant to clause (b) above on or prior to such date.
SECTION 2.11 VOLUNTARY PREPAYMENTS. In addition to prepayments of
Swingline Loans permitted by Section 2.2(d), the Borrower or any Borrowing
Subsidiary shall have the right to prepay the Loans in whole or in part from
time to time on the following terms and conditions: (i) the Borrower shall give
the Administrative Agent written notice (or telephonic notice promptly confirmed
in writing) not later than 10:00 a.m. (New York City time), which notice shall
be irrevocable, of its intent to prepay the Loans, at least three Business Days
prior to a prepayment of Eurodollar Loans and at least one Business Day prior to
a prepayment of Base Rate Loans, which notice shall specify the amount of such
prepayment and what Types of Loans and which Facilities are to be prepaid and,
in the case of Eurodollar Loans, the specific Borrowing(s) pursuant to which
made, and which notice the Administrative Agent shall promptly transmit to each
of the Banks, (ii) each prepayment shall be in an aggregate principal amount of
$5,000,000 or any integral multiple of $1,000,000 in excess thereof (or, any
lesser amounts if all of the Loans shall be prepaid in full), and (iii) any such
prepayment shall be accompanied by any additional amount due pursuant to Section
2.17 hereof.
SECTION 2.12 MANDATORY PREPAYMENTS. (a) ASSET SALES. On each
Business Day immediately after the date on which the Parent or any of its
Subsidiaries receives any Net Cash Proceeds from an Asset Sale, the Borrower
shall prepay the outstanding Expansion Loans in an amount equal to 100% of the
amount of such Net Cash Proceeds, in accordance with the provisions of Section
2.13, PROVIDED that Net Cash Proceeds from Eligible Asset Sales shall not be
required to be used to so repay Expansion Loans to the extent the Borrower
elects, as hereinafter provided, to cause such Net Cash Proceeds to be
reinvested in Reinvestment Assets (a "Reinvestment Election"). The Borrower may
exercise its Reinvestment Election with respect to an Eligible Asset Sale if (x)
no Default or Event of Default exists and (y) the Borrower delivers a
Reinvestment Notice to the Administrative Agent on the Business Day after the
date of the consummation of the respective Eligible Asset Sale, with such
Reinvestment Election being effective with respect to the Net Cash Proceeds of
such Eligible Asset Sale equal to the Anticipated Reinvestment Amount specified
in such Reinvestment Notice. Notwithstanding the foregoing, the Borrower shall
in any event prepay the Loans to the extent necessary to avoid any requirement
to make an "Offer" under and as defined in Section 5.07 of the Senior Note
Indenture and the Senior Subordinated Note Indenture.
(b) ISSUANCE OF INDEBTEDNESS. On each date on which the Parent or
any of its Subsidiaries receives any Net Cash Proceeds from the issuance of any
debt securities or the incurrence of any other Indebtedness (other than
Indebtedness permitted by Section 6.2 (other than clause (h) thereof) as in
effect on the Closing Date), the Borrower shall prepay the outstanding Expansion
Loans in an amount equal to 50% of such Net Cash Proceeds, if on such date the
Borrower's senior unsecured Indebtedness is rated less than BBB by Standard &
Poor's or Baa2 by Moody's, in accordance with the provisions of Section 2.13. No
prepayments under this Section shall be required if the preceding sentence is
not applicable at the time such prepayment would be otherwise required hereby.
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(c) EXCESS CASH FLOW. On the date occurring 90 days after the close
of each fiscal year of the Borrower (or, if earlier, the seventh day following
delivery of the financial statements referred to in Section 5.1(b) in respect of
such fiscal year) commencing with the fiscal year ending January 30, 1999, the
Borrower shall prepay the outstanding Expansion Loans in an amount equal to (i)
if the Adjusted Leverage Ratio as of the last day of such fiscal year is greater
than 3.5:1.0, 75% of the Excess Cash Flow for such preceding fiscal year and
(ii) if the Adjusted Leverage Ratio as of the last day of such fiscal year is
less than or equal to 3.5:1.0 and greater than 2.5:1.0, 50% of the Excess Cash
Flow for such preceding fiscal year, each in accordance with the provisions of
Section 2.13. No prepayments under this Section shall be required if neither
clause (i) or (ii) hereof is applicable at the time such prepayment would be
otherwise required hereby.
(d) REINVESTMENT PREPAYMENT DATE. On the Reinvestment Prepayment
Date with respect to a Reinvestment Election, an amount equal to the
Reinvestment Prepayment Amount, if any, for such Reinvestment Election shall be
applied as a repayment of the principal amount of the then outstanding Loans in
accordance with the provisions of Section 2.13.
(e) EQUITY ISSUANCES. On each date on which the Parent or any of its
Subsidiaries receives any Net Cash Proceeds from any Equity Issuance (other than
an Equity Issuance substantially contemporaneous with any Permitted Acquisition
to the extent that the Net Cash Proceeds thereof are used to finance such
Permitted Acquisition), if the Adjusted Leverage Ratio as of the last day of the
fiscal quarter most recently ended prior to such date for which financial
statements have been delivered pursuant to Section 5.1(a) or (b) is greater than
3.5:1.0, the Borrower shall prepay the outstanding Expansion Loans in an amount
equal to 50% of such Net Cash Proceeds, in accordance with the provisions of
Section 2.13.
(f) CLEAN DOWN PERIOD. The Borrower shall prepay, repay or not
borrow the Revolving Loans and Swingline Loans so as to cause the aggregate
outstanding principal amount of Revolving Loans and Swingline Loans to at all
times equal zero during a period of not less than forty-five consecutive days
during each period of twelve consecutive months following the Closing Date;
PROVIDED that if the Total Revolving Loan Commitment is increased pursuant to
Section 2.30, the aggregate outstanding principal amount of Revolving Loans and
Swingline Loans shall be reduced to an amount equal to or less than the amount
of such increase at all times during a period of not less than forty-five
consecutive days during each period of twelve consecutive months following the
Closing Date.
(g) VOLUNTARY AND MANDATORY COMMITMENT REDUCTIONS. On each day on
which the Total Revolving Loan Commitment, Total Expansion Loan Commitment or
Swingline Loan Commitment is reduced pursuant to Section 2.10, the Borrower
shall prepay the Revolving Loans, Expansion Loans and Swingline Loans to the
extent, if any, that the outstanding principal amount of the Revolving Loans,
Expansion Loans and Swingline Loans PLUS the aggregate Letter of Credit
Outstandings at such time exceeds such reduced Total Revolving Loan Commitment,
Total Expansion Loan Commitment and Swingline Loan Commitment.
(h) C.R. ANTHONY COMPANY RECEIVABLES SALES. On the Business Day on
which the Parent or any of its Subsidiaries receives any Net Cash Proceeds from
the sale of receivables originally purchased in connection with the Acquisition,
the Borrower shall prepay the outstanding Revolving Loans in an amount equal to
100% of the amount of such Net Cash Proceeds. Such Net Cash Proceeds shall be
applied first to Base Rate Loans to the full extent thereof before application
to Eurodollar Loans, in each case in a manner which minimizes the amount of any
payments required to be made by the Borrower pursuant to Section 2.17.
SECTION 2.13 APPLICATION OF PREPAYMENTS. All prepayments of the
Expansion Loans required by Section 2.12 shall be applied first to Base Rate
Loans to the full extent thereof before application to
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Eurodollar Loans, in each case in a manner which minimizes the amount of any
payments required to be made by the Borrower pursuant to Section 2.17.
SECTION 2.14 METHOD AND PLACE OF PAYMENT. (a) Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
and the Notes shall be made to the Administrative Agent for the account of the
Banks, L/C Banks and the Swingline Bank entitled thereto not later than 12:00
p.m. (New York City time), on the date when due and shall be made in lawful
money of the United States of America in immediately available funds at the
Administrative Agent's Office, and any funds received by the Administrative
Agent after such time shall, for all purposes hereof (including the following
sentence), be deemed to have been paid on the next succeeding Business Day.
Except as otherwise specifically provided herein, the Administrative Agent shall
thereafter cause to be distributed on the date of receipt thereof to each Bank
and the Swingline Bank in like funds its Pro Rata Share of payments so received.
(b) Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest and Fees shall be payable at the applicable
rate during such extension.
(c) All payments made by the Borrower or any Borrowing Subsidiary
hereunder and under the other Loan Documents shall be made irrespective of, and
without any reduction for, any setoff or counterclaims.
SECTION 2.15 FEES. (a) The Borrower agrees to pay to the
Administrative Agent for its own account and for distribution to the Banks as
separately agreed between each Bank and the Administrative Agent the fees and
expenses in the amounts and on the dates specified in the Fee Letter.
(b) The Borrower agrees to pay to the Administrative Agent for the
account of each Bank a commitment fee (the "Commitment Fee"), computed at a per
annum rate equal to the applicable Margin Percentage from time to time on the
average daily unused portion of such Bank's Total Commitment, from and including
the Closing Date to the Final Maturity Date, payable quarterly in arrears on
each Payment Date and on the Final Maturity Date or such earlier date, if any,
on which the Total Commitment shall terminate in accordance with the terms
hereof. For the purposes of calculating the Commitment Fee, outstanding
Swingline Loans shall not constitute usage of the Total Revolving Loan
Commitment or of any Bank's or Swingline Bank's Revolving Loan Commitment.
SECTION 2.16 INTEREST RATE UNASCERTAINABLE, INCREASED COSTS,
ILLEGALITY. (a) In the event that the Administrative Agent, in the case of
clause (i) below, or any Bank, in the case of clauses (ii) and (iii) below,
shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for
any Interest Period, that by reason of any changes arising after the
date of this Agreement affecting the interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of the
Eurodollar Rate; or
(ii) at any time, that the relevant Eurodollar Rate
applicable to any of its Loans shall not represent the effective
pricing to such Bank for funding or maintaining a Eurodollar Loan,
or such Bank shall incur increased costs or reductions in the
amounts received or receivable hereunder in respect of any
Eurodollar Loan, in any such case because of (x) any change since
the date of this Agreement in any applicable law or governmental
rule, regulation,
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guideline or order or any interpretation thereof and including the
introduction of any new law or governmental rule, regulation,
guideline or order (such as for example but not limited to a change
in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate), whether or not having the force
of law and whether or not failure to comply therewith would be
unlawful, and/or (y) other circumstances affecting such Bank or the
interbank Eurodollar market or the position of such Bank in such
market; or
(iii) at any time, that the making or continuance by it
of any Eurodollar Loan has become unlawful by compliance by such
Bank in good faith with any law or governmental rule, regulation,
guideline or order (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) or has
become impracticable as a result of a contingency occurring after
the date of this Agreement which materially and adversely affects
the interbank Eurodollar market;
then, and in any such event, the Administrative Agent or such Bank shall,
promptly after making such determination, give notice (by telephone promptly
confirmed in writing) to the Borrower and (if applicable) the Administrative
Agent of such determination (which notice the Administrative Agent shall
promptly transmit to each of the other Banks). Thereafter (x) in the case of
clause (i) above, the Borrower's right to request Eurodollar Loans and
Eurodollar Auctions shall be suspended, and any Notice of Borrowing, Notice of
Conversion or Notice of Continuation given by the Borrower with respect to any
Borrowing of Eurodollar Loans, which has not yet been made shall be deemed
cancelled and rescinded by the Borrower, (y) in the case of clause (ii) above,
the Borrower shall pay to such Bank, upon such Bank's delivery of written demand
therefor to the Borrower, with a copy to the Administrative Agent, such
additional amounts (in the form of an increased rate of interest, or a different
method of calculating interest, or otherwise, as such Bank in its sole
discretion shall determine) as shall be required to compensate such Bank for
such increased costs or reduction in amounts received or receivable hereunder
and (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in clause (b) below as promptly as possible and, in any event,
within the time period required by law. The written demand provided for in
clause (y) shall demonstrate in reasonable detail the calculation of the amounts
demanded and shall, absent manifest error, be final and conclusive and binding
upon all of the parties hereto.
(b) In the case of any Eurodollar Loan or requested Eurodollar Loan
affected by the circumstances described in clause (a)(ii) above, the Borrower
may, and in the case of any Eurodollar Loan affected by the circumstances
described in clause (a)(iii) above the Borrower shall, either (i) if any such
Eurodollar Loan has not yet been made but is then the subject of a Notice of
Borrowing, a Notice of Conversion or Notice of Continuation, be deemed to have
cancelled and rescinded such notice, or (ii) if any such Eurodollar Loan is then
outstanding, require the affected Bank to convert each such Eurodollar Loan into
a Base Rate Loan at the end of the applicable Interest Period or such earlier
time as may be required by law, in each case by giving the Administrative Agent
notice (by telephone promptly confirmed in writing) thereof on the Business Day
that the Borrower was notified by the Bank pursuant to clause (a) above;
PROVIDED, HOWEVER, that all Banks whose Eurodollar Loans are affected by the
circumstances described in clause (a) above shall be treated in the same manner
under this clause (b).
(c) In the event that the Administrative Agent determines at any
time following its giving of notice based on the conditions described in clause
(a)(i) above that none of such conditions exist, the Administrative Agent shall
promptly give notice thereof to the Borrower and the Banks, whereupon the
Borrower's right to request Eurodollar Loans from the Banks and the Banks'
obligation to make Eurodollar Loans shall be restored.
(d) In the event that a Bank determines at any time following its
giving of a notice based on the conditions described in clause (a)(iii) above
that none of such conditions exist, such Bank shall promptly give notice thereof
to the Borrower and the Administrative Agent, whereupon the Borrower's right
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to request Eurodollar Loans from such Bank and such Bank's obligation to make
Eurodollar Loans shall be restored.
(e) If any Bank or the Swingline Bank determines that any applicable
law, rule, or regulation or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank, or comparable agency charged with the interpretation or administration
thereof, or compliance by such Bank or Swingline Bank with any request or
directive (whether or not having the force of law) of any such authority,
central bank, or comparable agency shall make it unlawful or impossible for such
Bank or Swingline Bank to maintain its Commitment or Swingline Commitment, then
upon notice to the Administrative Agent and the Borrower by the Bank or
Swingline Bank, the Commitment or Swingline Commitment of such Bank or Swingline
Bank, as the case may be, shall terminate.
SECTION 2.17 FUNDING LOSSES. The Borrower shall compensate each
Bank, upon such Bank's delivery of a written demand therefor to the Borrower,
with a copy to the Administrative Agent (which demand shall, absent manifest
error, be final and conclusive and binding upon all of the parties hereto), for
all reasonable losses, expenses and liabilities (including, without limitation,
any loss, expense or liability incurred by such Bank in connection with the
liquidation or reemployment of deposits or funds required by it to make or carry
its Eurodollar Loans but excluding anticipated profits), that such Bank
sustains: (i) if for any reason (other than a default by such Bank) a Borrowing
of, or conversion from or into, or a continuation of, Eurodollar Loans does not
occur on a date specified therefor in a Notice of Borrowing, Notice of
Conversion or Notice of Continuation, (whether or not rescinded, cancelled or
withdrawn or deemed rescinded, cancelled or withdrawn, pursuant to Section
2.16(a) or 2.16(b) or otherwise), (ii) if any repayment (including, without
limitation, payment after acceleration) or conversion of any of its Eurodollar
Loans occurs on a date which is not the last day of the Interest Period
applicable thereto, (iii) if any prepayment of any of its Eurodollar Loans is
not made on any date specified in a notice of prepayment given by the Borrower,
or (iv) as a consequence of any default by the Borrower or any Borrowing
Subsidiary in repaying its Eurodollar Loans, or any other amounts owing
hereunder in respect of its Eurodollar Loans when required by the terms of this
Agreement. Calculation of all amounts payable to a Bank under this Section 2.17
shall be made on the assumption that such Bank has funded its relevant
Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at
the Eurodollar Rate in an amount equal to the amount of such Eurodollar Loan
with a maturity equivalent to the Interest Period applicable to such Eurodollar
Loan, and through the transfer of such Eurodollar deposit from an offshore
office of such Bank to a domestic office of such Bank in the United States of
America, provided that each Bank may fund its Eurodollar Loans in any manner
that it in its sole discretion chooses and the foregoing assumption shall only
be made in order to calculate amounts payable under this Section 2.17.
SECTION 2.18 INCREASED CAPITAL. If at any time any Bank or the
Swingline Bank determines that the introduction after the Closing Date of, or
any change after the Closing Date in, any applicable law or governmental rule,
regulation, order, guideline, directive or request (whether or not having the
force of law) concerning capital adequacy, or any change after the Closing Date
in interpretation or administration thereof by any governmental authority,
central bank or comparable agency, will have the effect of increasing the amount
of capital required or expected to be maintained by such Bank or Swingline Bank
or any corporation controlling such Bank or Swingline Bank based on the
existence of such Bank's Commitments or such Swingline Bank's Swingline Loan
Commitment hereunder or its obligations hereunder, or shall change the basis of
taxation of any amounts payable to any Bank or the Swingline Bank under this
Agreement or the Notes in respect of any such Loans (other than taxes imposed on
the overall net income of any Bank or Swingline Bank for any of such Loans by
the jurisdiction where such Bank or Swingline Bank is located) then the Borrower
shall pay to such Bank or Swingline Bank, within 15 days after its written
demand therefor, such additional amounts as shall be required to compensate such
Bank or Swingline Bank or such other corporation for the increased cost to such
Bank or Swingline Bank or such other corporation or the reduction in the rate of
return to such Bank or Swingline Bank or such other corporation as a result of
such increase of capital or
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change in basis. In determining such additional amounts, each Bank and Swingline
Bank will act reasonably and in good faith and will use averaging and
attribution methods which are reasonable, PROVIDED that such Bank's or Swingline
Bank's reasonable good faith determination of compensation owing under this
Section 2.18 shall, absent manifest error, be final and conclusive and binding
on all the parties hereto. Each Bank or Swingline Bank, upon determining that
any additional amounts will be payable pursuant to this Section 2.18, will give
prompt written notice thereof to the Borrower, which notice shall show the basis
for calculation of such additional amounts, although the failure to give any
such notice shall not release or diminish any of the Borrower's Obligations to
pay additional amounts pursuant to this Section 2.18.
SECTION 2.19 TAXES. (a) All payments made by the Borrower or any
Borrowing Subsidiary under this Agreement shall be made free and clear of, and
without reduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any governmental authority excluding, in the case of the
Administrative Agent, each Bank and the Swingline Bank, net income and franchise
taxes imposed on the Administrative Agent, such Bank or Swingline Bank by the
jurisdiction under the laws of which the Administrative Agent, such Bank or
Swingline Bank is organized or any political subdivision or taxing authority
thereof or therein, or by any jurisdiction in which such Bank's or Swingline
Bank's Lending Office, as the case may be, is located or any political
subdivision or taxing authority thereof or therein (all such non-excluded taxes,
levies, imposts, deductions, charges or withholdings being hereinafter called
"Taxes"). If any Taxes are required to be withheld from any amounts payable to
the Administrative Agent, any Bank or the Swingline Bank hereunder or under the
Notes, the amounts so payable to the Administrative Agent, such Bank or
Swingline Bank shall be increased to the extent necessary to yield to the
Administrative Agent, such Bank or Swingline Bank (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Notes. Whenever any Taxes are
payable by the Borrower or any Borrowing Subsidiary, as promptly as possible
thereafter, the Borrower shall send to the Administrative Agent for its own
account or for the account of such Bank or Swingline Bank, as the case may be, a
certified copy of an original official receipt received by the Borrower showing
payment thereof or other evidence of payment reasonably satisfactory to the
Administrative Agent, such Bank or the Swingline Bank, as the case may be. If
the Borrower fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to the Administrative Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Administrative
Agent, the Banks and the Swingline Bank for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent, any Bank or
Swingline Bank as a result of any such failure. The agreements in this Section
2.19 shall survive the termination of this Agreement and the payment of the
Notes and all other Obligations.
(b) Each Bank (including each Purchasing Bank that becomes a party
to this Agreement pursuant to Section 9.4) or Swingline Bank that is not
incorporated under the laws of the United States of America or a state thereof
(a "Non-U.S. Bank") agrees that, prior to the first date on which any payment is
due to it hereunder, it will deliver to the Borrower and the Administrative
Agent (i) two duly completed copies of United States Internal Revenue Service
Form 1001 or 4224 or successor applicable form, as the case may be, certifying
in each case that such Bank or Swingline Bank is entitled to receive payments
under this Agreement and the Notes payable to it, without deduction or
withholding of any United States federal income taxes, or (ii) in the case of a
Non-U.S. Bank claiming exemption from U.S. federal withholding taxes under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest," an Internal Revenue Service Form W-8 or successor applicable form, as
the case may be, to establish an exemption from United States backup withholding
tax together with a certificate to the effect that such Non-U.S. Bank is not a
bank for purposes of Section 881(c) of the Code, is not a 10 percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower, is not
a controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code) and is entitled to a complete exemption from U.S.
federal withholding taxes. Each Bank and Swingline Bank which delivers to the
Borrower and the Administrative Agent a Form 1001 or 4224 and Form W-8 pursuant
to the preceding sentence further undertakes to deliver to the Borrower and the
Adminis-
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trative Agent two further copies of Form 1001 or 4224 and Form W-8 (together
with the accompanying certificate), or successor applicable forms, or other
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Borrower, and
such extensions or renewals thereof as may reasonably be requested by the
Borrower, certifying in the case of a Form 1001 or 4224 that such Bank or
Swingline Bank is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes, unless in
any such case an event (including, without limitation, any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank or Swingline Bank from duly completing and delivering any such
form with respect to it and such Bank or Swingline Bank advises the Borrower
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax, and in the case of a Form W-8,
establishing an exemption from United States backup withholding tax.
SECTION 2.20 ACTION OF AFFECTED BANKS AND SWINGLINE BANK. Upon the
written request of the Borrower, each Bank and Swingline Bank agrees to use
reasonable efforts (including reasonable efforts to change the lending office
for its Loans) to avoid or minimize any illegality or any amounts which might
otherwise be payable by the Borrower pursuant to Sections 2.16, 2.18 or 2.19;
PROVIDED, HOWEVER, that such efforts shall not cause, in the sole determination
of such Bank or Swingline Bank, the imposition on such Bank or Swingline Bank of
any additional costs or legal or regulatory burdens and shall not be deemed by
such Bank or Swingline Bank to be otherwise contrary to its policies. In the
event that such reasonable efforts are insufficient to avoid all such illegality
or all amounts that might be payable pursuant to Sections 2.16, 2.18 or 2.19,
then such Bank or Swingline Bank (the "Affected Bank") shall use its reasonable
efforts to transfer to any other Bank (which itself is not then an Affected
Bank) its Loans and Commitments or Swingline Loans and Swingline Loan
Commitment, as the case may be, subject to the provisions of Section 9.4;
PROVIDED, HOWEVER, that such transfer shall not be deemed by such Affected Bank,
in its sole discretion, to be disadvantageous to it or contrary to its policies.
In the event that the Affected Bank is unable, or otherwise is unwilling, so to
transfer its Loans and Commitments or Swingline Loans and Swingline Loan
Commitment, as the case may be, the Borrower may designate an alternate lender
(reasonably acceptable to the Administrative Agent and the L/C Banks) to
purchase the Affected Bank's Loans and Commitments or Swingline Loans and
Swingline Loan Commitment, as the case may be, at par and including accrued
interest, and, subject to the provisions of Section 9.4, the Affected Bank shall
transfer its Commitments or Swingline Loan Commitment to such alternate lender
and such alternate lender shall become a Bank or Swingline Bank hereunder. Any
fee payable to the Administrative Agent pursuant to subsection 9.4(c) in
connection with such transfer shall be for the account of the Borrower.
SECTION 2.21 USE OF PROCEEDS. The proceeds of the Expansion Loans
(together with the proceeds of the Senior Notes and the Senior Subordinated
Notes) made on and after the Closing Date shall be used to fund up to $75
million of the purchase price of the Acquisition, to pay the Transaction Costs,
to finance additional Permitted Acquisitions and for general corporate purposes.
The proceeds of the Revolving Loans and Swingline Loans made on or after the
Closing Date shall be used for working capital and other general corporate
purposes (including the purchase of the C.R. Anthony Company receivables).
SECTION 2.22 LETTERS OF CREDIT. (a) Subject to and upon the terms
and conditions of, and in reliance upon the representations and warranties of
the Borrower set forth in, this Agreement, in addition to requesting that the
Banks or the Swingline Bank make Loans or Swingline Loans, the Borrower may
request, in accordance with the provisions of this Section 2.22 and Section
2.23, that, on and after the Closing Date and prior to the termination or
expiration of the Total Revolving Loan Commitment and Swingline Loan Commitment,
any L/C Bank issue one or more Letters of Credit for the account of the
Borrower; PROVIDED that any Letter of Credit issued by an L/C Bank shall be in a
form customarily used by such L/C Bank or in any
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other form requested by the Borrower and approved by such L/C Bank; PROVIDED
FURTHER, that (i) no Letter of Credit shall have an expiration date that is
later than 12 months after the date of issuance thereof; (ii) in no event shall
any Letter of Credit issued by an L/C Bank have an expiration date (or be
extended or extendible so that it will expire) later than the fifth Business Day
prior to the Final Maturity Date; (iii) the Borrower shall not request that any
L/C Bank issue any Letter of Credit if, after giving effect to such issuance,
the aggregate Letter of Credit Outstandings PLUS the then outstanding aggregate
principal amount of Revolving Loans PLUS the outstanding principal amount of
Swingline Loans would exceed the Total Revolving Loan Commitment; (iv) the
Borrower shall not request the issuance of any Letter of Credit if, after giving
effect to such issuance, the aggregate Letter of Credit Outstandings would
exceed the L/C Sublimit; and (v) the Borrower shall not request the issuance of
any Standby Letter of Credit (other than Standby Letters of Credit issued in
connection with the purchase of inventory in the ordinary course of business
including those issued in connection with cooperative purchase programs) if
after giving effect to such issuance the aggregate Standby Letter of Credit
Outstandings would exceed $20,000,000 (the "Standby L/C Sublimit").
(b) Upon the occurrence of a Default or an Event of Default or the
acceleration of the maturity of the Loans or Swingline Loans, if payment is not
then due to the beneficiary, the Borrower shall deposit funds totalling 105% of
the Letter of Credit Outstandings in the L/C Cash Collateral Account to secure
payment to the beneficiary and to secure, for the benefit of the Secured
Creditors, the Secured Obligations. Any funds so deposited shall be paid to the
beneficiary of the Letter of Credit if conditions to such payment are satisfied.
Each payment or deposit of funds as provided in this paragraph shall be treated
for all purposes of this Agreement as a drawing duly honored by the L/C Bank
under the related Letter of Credit.
SECTION 2.23 NOTICE OF ISSUANCE; AGREEMENT TO ISSUE. (a) Whenever
the Borrower desires the issuance of a Letter of Credit, it shall deliver to the
desired L/C Bank and the Administrative Agent a written notice no later than
10:00 a.m. (New York City time) at least three Business Days in advance of the
proposed date of issuance (which prescribed time period may be waived at the
option of the L/C bank in its sole discretion). If on any day the Borrower shall
request that more than one Letter of Credit be issued, the Borrower shall
provide to the Administrative Agent a schedule of all such requests no later
than 12:00 p.m. (New York city time) on such day. Each such notice shall be in
substantially the form attached as Exhibit F or in such other form as shall be
reasonably acceptable to such L/C Bank (each a "Letter of Credit Request"), and
in any event shall specify (i) the proposed date of issuance (which shall be a
Business Day), (ii) the proposed face amount of the Letter of Credit, (iii) the
proposed expiration date of the Letter of Credit, (iv) the purpose of the Letter
of Credit, and (v) the name and address of the beneficiary with respect to such
Letter of Credit, and shall be accompanied by a precise description of the
documents and a verbatim text of any certificate to be presented by the
beneficiary of such Letter of Credit, which if presented by such beneficiary
prior to the expiration date of the Letter of Credit, would require the L/C Bank
to make payment under the Letter of Credit; PROVIDED that the applicable L/C
Bank may require changes in any such documents and the delivery of certificates
in accordance with its customary letter of credit practices; and, PROVIDED
FURTHER, that no Letter of Credit shall require payment against a conforming
draft to be made thereunder on the same Business Day that such draft is
presented. In determining whether to pay under any Letter of Credit, each L/C
Bank shall be responsible only to determine that the documents and certificates
required to be delivered under its Letter of Credit have been delivered and that
they comply on their face with the requirements of its Letter of Credit. The
submission of each Letter of Credit Request shall be deemed to be a
representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with and will not violate the terms of Section
3.1(a)(i)-(v). Each L/C Bank shall furnish to the Administrative Agent a
specimen copy of each Letter of Credit issued by such L/C Bank pursuant to this
Agreement immediately upon the issuance thereof. The Administrative Agent shall
notify each Participating Bank of its participation with respect to the total of
Letters of Credit outstanding on a monthly basis, determined in accordance with
Section 2.23(b). Each L/C Bank shall immediately notify the Administrative Agent
of the terms of each issuance, amendment or termination of each Letter of Credit
issued, amended or terminated on the date of issuance, amended or termination.
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(b) Each L/C Bank receiving a Letter of Credit Request from the
Borrower agrees, subject to the terms and conditions set forth in this
Agreement, and so long as it shall not have received any notice from any Bank
pursuant to the immediately succeeding sentence, to issue for the account of the
Borrower, on the date specified in such Letter of Credit Request, a Letter of
Credit in a face amount equal to the face amount requested in such Letter of
Credit Request. Immediately upon the issu ance of each Letter of Credit, each
Bank having a Revolving Loan Commitment (a "Participating Bank") shall be deemed
to, and hereby agrees to, have irrevocably purchased from the applicable L/C
Bank a participation in such Letter of Credit and any drawing thereunder in an
amount equal to such Participating Bank's Pro Rata Share of the maximum amount
which is or at any time may become available to be drawn thereunder; PROVIDED
that no Bank shall have delivered a notice to such L/C Bank prior to the
issuance of such Letter of Credit (with a copy to the Administrative Agent) to
the effect that one or more of the conditions set forth in Section 3.1 or 3.2,
as applicable, are not then satisfied or that the issuance of such Letter of
Credit or purchase of a participation therein by such Bank would violate Section
2.27. Upon any change in the Revolving Loan Commitments of the Banks, it is
hereby agreed that, with respect to all Letter of Credit Outstandings, there
shall be an automatic adjustment to the participations in the Letters of Credit
pursuant to this Section 2.23 to reflect the new Pro Rata Shares of all of the
Banks.
(c) Upon the request of any Bank, the applicable L/C Bank shall
promptly deliver to such Bank the information specified in the Letter of Credit
Request and copies of any Letters of Credit issued by such L/C Bank.
(d) Each L/C Bank shall, on the last Business Day of each calendar
month, provide to the Administrative Agent a report with respect to the Letters
of Credit issued by it, including the date of issue, account party amount,
expiration date and reference number of each Letter of Credit issued by it.
SECTION 2.24 PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. (a)
In the event of any request for payment under any Letter of Credit by the
beneficiary thereof, the L/C Bank shall promptly notify the Borrower and the
Administrative Agent (which shall in turn promptly notify the Participating
Banks), no later than 10:00 a.m. (New York City time) on the Business Day
immediately preceding the date on which such L/C Bank intends to honor such
drawing (which in no event shall be less than three Business Days after
presentation); and the Borrower shall reimburse such L/C Bank on the day on
which such drawing is honored in same day funds in an amount equal to the amount
of such drawing; PROVIDED that, unless the Borrower shall have notified the
Administrative Agent and such L/C Bank prior to 12:00 p.m. (New York City time)
on the Business Day immediately prior to the date on which such drawing is
honored that the Borrower intends to reimburse such L/C Bank for the amount of
such drawing with funds other than the proceeds of Revolving Loans, (i) the
Borrower shall be deemed to have timely given a Notice of Borrowing to the
Administrative Agent requesting a Borrowing of Revolving Loans which are Base
Rate Loans on the date on which such drawing is honored in an amount equal to
the amount of such drawing, and (ii) subject to Section 2.2, each Participating
Bank shall, by 12:00 p.m. (New York City time) on the date of the honoring of
such drawing, make a Revolving Loan which is a Base Rate Loan in an amount equal
to such Participating Bank's Pro Rata Share of the amount of such drawing, the
proceeds of which shall be applied directly by the Administrative Agent to
reimburse such L/C Bank for the amount of such drawing (PROVIDED that, solely
for purposes of such Borrowing, the conditions precedent set forth in Section
3.2 shall not be applicable); PROVIDED FURTHER that, if for any reason, proceeds
of Revolving Loans are not received by such L/C Bank on such date in an amount
equal to the amount of such drawing, the Borrower shall reimburse such L/C Bank,
on the Business Day immediately following the date of such drawing, in an amount
in dollars and immediately available funds equal to the excess of the amount of
such drawing over the amount of such Revolving Loans, if any, which are so
received by the Administrative Agent from the Participating Banks, plus accrued
interest on such amount at the applicable rate of interest for Base Rate Loans.
If the Borrower notifies the Administrative Agent and such L/C Bank prior to
12:00 p.m. (New York City time) on the Business Day immediately prior to the
date on which such drawing is honored that the Borrower intends to reimburse
such L/C Bank for the amount of such
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drawing with funds other than the proceeds of Revolving Loans, the Borrower
shall reimburse such L/C Bank on the day on which such drawing is honored in an
amount in immediately available funds equal to the amount of such drawing.
Notwithstanding anything contained in this Agreement to the contrary, to the
extent the Borrower does not reimburse an L/C Bank in accordance with the
preceding provisions of this Section 2.24 or a Default or an Event of Default
exists at the time of the honoring of a drawing under a Letter of Credit,
amounts, if any, then held by the Collateral Agent in the L/C Cash Collateral
Account may be applied by the Administrative Agent to reimburse the applicable
L/C Bank for the honoring of such drawing, and the aggregate amount of Revolving
Loans, if any, required to be made by the Participating Banks pursuant to this
Section 2.24 shall be reduced by a corresponding amount. Any payments owed by
the Borrower pursuant to this Section 2.24 which are made later than 10:00 a.m.
(New York City time) shall be deemed to have been made on the next succeeding
Business Day.
(b) Each Participating Bank shall indemnify and hold harmless the
Administrative Agent and each L/C Bank from and against any and all losses,
liabilities (including liabilities for penalties), actions, suits, judgments,
demands, costs and expenses (including, without limitation, attorney's fees and
expenses) resulting from any failure on the part of such Participating Bank to
provide, on the same day of any drawing under a Letter of Credit, the
Administrative Agent with such Participating Bank's Pro Rata Share of the amount
of any drawing under such Letter of Credit in accordance with the provisions of
Section 2.24(a).
SECTION 2.25 PAYMENT BY BANKS. In the event that the Borrower shall
fail to reimburse an L/C Bank as provided in Section 2.24 by borrowing Revolving
Loans or otherwise for all or any portion, as the case may be, of any drawing
honored by such L/C Bank under a Letter of Credit issued by it, such L/C Bank
shall promptly notify the Administrative Agent which shall thereupon promptly
notify each Participating Bank of the unreimbursed amount of such drawing and
the amount of such Participating Bank's Pro Rata Share thereof. Whether or not a
Default or an Event of Default shall then exist, each Participating Bank shall
make available to the Administrative Agent an amount equal to its Pro Rata Share
of such unreimbursed payment in dollars and immediately available funds, at the
office of the Administrative Agent specified in such notice, not later than
12:00 p.m. (New York City time) on the Business Day after the date notified by
the Administrative Agent. In the event that any such Participating Bank fails to
make available to the Administrative Agent the amount of such Participating
Bank's Pro Rata Share of such unreimbursed payment as provided in this Section
2.25, the Administrative Agent shall be entitled to recover such amount on
demand from such Participating Bank together with interest at the Federal Funds
Effective Rate. Nothing in Section 2.24 or this Section 2.25 shall be deemed to
prejudice the right of any Participating Bank to recover any amounts made
available by such Participating Bank pursuant to Section 2.24 or this Section
2.25 in the event that the payment with respect to a Letter of Credit by such
L/C Bank in respect of which payment was made by such Participating Bank
constituted gross negligence or willful misconduct on the part of such L/C Bank.
The Administrative Agent shall distribute to each other Participating Bank which
has paid all amounts payable by it under this Section 2.25 with respect to any
Letter of Credit issued by such L/C Bank such other Participating Bank's share
(based on the proportionate aggregate amount funded by such Participating Bank
to the aggregate amount funded by all Participating Banks) of all payments
received by the Administrative Agent from the Borrower in reimbursement of
drawings honored by such L/C Bank under such Letter of Credit when such payments
are received (including interest payable under Section 2.6 with respect to the
period commencing on the date of the funding of such participation).
SECTION 2.26 COMPENSATION. (a) The Borrower agrees to pay to the
Administrative Agent for distribution to each Participating Bank in respect of
all (i) Standby Letters of Credit a commission equal to the then applicable
Margin Percentage for Eurodollar Loans less 0.25% on the total Standby Letter of
Credit Outstandings, from time to time and (ii) Trade Letters of Credit a
commission equal to the then applicable Margin Percentage for Eurodollar Loans
less 0.75% (but in no event shall the commission be equal to an amount less than
0.75% per annum) on the total Trade Letter of Credit Outstandings from time to
time, in each case such fee to be payable in arrears on each Payment Date.
Promptly upon receipt by the Administrative
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Agent of any amount described in this Section 2.26(a), the Administrative Agent
shall distribute to each Participating Bank its Pro Rata Share of such amount.
(b) The Borrower agrees to pay to each L/C Bank in respect of each
Letter of Credit issued by it such fees (including, without limitation,
fronting, issuance, facing, processing and transfer fees), in such amounts, and
at such times, as such L/C Bank customarily charges for the issuance of letters
of credit or as may otherwise be agreed by the Borrower and such L/C Bank.
SECTION 2.27 ADDITIONAL PAYMENTS; ILLEGALITY. (a) If by reason of
any change in applicable law or governmental regulation, rule, guideline or
order or any interpretation thereof including the introduction of any new law or
governmental rule, regulation, guideline or order (such as for example but not
limited to a change in official reserve requirements) whether or not having the
force of law and whether or not failure to comply therewith would be unlawful:
(i) such Bank shall be subject to any tax, levy, charge
or withholding of any nature or to any variation thereof or to any
penalty with respect to the maintenance or fulfillment of its
obligations under Sections 2.22 through 2.29, inclusive, whether
directly or by such being imposed on or suffered by such Bank;
(ii) any reserve, deposit or similar requirement is or
shall be applicable, imposed or modified in respect of any Letter of
Credit issued by such Bank or any participations purchased by such
Bank in any Letter of Credit (or in respect of such Bank's
commitment to purchase such a participation); or
(iii) there shall be imposed on such Bank any other
condition regarding Sections 2.22 through 2.29, inclusive, any
Letter of Credit or any participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to such Bank of committing to issue, purchase or purchasing or maintaining any
participation in any Letter of Credit, or to reduce the amount receivable in
respect thereof by such Bank, then and in any such case such Bank may, at any
time after the additional cost is incurred or the amount received is reduced,
promptly notify the Borrower and the Borrower shall pay to such Bank promptly
after a written demand therefor (which demand may be contained in such notice),
such additional amounts as shall be required to compensate such Bank for such
increased costs or reduction in amounts receivable hereunder (a written notice
as to additional amounts owed such Bank setting forth in reasonable detail the
conditions giving rise thereto and the calculation of such amounts, submitted to
the Borrower by such Bank shall, absent manifest error, be final and conclusive
and binding upon all parties hereto). The failure of any Bank to give any notice
or demand as provided in this Section shall not release or diminish any of the
Borrower's obligations to pay any additional costs to such Bank pursuant to this
Section.
(b) Notwithstanding any other provision contained in this Agreement,
no L/C Bank shall be obligated to issue any Letter of Credit if the issuance of
such Letter of Credit shall have become unlawful or prohibited by compliance by
such L/C Bank in good faith with any law, governmental rule, guideline, request,
order, injunction, judgement or decree (whether or not having the force of law).
SECTION 2.28 OBLIGATIONS ABSOLUTE. The respective obligations under
Sections 2.24 and 2.25 of the Borrower and the Participating Banks to reimburse
each L/C Bank for drawings made under the Letters of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including, without limitation,
the following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit;
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(b) the existence of any claim, set-off, defense or other right
which the Borrower or any Subsidiary or Affiliate of the Borrower may have at
any time against a beneficiary or any transferee of any Letter of Credit (or any
Persons for whom any such beneficiary or transferee may be acting), any Bank or
any other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including, without limitation,
any underlying transaction between the Borrower or any of its Subsidiaries or
Affiliates and the beneficiary for which the Letter of Credit was procured);
(c) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect;
(d) payment by such L/C Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
(e) any other circumstance or happening whatsoever, which is similar
to any of the foregoing; or
(f) the fact that a Default or an Event of Default shall have
occurred and be continuing.
SECTION 2.29 INDEMNIFICATION; NATURE OF L/C BANKS' DUTIES. (a) In
addition to amounts payable as elsewhere provided in Sections 2.22 through 2.29,
inclusive, the Borrower hereby agrees to protect, indemnify, pay and save each
L/C Bank harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and reasonable expenses (including reasonable
attorneys' fees and disbursements and allocated costs of internal counsel) which
such L/C Bank may incur or be subject to as a consequence, direct or indirect,
of (i) the issuance of any Letter of Credit for the account of the Borrower
other than as a result of the gross negligence or willful misconduct of such L/C
Bank or (ii) the failure of such L/C Bank to honor a drawing under any Letter of
Credit due to an act or omission (whether rightful or wrongful) of any present
or future DE JURE or DE FACTO government or governmental authority.
(b) As between the Borrower and each L/C Bank, the Borrower assumes
all risks of the acts and omissions of, or misuse of the Letters of Credit
issued by such L/C Bank, by the respective beneficiaries of such Letters of
Credit, other than losses resulting from the gross negligence or willful
misconduct of such L/C Bank. In furtherance and not in limitation of the
foregoing, no L/C Bank shall be responsible: (i) for the form, validity,
sufficiency, accuracy, genuineness or legal effects of any document submitted by
any party in connection with the application for and issuance of such Letters of
Credit, even if it should in fact prove to be in any or all respects
insufficient, inaccurate, fraudulent or forged or otherwise invalid; (ii) for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) for failure of the beneficiary
of any such Letter of Credit to comply fully with conditions required in order
to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex, telecopy or otherwise, whether or not they be in cipher; (v) for good
faith errors in interpretation of technical terms; (vi) for any loss or delay in
the transmission or otherwise of any document required in order to make a
drawing under any such Letter of Credit or of the proceeds thereof; (vii) for
the misapplication by the beneficiary of any such Letter of Credit; and (viii)
for any consequences arising from causes beyond the control of such L/C Bank,
including, without limitation, any act or omission, whether rightful or
wrongful, of any present or future DE JURE or DE FACTO government or
governmental authority. None of the above shall affect, impair, or prevent the
vesting of any such L/C Bank's rights or powers hereunder.
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(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by any
L/C Bank under or in connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not put such L/C Bank under any resulting liability to
the Borrower.
SECTION 2.30 INCREASE OF TOTAL REVOLVING LOAN COMMITMENT. (a) At any
time prior to the third anniversary of the Closing Date, at the request of the
Parent and the Borrower to the Administrative Agent, the Total Revolving Loan
Commitment hereunder may be increased after the Closing Date on one or more
occasions but on not more than two occasions; PROVIDED that (i) the aggregate of
all such increases pursuant to this Section 2.30 may total no more than
$25,000,000, (ii) the sum of the Total Revolving Loan Commitment and the Total
Expansion Loan Commitment shall not exceed $225,000,000, (iii) each such
increase is in a minimum amount of $10,000,000, (iv) each Bank whose Revolving
Loan Commitment is increased consents to its share of the increase and (v) the
consent of the Administrative Agent is obtained.
(b) In the event that the Borrower and one or more of the Banks (or
other financial institutions which may elect to participate with the consent of
the Administrative Agent and the L/C Banks) shall agree, in accordance with
Section 2.30(a), upon such an increase in the Total Revolving Loan Commitment,
the Borrower, the Administrative Agent and each financial institution in
question shall enter into a Commitment Increase Supplement (a form of which is
attached hereto) setting forth the amounts of the increase in Revolving Loan
Commitments and providing that the additional financial institutions
participating shall be deemed to be included as Banks for all purposes of this
Agreement. Upon the execution and delivery of such Commitment Increase
Supplement as provided above, and upon satisfaction of such other conditions as
the Administrative Agent may specify, this Agreement shall be deemed to be
amended accordingly.
(c) No Bank shall have any obligation to increase its Revolving Loan
Commitment in the event of such a request by the Borrower hereunder.
SECTION 2.31 BORROWING SUBSIDIARIES. The Parent and the Borrower
may, and, in the case of any Material Subsidiary resulting from a Permitted
Acquisition that is not a Subsidiary of the Borrower, shall, from time to time,
designate any other wholly-owned Subsidiary of the Parent to be a Borrowing
Subsidiary pursuant to this Section 2.31 effective on a date not later than
thirty days after written notice to the Administrative Agent accompanied by (a)
an Assumption Agreement in the form of Exhibit Q attached hereto executed by
such Subsidiary and acknowledged by the Borrower and each Guarantor, (b) a
certificate of good standing of such Subsidiary in the jurisdiction of its
incorporation, (c) certified resolutions of the Board of Directors of such
Borrowing Subsidiary authorizing the execution and delivery of the Assumption
Agreement, and any other documents required to be delivered by this Section
2.31, (d) a counterpart of the Security Agreement and the Pledge Agreement, if
applicable, executed by such Subsidiary and (e) such other information,
certificates or legal opinions as the Administrative Agent reasonably may
request. Unless the Administrative Agent notifies the Borrower to the contrary
prior to the effective date specified in the designation notice, such Subsidiary
shall become a Borrowing Subsidiary on that date or such earlier date as the
Administrative Agent may designate.
SECTION 3. CONDITIONS PRECEDENT.
SECTION 3.1 CONDITIONS PRECEDENT TO INITIAL LOANS. The obligation of
each Bank to make its initial Loans, the obligation of the Swingline Bank to
make any Swingline Loan and the obligation of each L/C Bank to issue any Letter
of Credit are each subject to the satisfaction on the Closing Date of the
following conditions precedent:
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(a) LOAN DOCUMENTS.
(i) CREDIT AGREEMENT. The Borrower, the Parent and each
other party to this Agreement shall have executed and delivered this
Agreement to the Administrative Agent.
(ii) NOTES. The Borrower shall have executed and
delivered to each Bank or Swingline Bank which has requested Notes
the appropriate Notes in the amount, maturity and as otherwise
provided herein.
(iii) SECURITY AGREEMENT. Each of the Borrower, the
Parent and the Guarantors shall have executed and delivered to the
Collateral Agent a security agreement substantially in the form set
forth as Exhibit G hereto (as amended, modified or supplemented from
time to time, the "Security Agreement").
(iv) PLEDGE AGREEMENT. The Borrower, the Parent and any
other Subsidiary a party thereto shall have executed and delivered
to the Collateral Agent a pledge agreement substantially in the form
set forth as Exhibit H hereto (as amended, modified or supplemented
from time to time, the "Pledge Agreement").
(v) MORTGAGES. The Borrower and all Subsidiaries which
shall own Mortgaged Properties shall have executed and delivered to
the Collateral Agent mortgages substantially in the form set forth
as Exhibit I hereto (as amended, modified or supplemented from time
to time, the "Mortgages").
(vi) SUBSIDIARY GUARANTY. The Guarantors shall have
executed and delivered to the Collateral Agent a guaranty
substantially in the form set forth as Exhibit J hereto (as amended,
modified or supplemented from time to time, the "Subsidiary
Guaranty").
(b) PROCEEDS OF ISSUANCE OF SENIOR NOTES AND SENIOR
SUBORDINATED NOTES. The Borrower shall have received not less $300,000,000 (of
which not less than $100,000,000 will be subordinated to the Obligations) in
gross proceeds from the issuance of the Senior Notes and the Senior Subordinated
Notes and the terms and conditions (including, without limitation, terms and
conditions relating to the interest rate, fees, amortization, maturity,
subordination, covenants, events of default and remedies) of the Senior Notes
and the Senior Subordinated Notes and the respective Indentures and other
documents relating thereto, including, without limitation, the guarantees, if
any, thereof by the Parent, shall be reasonably satisfactory in all material
respects to the Banks.
(c) OPINIONS OF COUNSEL.
(i) The Administrative Agent shall have received a legal
opinion, dated the Closing Date, from Kirkland & Ellis, counsel to
the Loan Parties, substantially in the form set forth as Exhibit K-1
hereto, and the Borrower hereby instructs such counsel to deliver
such opinion.
(ii) The Administrative Agent shall have received
favorable legal opinions from local counsel satisfactory to the
Administrative Agent in each jurisdiction deemed necessary or
advisable by the Administrative Agent which opinions shall be
substantially in the form of Exhibit K-2 hereto and shall cover such
other matters relating to the Collateral, the Security Documents and
the other transactions contemplated hereby as the Administrative
Agent shall deem necessary or advisable.
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(iii) The Administrative Agent shall have received a
legal opinion, dated the Closing Date, from Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel to the Administrative Agent.
(d) CORPORATE DOCUMENTS. The Administrative Agent shall have
received the Articles or Certificate of Incorporation of each of the Loan
Parties as amended, modified or supplemented to the Closing Date, certified to
be true, correct and complete by the appropriate Secretary of State as of a date
not more than five days prior to the Closing Date, together with a good standing
certificate from such Secretary of State and a good standing certificate from
the Secretaries of State (or the equivalent thereof) of each other State in
which each of them is required to be qualified to transact business, each to be
dated a date not more than five days prior to the Closing Date.
(e) CERTIFIED RESOLUTIONS, ETC. The Administrative Agent shall have
received a certificate of the Secretary or Assistant Secretary of each of the
Loan Parties and dated the Closing Date certifying (i) the names and true
signatures of the incumbent officers of such Person authorized to sign the
applicable Loan Documents, (ii) the By-Laws of such Person as in effect on the
Closing Date, (iii) the resolutions of such Person's Board of Directors
approving and authorizing the execution, delivery and performance of all Loan
Documents executed by such Person, and (iv) that there have been no changes in
the Articles or Certificate of Incorporation of such Person since the date of
the most recent certification thereof by the appropriate Secretary of State.
(f) TRANSACTION DOCUMENTS. The Administrative Agent shall have
received executed copies of the Transaction Documents (other than the Loan
Documents) and any amendments or supplements thereto, certified as of the
Closing Date by an Authorized Officer of the Borrower to be true, correct and
complete copies of such documents.
(g) OFFICER'S CERTIFICATE. The Administrative Agent, the Banks and
the Swingline Bank shall have received a certificate of an Authorized Officer of
the Borrower, dated the Closing Date, certifying that (i) the Transaction
Documents (other than the Loan Documents) are in full force and effect and no
material term or condition thereof has been amended from the form thereof
delivered to the Administrative Agent, or waived, except as disclosed to the
Administrative Agent or its counsel prior to the execution of this Agreement,
(ii) each of the Loan Parties and, to the best of his or her knowledge, the
other parties to the Transaction Documents, have performed or complied in all
material respects with all agreements and conditions contained in such
Transaction Documents and any agreements or documents referred to therein
required to be performed or complied with by each of them on or before the
Closing Date, and (iii) subject to the foregoing, neither any Loan Party nor, to
the best of his or her knowledge, any such other party is in default in the
performance or compliance with any of the terms or provisions thereof, except to
the extent that performance thereof or compliance therewith or default has been
waived with the prior written consent of the Banks and the Swingline Bank.
(h) CAPITALIZATION. The Administrative Agent shall be satisfied with
the Parent's and the Borrower's capital structure, including the Receivables
Program Documents and shall have received and be satisfied with the Borrower's
business plan.
(i) REFINANCING. The Administrative Agent shall have received
evidence satisfactory to it that the Refinanced Debt, together with all
interest, fees, penalties and other amounts payable in respect thereof, shall
have been repaid in full and that all commitments thereunder and agreements
relating thereto shall have been terminated.
(j) INSURANCE. The Administrative Agent shall have received a
certificate of insurance demonstrating insurance coverage in respect of each of
the Loan Parties of types, in amounts, with insurers
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and with other terms satisfactory to the Banks and the Swingline Bank, which
certificate shall indicate that the Collateral Agent, the Banks and the
Swingline Bank are named additional insureds as their interests may appear and
shall contain a lenders loss payee endorsement in favor of the Collateral Agent
in form and substance satisfactory to the Administrative Agent.
(k) LIEN SEARCH REPORTS. The Administrative Agent shall have
received satisfactory reports of UCC, tax lien, judgment and litigation searches
conducted by a search firm acceptable to the Administrative Agent, the Banks and
the Swingline Bank with respect to the Loan Parties in each of the locations set
forth on Annex B to the Security Agreement and such other locations as the
Administrative Agent may request together with satisfactory searches of the
United States Patent and Trademark Office.
(l) UCC-1 FINANCING STATEMENTS AND MORTGAGE RECORDING. The
Administrative Agent shall have received (x) acknowledgment copies (or other
evidence of filing) of each UCC-1 financing statement signed by Borrower and the
other Loan Parties as debtors naming the Collateral Agent as secured party and
filed in the jurisdictions set forth on Annex B to the Security Agreement and
such other locations as the Administrative Agent may request, (y) satisfactory
evidence of the recording of the Security Agreement in the United States Patent
and Trademark Office and (z) satisfactory evidence of the recording of the
Mortgages in the necessary filing offices.
(m) PRO FORMA BALANCE SHEET. The Administrative Agent shall have
received a PRO FORMA consolidated balance sheet of the Parent, the Borrower and
their respective Subsidiaries, dated as of February 1, 1997, giving effect to
the Transactions and the payment or accrual of all Transaction Costs, certified
by the Principal Financial Officer of the Borrower.
(n) PLEDGED STOCK AND PLEDGED NOTES. The Collateral Agent shall have
received the original stock certificates evidencing the stock and the original
promissory notes evidencing the promissory note obligations, in each case,
pledged pursuant to the Pledge Agreement, together with undated stock and
promissory note powers duly executed in blank in connection therewith.
(o) REAL ESTATE SEARCH REPORTS. The Collateral Agent shall have
received satisfactory reports of title searches conducted by a search firm
satisfactory to the Administrative Agent, the Banks and the Swingline Bank with
respect to each of the Mortgaged Properties.
(p) FINANCIAL STATEMENTS. The Administrative Agent shall have
received the audited financial statements of the Parent and the Borrower for the
fiscal years ending February 1, 1997, February 1, 1996 and February 1, 1995 and
the unaudited financial statements of the Borrower for the fiscal period ending
on May 1, 1997.
(q) ENVIRONMENTAL MATTERS. The Administrative Agent shall be
satisfied that neither the Borrower, any of its Subsidiaries nor any Loan Party
is subject to any present or contingent environmental liability which could
reasonably be expected to have a Material Adverse Effect.
(r) FUNDS FLOW INSTRUCTIONS. The Administrative Agent shall have
received detailed instructions satisfactory to it describing the funds flow in
connection with the Transactions on the Closing Date.
(s) FEES AND EXPENSES. The Administrative Agent shall have received,
for its account and for the account of each Bank and the Swingline Bank, as
applicable, all Fees and other fees and expenses due and payable hereunder on or
before the Closing Date (if then invoiced), including, without limitation, the
reasonable fees and expenses accrued through the Closing Date, of Skadden, Arps,
Slate, Meagher & Flom
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LLP and any other counsel retained by the Administrative Agent in connection
with the transactions contemplated by the Loan Documents.
(t) CONSENTS, LICENSES, APPROVALS, ETC. The Administrative Agent
shall have received copies of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by the
Borrower, the Loan Parties or any of their respective Subsidiaries, and the
validity and enforceability, of the Transaction Documents, or in connection with
any of the Transactions, and such consents, licenses and approvals shall be in
full force and effect.
(u) PROJECTIONS. The Administrative Agent shall have received
projections prepared by the Parent demonstrating the projected consolidated
financial condition and results of operations of the Parent and its Subsidiaries
after giving effect to the Transactions, for each fiscal year for the period
commencing on the Closing Date and ending on the Final Maturity Date and for
each fiscal quarter for the fiscal year ending February 1, 1998, which
projections shall be accompanied by a written statement of the assumptions
underlying the projections, and all of the foregoing shall be satisfactory to
the Banks and the Swingline Bank.
(v) RECEIVABLES PROGRAM DOCUMENTS. The Administrative Agent shall
have received copies of the Receivables Program Documents and shall be satisfied
with the terms thereof.
(w) PURCHASE OF EXISTING SENIOR NOTES AND EXISTING SENIOR
SUBORDINATED NOTES. The Borrower shall have purchased not less than 95% of the
aggregate principal amount of the Existing Senior Notes and not less than 95% of
the aggregate principal amount of the Existing Senior Subordinated Notes, each
pursuant to the Tender Offer at prices reasonably satisfactory to the Banks
(and, if fewer than 100% of all outstanding Existing Notes shall have been so
purchased, the indentures governing each of the Existing Senior Notes and
Existing Senior Subordinated Notes shall have been amended in a manner
reasonably satisfactory to the Banks in all material respects, which amendments
shall, among other things, eliminate substantially all of the restrictive
covenants contained therein and shall make such other changes as shall be
necessary so that after giving effect thereto and to the consummation of the
Transactions, and the other transactions contemplated thereby, no default or
event of default would exist thereunder).
(x) SOLVENCY CERTIFICATE. The Administrative Agent shall have
received a solvency certificate substantially in the form of Exhibit S hereto
executed by the Vice President, Financial Planning or the Chief Financial
Officer of the Borrower and the Parent, dated the Closing Date.
(y) ADDITIONAL MATTERS. The Administrative Agent shall have received
such other certificates, opinions, documents and instruments relating to the
Transactions as may have been reasonably requested by the Administrative Agent,
any Bank and the Swingline Bank, and all corporate and other proceedings and all
other documents (including, without limitation, all documents referred to herein
and not appearing as exhibits hereto) and all legal matters in connection with
the Transactions shall be satisfactory in form and substance to the Banks and
the Swingline Bank.
SECTION 3.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of
each Bank to make any Loan, the obligation of each L/C Bank to issue (or renew
or extend pursuant to Section 2.22) any Letter of Credit and the obligation of
the Swingline Bank to make a Swingline Loan (each a "Credit Event"), including
the initial Credit Event on the Closing Date, is subject to the satisfaction on
the date of such Credit Event of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained herein and in the other Loan Documents (other than
representations and warranties which expressly speak only as of a different date
which representations and warranties shall be true and correct in all material
respects as
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of such date) shall be true and correct in all material respects on such date
both before and after giving effect to such Credit Event.
(b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing on such date either before or after giving
effect to such Credit Event.
(c) NO INJUNCTION OR LITIGATION. No law or regulation shall have
been adopted, no order, judgment or decree of any governmental authority shall
have been issued, and no litigation, proceeding or investigation shall be
pending or threatened, which in the reasonable judgment of the Banks and the
Swingline Bank would (i) enjoin, prohibit or restrain, or impose or result in
the imposition of any material adverse condition upon, the making or repayment
of the Loans or Swingline Loans, the issuance of any Letter of Credit or the
Transactions or (ii) affect the legality, validity or enforceability of this
Agreement, any of the Loan Documents, the Transaction Documents, the
Transactions, or any document to be executed in connection therewith and the
Banks shall be satisfied as to any other material litigation and contingent
obligations to which the Company or its Subsidiaries may be subject.
(d) NO MATERIAL ADVERSE CHANGE. No event, act or condition shall
have occurred after February 1, 1997 which, in the reasonable judgment of the
Required Banks, has had or could reasonably be expected to have a Material
Adverse Effect.
(e) NOTICE OF BORROWING. The Administrative Agent shall have
received a fully executed Notice of Borrowing in respect of the Loans (other
than Swingline Loans), if any, to be made on such date. In the case of the
Swingline Loan, the Administrative Agent shall have received a notice of request
for such Swingline Loan in accordance with Section 2.2(e) hereof.
(f) DOCUMENTATION WITH RESPECT TO LETTERS OF CREDIT. The relevant
L/C Bank shall have received a fully executed Letter of Credit Request in
respect of the Letters of Credit, if any, to be issued on such date.
(g) PERMITTED ACQUISITIONS. In the case of any Loan the proceeds of
which are to be used to finance in whole or in part a Permitted Acquisition, the
Administrative Agent shall have received the certifications required by the
definition of Permitted Acquisition to demonstrate that such Permitted
Acquisition is permitted by the terms hereof.
(h) BORROWING SUBSIDIARIES. On the occasion of the initial Loan to
be made to any Borrowing Subsidiary, the Administrative Agent shall have
received all of the documents required by Section 2.31, in each case in form and
substance satisfactory to the Administrative Agent, in respect of such Borrowing
Subsidiary and the designation of such Subsidiary as a Borrowing Subsidiary
shall have become effective in accordance with the provisions of Section 2.31.
The acceptance of the proceeds of each Loan or Swingline Loan and
the delivery of a Letter of Credit Request shall constitute a representation and
warranty by the Borrower to each of the Banks and the Swingline Bank, as the
case may be, that all of the conditions required to be satisfied under this
Section 3 in connection with the making of such Loan or Swingline Loan or the
issuance of any Letter of Credit have been satisfied.
All of the Notes, certificates, agreements, legal opinions and other
documents and papers referred to in this Section 3, unless otherwise specified,
shall be delivered to the Administrative Agent for the account of each of the
Banks and the Swingline Bank and, except for the Notes, in sufficient
counterparts for each of the Banks and the Swingline Bank, and shall be
satisfactory in form and substance to each Bank and the Swingline Bank in its
sole discretion.
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SECTION 4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Administrative Agent, the Collateral Agent,
the Swingline Bank, the L/C Banks and Banks to enter into this Agreement and to
make the Loans and the Swingline Loans, and in the case of the L/C Banks, to
issue Letters of Credit, each of the Parent and the Borrower makes the following
representations and warranties, which shall survive the execution and delivery
of this Agreement and the Notes and the making of the Loans and the Swingline
Loans:
SECTION 4.1 CORPORATE STATUS. Each Loan Party (i) is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its incorporation, (ii) has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged or presently proposes to engage and (iii) has duly qualified and
is authorized to do business and is in good standing as a foreign corporation in
every jurisdiction in which it owns or leases real property or in which the
nature of its business requires it to be so qualified, except where the failure
to so qualify, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.2 CORPORATE POWER AND AUTHORITY. Each Loan Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of each of the Transaction Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of such Transaction Documents. Each Loan Party has duly
executed and delivered each such Transaction Document, and each such Transaction
Document constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms.
SECTION 4.3 NO VIOLATION. Neither the execution, delivery or
performance by any Loan Party of the Transaction Documents (other than the
Acquisition Documents) to which it is a party, nor compliance by it with the
terms and provisions thereof nor the consummation of the Transactions (other
than the Acquisition), (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality or (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (except pursuant to the
Security Documents) upon any of the property or assets of any Loan Party
pursuant to the terms of any indenture, mortgage, deed of trust, agreement or
other instrument to which such Loan Party is a party or by which it or any of
its property or assets is bound or to which it may be subject, or (iii) will
violate any provision of the Articles or Certificate of Incorporation or By-Laws
of any Loan Party. Neither the execution, delivery or performance by any Loan
Party of the Acquisition Documents to which it is a party, nor compliance by it
with the terms and provisions thereof nor the consummation of the Acquisition,
(i) will contravene any applicable provision of any material law, statute, rule,
regulation, order, writ, injunction or decree of any court or governmental
instrumentality or (ii) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
any Loan Party pursuant to the terms of any material indenture, mortgage, deed
of trust, agreement or other instrument to which such Loan Party is a party or
by which it or any of its property or assets is bound or to which it may be
subject, or (iii) will violate any provision of the Articles or Certificate of
Incorporation or By-Laws of any Loan Party.
SECTION 4.4 LITIGATION. There are no actions, suits, investigations
or proceedings pending, or to the Parent's or the Borrower's best knowledge,
threatened (i) with respect to any of the Transactions or Transaction Documents
or (ii) that could, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
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SECTION 4.5 FINANCIAL STATEMENTS; FINANCIAL CONDITION; ETC. Each of
the financial statements delivered pursuant to Sections 3.1(m) and 3.1(p) were
prepared in accordance with GAAP consistently applied and fairly present the
financial condition and the results of operations of the entities covered
thereby on the dates and for the periods covered thereby, except as disclosed in
the notes thereto and, with respect to interim financial statements, subject to
normally recurring year-end ad justments. As of the Closing Date, no Loan Party
has any material liability (contingent or otherwise) not reflected in such
financial statements or in the notes thereto other than as set forth on Schedule
6.6 hereto.
SECTION 4.6 SOLVENCY. On the Closing Date and after giving effect to
the Transactions, each Loan Party will be Solvent.
SECTION 4.7 PROJECTIONS. The projections delivered pursuant to
Section 3.1(u) have been prepared on the basis of the assumptions accompanying
them, and such projections and assumptions, as of the date of preparation
thereof and as of the Closing Date, are reasonable and represent the Parent's
good faith estimate of its future financial performance, it being understood
that nothing contained in this Section shall constitute a representation or
warranty that such future financial performance or results of operations will in
fact be achieved.
SECTION 4.8 MATERIAL ADVERSE CHANGE. Except as set forth on Schedule
4.8, since February 1, 1997 there has occurred no event, act or condition which
has had, or could reasonably be expected to have, a Material Adverse Effect.
SECTION 4.9 USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds of
each Loan and Swingline Loan will be used by the Borrower and any Borrowing
Subsidiary only in accordance with the provisions of Section 2.21. No part of
the proceeds of any Loan or Swingline Loan will be used by the Borrower or any
Borrowing Subsidiary to purchase or carry any Margin Stock or to extend credit
to others for the purpose of purchasing or carrying any Margin Stock. Neither
the making of any Loan or Swingline Loan nor the use of the proceeds thereof
will violate or be inconsistent with the provisions of Regulations G, T, U or X
of the Federal Reserve Board.
SECTION 4.10 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with
(i) the execution, delivery and performance of any Transaction Document or the
consummation of any of the Transactions or (ii) the legality, validity, binding
effect or enforceability of any Transaction Document, except (x) those listed on
Schedule 4.10 that have already been duly made or obtained and remain in full
force and effect and (y) the filing of UCC-1 financing statements in the
appropriate filing offices and the recording of the Mortgages in the appropriate
recording offices.
SECTION 4.11 SECURITY INTERESTS AND LIENS. The Security Documents
create, as security for the Secured Obligations, valid and enforceable Liens on
all of the Collateral, in favor of the Collateral Agent for the ratable benefit
of the Secured Creditors, and subject to no other Liens other than Liens
permitted by Section 6.3 hereunder. Upon the satisfaction of the conditions
precedent described in Section 3.1(l), such Liens on the Collateral shall be
superior to and prior to the rights of all third parties (except as disclosed on
Schedule 6.3), and no further recordings or filings are or will be required in
connection with the creation, perfection or enforcement of such Liens, other
than the filing of continuation statements in accordance with applicable law.
SECTION 4.12 TAX RETURNS AND PAYMENTS. The Parent and each of its
Subsidiaries has filed all tax returns required to be filed by it and has paid
all taxes and assessments payable by it which have become
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due, other than those not yet delinquent or those that are reserved against in
accordance with GAAP which are being diligently contested in good faith by
appropriate proceedings.
SECTION 4.13 ERISA. As of the Closing Date, no Loan Party has any
Plans other than those listed on Schedule 4.13. No accumulated funding
deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) or
Reportable Event has occurred with respect to any Plan. As of the Closing Date,
Unfunded Benefit Liabilities under the Plans do not, in the aggregate, exceed
$6,000,000. As of the Closing Date, neither the Borrower nor any member of its
ERISA Controlled Group is a party to or has any responsibility, contingent or
otherwise, with respect to any Multiemployer Plan. To the best knowledge of the
Borrower and each member of its ERISA Controlled Group, no Multiemployer Plan is
or is likely to be in reorganization (as defined in Section 4241 of ERISA or
Section 418 of the Code) or is insolvent (as defined in Section 4245 of ERISA)
which reorganization or insolvency could reasonably be expected to have a
Material Adverse Effect. No liability to the PBGC (other than required premi um
payments), the Internal Revenue Service, any Plan or any trust established under
Title IV of ERISA has been, or is expected by the Borrower or any member of its
ERISA Controlled Group to be, incurred by the Borrower or any member of its
ERISA Controlled Group which liability could reasonably be expected to result in
a Material Adverse Effect. Except as otherwise disclosed on Schedule 4.13
hereto, neither the Borrower nor any member of its ERISA Controlled Group has
any material contingent liability with respect to any post-retirement benefit
under any "welfare plan" (as defined in Section 3(1) of ERISA), other than
liability for continuation coverage under Part 6 of Title I of ERISA or other
similar statute. No lien under Section 412(n) of the Code or Section 302(f) of
ERISA or requirement to provide security under Section 401(a)(29) of the Code or
Section 307 of ERISA has been or is reasonably expected by the Borrower or any
member of its ERISA Controlled Group to be imposed on the assets of the Borrower
or any member of its ERISA Controlled Group.
SECTION 4.14 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. No Loan Party nor any of its Subsidiaries is (x) an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, (y) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (z) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.
SECTION 4.15 REPRESENTATIONS AND WARRANTIES IN TRANSACTION
DOCUMENTS. All representations and warranties made by any Loan Party in the
Transaction Documents (other than the Loan Documents), and, to the best of the
Borrower's knowledge, all representations made by each other Person in such
Transaction Documents, are true and correct in all material respects as of the
Closing Date. None of such representations and warranties are inconsistent in
any material respect with the representations and warranties of any Loan Party
made herein or in any other Loan Document.
SECTION 4.16 TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole) furnished by or on behalf of any Loan Party in writing to the
Administrative Agent, any Bank or the Swingline Bank on or prior to the Closing
Date, for purposes of or in connection with this Agreement or any of the
Transactions is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of any Loan Party in writing to the
Administrative Agent, any Bank or the Swingline Bank will be, true and accurate
in all material respects on the date as of which such information is dated or
furnished and not incomplete by omitting to state any material fact necessary to
make such information (taken as a whole) not misleading at such time. As of the
Closing Date, there are no facts, events or conditions known to the Borrower
which, individually or in the aggregate, have or could reasonably be expected to
have a Material Adverse Effect.
SECTION 4.17 CORPORATE STRUCTURE; CAPITALIZATION. As of the Closing
Date, Schedule 4.17 hereto sets forth, both before and after giving effect to
the Transactions to be consummated on the Closing
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Date, the number of authorized and issued shares of capital stock of the Parent,
the Borrower and each of its Subsidiaries, the par value thereof and, in the
case of Subsidiaries, the registered owner(s) thereof. All of such issued stock
has been duly and validly issued and is fully paid and non-assessable. Except as
set forth in such Schedule, as of the Closing Date neither the Parent, the
Borrower nor any such Subsidiary has outstanding any securities convertible into
or exchangeable for its capital stock nor does the Parent, the Borrower or any
such Subsidiary have outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
SECTION 4.18 ENVIRONMENTAL MATTERS. (a) Except as set forth in
Schedule 4.18, (i) each Loan Party and its Subsidiaries are in compliance with
all applicable Environmental Laws, (ii) each Loan Party and its Subsidiaries
have all Environmental Approvals required to operate their businesses as
presently conducted or as reasonably anticipated to be conducted, all such
Environmental Approvals are in effect, no appeal or other action is pending to
revoke any such Environmental Approval, and each Loan Party and each of its
Subsidiaries are in full compliance with all terms and conditions of such
Environmental Approvals, (iii) no Loan Party, its Subsidiaries nor any of their
Environmental Affiliates has received any communication (written or oral),
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that a Loan Party or such Subsidiary or Environmental Affiliate is
not in full compliance with all Environmental Laws, and (iv) to the Parent's and
the Borrower's best knowledge after due inquiry, there are no circumstances that
may prevent or interfere with such full compliance in the future.
(b) Except as set forth in Schedule 4.18, there is no Environmental
Claim pending or threatened against any Loan Party, any of its Subsidiaries or
any Environmental Affiliate.
(c) Except as set forth in Schedule 4.18, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge or disposal of
any Material of Environmental Concern, that could form the basis of any
Environmental Claims against any Loan Party, any of its Subsidiaries or any of
their Environmental Affiliates, which Environmental Claims, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
(d) No Release or Cleanup has occurred at any property currently or
formerly owned or leased by any Loan Party or its Subsidiaries that could
reasonably be expected to result in the assertion or creation of a Lien on said
property by any governmental body or agency with respect thereto, nor has any
such assertion of a Lien been made by any governmental body or agency with
respect thereto.
(e) The Borrower has heretofore delivered true and correct copies of
all environmental studies, assessments or reports conducted of the Parent or any
of its Subsidiaries and of each property currently or formerly owned or operated
by the Parent or any of its Subsidiaries, including but not necessarily limited
to Phase I or Phase II environmental assessments, underground storage tank
investigation reports, or asbestos surveys, that were prepared within the last
five years, except that such time limitation shall not apply to asbestos
surveys.
(f) Without in any way limiting the generality of the foregoing,
except as disclosed in Schedule 4.18, (i) there are no underground storage tanks
located on property owned or leased by any Loan Party or any of its Subsidiaries
and (ii) no polychlorinated biphenyls (PCB's) are used or stored at any property
owned or leased by the Borrower or any of its Subsidiaries.
SECTION 4.19 INSURANCE. Schedule 4.19 sets forth a complete and
accurate description of all policies of insurance maintained by the Parent and
its Subsidiaries as of the Closing Date. The Borrower has paid all premiums due
on or prior to the Closing Date in respect of such policies and all such
policies are in full force and effect.
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SECTION 4.20 PATENTS, TRADEMARKS, ETC. Each Loan Party and its
Subsidiaries has obtained and holds in full force and effect all patents,
trademarks, servicemarks, trade names, copyrights and other such rights, free
from burdensome restrictions, which are reasonably necessary for the operation
of its business as presently conducted. No material product, process, method,
substance, part or other material presently sold by or employed by any Loan
Party or any of its Subsidiaries in connec tion with such business infringes any
patent, trademark, service mark, trade name, copyright, license or other right
owned by any other Person. There is not pending or overtly threatened any claim
or litigation against or affecting any Loan Party or any of its Subsidiaries
contesting its right to sell or use any such product, process, method,
substance, part or other material which would be reasonably likely to have a
Material Adverse Effect.
SECTION 4.21 OWNERSHIP OF PROPERTY. Schedule 4.21 sets forth all the
real property owned or leased by the Parent or any of its Subsidiaries as of the
Closing Date and identifies the street address, whether such property is leased
or owned and, if owned, the current owner thereof. The Parent and its
Subsidiaries have good and marketable fee simple title to or valid leasehold
interests in all of such real property and good title or valid leasehold
interests to all of their personal property subject to no Lien of any kind
except Liens permitted hereby. The Parent and its Subsidiaries enjoy peaceful
and undisturbed possession under all of their respective leases, except where
the failure would not reasonably be expected to have a Material Adverse Effect.
SECTION 4.22 NO DEFAULT. No Loan Party nor any of its Subsidiaries
is in default under or with respect to any Transaction Document or any other
agreement, instrument or undertaking to which it is a party or by which it or
any of its property is bound in any respect which could reasonably be expected
to result in a Material Adverse Effect. No Default or Event of Default exists.
SECTION 4.23 LICENSES, ETC. Each Loan Party and its Subsidiaries
have obtained and hold in full force and effect, all material franchises,
licenses, permits, certificates, authorizations, qualifications, easements,
rights of way and other rights, consents and approvals which are reasonably
necessary for the operation of their respective businesses as presently
conducted.
SECTION 4.24 COMPLIANCE WITH LAW. Each Loan Party and each of its
Subsidiaries is in compliance with all laws, rules, regulations, orders,
judgments, writs and decrees except where such non-compliance, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.25 NO BURDENSOME RESTRICTIONS. No Loan Party nor any of
its Subsidiaries is a party to any agreement or instrument or subject to any
other obligation or any charter or corporate restriction or any provision of any
applicable law, rule or regulation which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
SECTION 4.26 LABOR MATTERS. Except as set forth on Schedule 4.26, as
of the Closing Date there are no collective bargaining agreements or
Multiemployer Plans covering the employees of any Loan Party or any of its
Subsidiaries. None of the Loan Parties has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years and to
the best knowledge of such Persons, there are none now threatened.
Section 4.27 PARENT BUSINESS. As of the Closing Date, the Parent
conducts no business other than the ownership of 100% of the capital stock of
the Borrower and has no assets or liabilities other than those reflected in the
financial statements previously delivered to the Banks. At any time after the
Closing Date, the Parent conducts no business other than that expressly
permitted by the terms of this Agreement, including,
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without limitation, the consummation of, and ownership of Subsidiaries purchased
or created pursuant to, Permitted Acquisitions.
SECTION 5. AFFIRMATIVE COVENANTS.
The Parent and the Borrower covenant and agree that on and after the
Closing Date and until the Total Commitment has terminated, and the Obligations
are paid in full:
SECTION 5.1 INFORMATION COVENANTS. With respect to the information
required to be delivered pursuant to clauses (a) through (d) below, the Borrower
shall furnish to the Administrative Agent sufficient copies of such information
for the Administrative Agent to promptly furnish such information to the Banks
and with respect to the information required to be delivered in clauses (e)
through (k), the Borrower shall furnish to each Bank, the Swingline Bank and to
the Administrative Agent:
(a) QUARTERLY FINANCIAL STATEMENTS. Within 45 days after the close
of each quarterly accounting period in each fiscal year of the Parent (other
than the fourth quarterly accounting period), the consolidated and consolidating
balance sheet of the Parent and its Subsidiaries as at the end of such quarterly
period and the related consolidated statements of income, cash flow and
shareholders' equity and consolidating statements of income, for such quarterly
period and for the elapsed portion of the fiscal year ended with the last day of
such quarterly period, and in the case of such consolidated statements of income
setting forth comparative figures for the related periods in the prior fiscal
year.
(b) ANNUAL FINANCIAL STATEMENTS. Within 90 days after the close of
each fiscal year of the Parent, the consolidated and consolidating balance sheet
of the Parent and its Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income, cash flow and shareholders' equity
and consolidating statements of income for such fiscal year, setting forth, in
the case of such consolidated financial statements, comparative figures for the
preceding fiscal year and, with respect to such consolidated financial
statements, certified without qualification by Price Waterhouse or any other
"big six" accounting firm or any other independent certified public accountants
of recognized national standing reasonably acceptable to the Required Banks, in
each case together with a report of such accounting firm stating that in the
course of its regular audit of the consolidated financial statements of the
Borrower, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge of any
Default or Event of Default under Section 6.1, or if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(c) MONTHLY FINANCIAL STATEMENTS. Within 30 days after the end of
each monthly reporting period in the twelve month period following the Closing
Date, the consolidated and consolidating balance sheet of the Parent and its
Subsidiaries as at the end of such monthly reporting period and the related
consolidated and consolidating statements of income for such monthly reporting
period and for the elapsed portion of current fiscal year ended on the last day
of such monthly reporting period, and in each case setting forth, in the case of
such consolidated financial statements, comparative figures for the related
periods in the prior fiscal year, including, without limitation, a division
sales analysis in the form of Exhibit P attached hereto.
(d) MANAGEMENT LETTERS. Promptly after the Borrower's or the
Parent's receipt thereof, a copy of any "management letter" or other material
report received by the Borrower or the Parent from its certified public
accountants.
(e) BUDGETS. Within 45 days after the first day of each fiscal year
of the Parent, a quarterly budget and quarterly financial forecast of results of
operations and sources and uses of cash (in form
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satisfactory to the Required Banks) for the Parent and its Subsidiaries and for
the Borrower and its Subsidiaries prepared by the Parent for such fiscal year,
accompanied by a written statement of the assumptions used in connection
therewith, together with a certificate of the Principal Financial Officer of the
Parent to the effect that such budget and financial forecast and assumptions are
reasonable and represent the Borrower's good faith estimate of its future
financial requirements and performance. The financial statements required to be
delivered pursuant to clauses (a), (b) and (c) above shall be accompanied by a
comparison of the actual financial results set forth in such financial
statements to those contained in the forecasts delivered pursuant to this clause
(e) together with an explanation of any material variations from the results
anticipated in such forecasts.
(f) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements under clauses (a), (b) and (c) above, a compliance
certificate of the Principal Financial Officer of the Borrower in the form of
Exhibit L (a "Compliance Certificate") which certifies that such financial
statements fairly present the financial condition and the results of operations
of the Parent and the Borrower and their respective Subsidiaries on the dates
and for the periods indicated, subject, in the case of interim financial
statements, to normally recurring year-end adjustments and at the time of
delivery of the financial statements under clauses (a) and (b) above such
Compliance Certificate shall certify that such officer has reviewed the terms of
the Loan Documents and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and condition of the
Parent and the Borrower and their respective Subsidiaries during the accounting
period covered by such financial statements, and that as a result of such review
such officer has concluded that no Default or Event of Default has occurred
during the period commencing at the beginning of the accounting period covered
by the financial statements accompanied by such certificate and ending on the
date of such certificate or, if any Default or Event of Default has occurred,
specifying the nature and extent thereof and, if continuing, the action the
Borrower has taken or proposes to take in respect thereof. The Compliance
Certificate delivered pursuant to the financial statements delivered under
clauses (a) and (b) above shall also set forth the calculations as required to
establish (i) whether the Parent was in compliance with the provisions of
Section 6.1 during and as at the end of the accounting period covered by the
financial statements accompanied by such certificate, (ii) the Adjusted Leverage
Ratio as in effect on the date of such statements for purposes of determining
the Margin Percentage, and (iii) the amount of the Borrower's Share of Excess
Cash Flow and Retained Equity Proceeds as of the date of such statements. At the
time of delivery of the financial statements delivered pursuant to clause (b)
above, the Borrower shall furnish a certificate in the form of Exhibit M hereto
(the "Excess Cash Flow Certificate") of the Principal Financial Officer of the
Borrower setting forth the calculation of the amount of Excess Cash Flow for the
relevant fiscal year.
(g) NOTICE OF DEFAULT OR LITIGATION. Promptly and in any event
within three Business Days after any Loan Party obtains knowledge thereof,
notice of (i) the occurrence of any Default or Event of Default, (ii) any
litigation or governmental proceeding pending or threatened against any Loan
Party which could reasonably be expected to result in a Material Adverse Effect
and (iii) any other event, act or condition which could reasonably be expected
to result in a Material Adverse Effect.
(h) ERISA.
(i) As soon as possible and in any event within 10 days
after any Loan Party or any member of its ERISA Controlled Group
knows, that:
(A) any Termination Event has occurred or
will occur, or
(B) any condition exists with respect to a
Plan which, in the case of an ERISA Plan, presents a
material risk of termination of the ERISA Plan and, in
the case of any Plan, presents a material risk of the
imposition of a material excise tax or other liability
on any Loan Party or any member of its ERISA Controlled
Group, or
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(C) any Loan Party or any member of its
ERISA Controlled Group has applied for a waiver of the
minimum funding standard under Section 412 of the Code
or Section 302 of ERISA, or
(D) any Loan Party or any member of its
ERISA Controlled Group has engaged in a "prohibited
transaction," as defined in Section 4975 of the Code or
as described in Section 406 of ERISA, that is not exempt
under Section 4975 of the Code and Section 408 of ERISA
where such transaction could reasonably be expected to
have a Material Adverse Effect, or
(E) the aggregate present value of the
Unfunded Benefit Liabilities under all Plans has in any
year increased to an amount in excess of $10,000,000, or
(F) any condition exists with respect to a
Multiemployer Plan which presents a material risk of a
partial or complete withdrawal (as described in Section
4203 or 4205 of ERISA) by any Loan Party or any member
of its ERISA Controlled Group from a Multiemployer Plan
that would have a Material Adverse Effect, or
(G) any Loan Party or any member of its
ERISA Controlled Group is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to
a Multiemployer Plan, or
(H) a Multiemployer Plan is in
"reorganization" (as defined in Section 418 of the Code
or Section 4241 of ERISA) or is "insolvent" (as defined
in Section 4245 of ERISA), or
(I) the potential withdrawal liability (as
determined in accordance with Title IV of ERISA) of any
Loan Party and the members of its ERISA Controlled Group
with respect to all Multiemployer Plans has in any year
increased to an amount in excess of $5,000,000, or
(J) there is an action brought against any
Loan Party or any member of its ERISA Controlled Group
under Section 502 of ERISA with respect to its failure
to comply with Section 515 of ERISA,
a certificate of an Authorized Officer of the
Borrower setting forth the details of each of
the events described in clauses (A) through (F)
above as applicable and the action which the
Borrower or the applicable member of its ERISA
Controlled Group has taken or proposes to take
with respect thereto, together with a copy of
any notice or filing from the PBGC or which may
be required by the PBGC or other agency of the
United States government with respect to each of
the events described in claus es (A) through (J)
above, as applicable.
(ii) As soon as possible and in any event (i) within
three Business Days after the receipt by any Loan Party or (ii)
within ten Business Days after the receipt by any member of its
ERISA Controlled Group of a demand letter from the PBGC notifying
such Loan Party or such member of its ERISA Controlled Group of its
final decision finding liability and the date by which such
liability must be paid, a copy of such letter, together with a
certificate of the president or Principal Financial Officer of the
Borrower setting forth the action which such Loan Party or such
member of its ERISA Controlled Group has taken or proposes to take
with respect thereto.
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(i) SEC FILINGS. Promptly upon transmission thereof,
copies of all regular and periodic financial information, proxy
materials and other information and reports, if any, which any Loan
Party shall file with the Securities and Exchange Commission or any
governmental agencies substituted therefore or which any Loan Party
shall send to its stockholders.
(j) ENVIRONMENTAL. Promptly and in any event within two
Business Days after the existence of any of the following
conditions, a certificate of an Authorized Officer of the Borrower
specifying in detail the nature of such condition and the applicable
Loan Party's proposed response thereto: (i) the receipt by any Loan
Party of any communication (written or oral), whether from a
governmental authority, citizens group, employee or otherwise, that
alleges that such Loan Party or an Environmental Affiliate is not in
compliance with applicable Environmental Laws, or (ii) any Loan
Party shall obtain actual knowledge that there exists any
Environmental Claim pending or threatened against such Loan Party or
Environmental Affiliate.
(k) OTHER INFORMATION. From time to time, such other
information or documents (financial or otherwise) as the
Administrative Agent or any Bank may reasonably request.
SECTION 5.2 BOOKS, RECORDS AND INSPECTIONS. Each Loan Party shall,
and shall cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in relation
to its business and activities. Each Loan Party shall, and shall cause each of
its Subsidiaries to, permit officers and designated representatives of any Bank
to visit and inspect any of its properties, and to examine its books of record
and account, and discuss the affairs, finances and accounts of each Loan Party
or any of its Subsidiaries with, and be advised as to the same by, its and their
officers and independent accountants, all upon reasonable notice and at such
reasonable times as such Bank may desire. Nothing contained in this Section 5.2
shall preclude any Loan Party from attending any meeting with such Loan Party's
independent accountants.
SECTION 5.3 MAINTENANCE OF INSURANCE. Each Loan Party shall, and
shall cause each of its Subsidiaries to, (a) maintain with financially sound and
reputable insurance companies insurance on itself and its properties in at least
such amounts and against at least such risks as are customarily insured against
in the same general area by companies engaged in the same or a similar business,
which insurance shall in any event not provide for materially less coverage than
the insurance in effect on the Closing Date as set forth on Schedule 4.19, (b)
maintain the Administrative Agent and the Banks as named additional insureds and
loss payees in respect of such insurance at least to the extent the
Administrative Agent and the Banks are so named on the Closing Date, and (c)
furnish to each Bank from time to time, upon written request, the policies under
which such insurance is issued, certificates of insurance and such other
information relating to such insurance as such Bank may reasonably request.
SECTION 5.4 TAXES. (a) Each Loan Party shall pay or cause to be
paid, and shall cause each of its Subsidiaries to pay or cause to be paid, when
due, all taxes, charges and assessments and all other lawful claims required to
be paid by such Loan Party or such Subsidiaries, except as contested in good
faith and by appropriate proceedings diligently conducted, if adequate reserves
have been established with respect thereto in accordance with GAAP.
(b) No Loan Party shall, and shall not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated tax return
with any Person (other than the Borrower and its Subsidiaries and the Parent).
SECTION 5.5 CORPORATE FRANCHISES. Each Loan Party shall, and shall
cause each of its Subsidiaries to, do or cause to be done, all things necessary
to preserve and keep in full force and effect its existence and its patents,
trademarks, servicemarks, tradenames, copyrights, franchises, licenses, permits,
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certificates, authorizations, qualifications, accreditation, easements, rights
of way and other rights, consents and approvals except where the failure to so
preserve any of the foregoing (other than existence) could not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
SECTION 5.6 COMPLIANCE WITH LAW. Each Loan Party shall, and shall
cause each of its Subsidiaries to, comply with all applicable laws, rules,
statutes, regulations, decrees and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of their business and the ownership of their property, including,
without limitation, all Environmental Laws, except such non-compliance as could
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
SECTION 5.7 PERFORMANCE OF OBLIGATIONS. Each Loan Party shall, and
shall cause each of its Subsidiaries to, perform all of its obligations under
the terms of each mortgage, indenture, security agreement, debt instrument,
lease, undertaking and contract by which it or any of its properties is bound or
to which it is a party if the failure to so perform, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
SECTION 5.8 MAINTENANCE OF PROPERTIES. Each Loan Party shall, and
shall cause each of its Subsidiaries to, ensure that its properties reasonably
necessary to its business are kept in good repair, working order and condition,
normal wear and tear excepted, except to the extent no Material Adverse Effect
could result therefrom.
SECTION 5.9 FURTHER ASSURANCES. (a) The Parent shall, and shall
cause each Loan Party to, execute any and all further documents, financing
statements, agreements and instruments, and take all further action (including
filing Uniform Commercial Code and other financing statements, mortgages and
deeds of trust), that may be required under applicable law or which the Required
Banks, the Administrative Agent or the Collateral Agent may reasonably request,
in order to effectuate the Transac tions and in order to grant, preserve,
protect and perfect the validity and first priority of the Liens created or
intended to be created by the Security Documents.
(b) In addition, from time to time, each Loan Party, at its own cost
and expense, will promptly secure the Secured Obligations by pledging or
creating, or causing to be pledged or created, perfected Liens with respect to
its assets and properties (and the assets and properties of its Subsidiaries) of
a nature similar to the Collateral as of the Closing Date as the Administrative
Agent or the Required Banks shall reasonably request (it being understood that
it is the intent of the parties that the Secured Obligations shall be secured
by, among other things, substantially all such assets of the Loan Parties
granted pursuant to the Security Documents (including those acquired subsequent
to the Closing Date)). Such Liens will be created under the Security Documents
or such other security agreements, mortgages, deeds of trust and other
instruments and documents as are satisfactory to the Collateral Agent, and each
Loan Party shall deliver or cause to be delivered to the Administrative Agent
all such instruments and documents (including legal opinions, title insurance
policies, surveys and lien searches) as the Collateral Agent shall reasonably
request to evidence compliance with this Section 5.9. The Borrower agrees to
provide such evidence as the Collateral Agent or the Required Banks shall
reasonably request as to the perfection and priority status of each such Lien.
In connection with any additional Liens in respect of real property, the
Borrower shall upon request by the Adminis trative Agent or the Required Banks,
at its expense, cause to be delivered to the Administrative Agent satisfactory
real estate appraisals. Notwithstanding the foregoing, mortgages shall only be
required on Material Real Estate.
(c) The Parent shall cause each Material Subsidiary incorporated or
organized after the Closing Date (other than a Receivables Subsidiary) to
promptly execute and deliver a counterpart of the Subsidiary Guaranty, the
Security Agreement, the Pledge Agreement and any other instruments or documents
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related thereto as the Collateral Agent shall reasonably request, and in the
case of any such Material Subsidiary which is not a Subsidiary of the Borrower,
to become a Borrowing Subsidiary as provided in Section 2.31, in each case
within 30 days of such Person's having become a Subsidiary.
SECTION 5.10 REQUIRED APPRAISALS. In the event that the
Administrative Agent or the Required Banks at any time after the Closing Date
determine in their sole discretion (whether as a result of a position taken by
an applicable bank regulatory agency or official, or otherwise) that real estate
appraisals satisfying the requirements set forth in 12 C.F.R., Part 34-Subpart
C, or any successor or similar statute, rule, regulations, guideline or order
(any such appraisal a "Required Appraisal") are or were required to be obtained,
or should be obtained, in connection with any Mortgaged Property or Mortgaged
Properties, then, within 60 days (or such earlier period as may be required by
law) after receiving written notice thereof from the Administrative Agent or the
Required Banks, as the case may be, the Borrower shall cause such Required
Appraisal to be delivered, at the expense of the Borrower, to the Administrative
Agent, which Required Appraisal, and the respective appraiser, shall be
satisfactory to the Administrative Agent.
SECTION 5.11 RECEIVABLES PROGRAM REFINANCINGS. On or prior to June
30 of each year commencing June 30, 2000, the Borrower shall furnish evidence
reasonably satisfactory to the Required Banks demonstrating either (x) that the
Borrower has refinanced, extended, renewed or replaced the Receivables Program,
or has written binding commitments therefor, in either case in such amounts and
pursuant to such terms and provisions as are sufficient to provide the Borrower
with sufficient liquidity for the twelve months following such date or (y) that
on a Pro Forma Basis, it shall have sufficient liquidity for such twelve month
period without the renewal, refinancing, extension or replacement of the
Receivables Program.
SECTION 5.12 MAINTENANCE OF CORPORATE SEPARATENESS. The Parent will,
and will cause each of its Subsidiaries to, satisfy customary corporate
formalities, including the holding of regular board of directors' and
shareholders' meetings or action by directors or shareholders without a meeting
and the maintenance of corporate offices and records. Other than pursuant to any
Parent Guaranty or Subsidiary Guaranty entered into pursuant to this Agreement,
neither the Parent nor any of its Subsid iaries shall make any payment to a
creditor of any other Subsidiary in respect of any liability of any such
Subsidiary, and no bank account of any Subsidiary shall be commingled with any
bank account of the Parent or any other Subsidiary. Any financial statements
distributed to any creditors of any Subsidiary shall clearly establish or
indicate the corporate separateness of such Subsidiary from the Parent and its
other Subsidiaries. Finally, neither the Parent nor any of its Subsidiaries
shall take any action, or conduct its affairs in a manner, which is likely to
result in the corporate existence of the Parent or any of its Subsidiaries being
ignored, or in the assets and liabilities of the Parent or any of its
Subsidiaries being substantively consolidated with those of any other such
Person in a bankruptcy, reorganization or other insolvency proceeding.
SECTION 6. NEGATIVE COVENANTS.
Each of the Parent and the Borrower covenants and agrees that on and
after the Closing Date until the Total Commitment has terminated, and the
Obligations are paid in full:
SECTION 6.1 FINANCIAL COVENANTS.
(a) LEVERAGE RATIOS. (i) The Parent shall not permit the
Adjusted Leverage Ratio, as of the last day of each four consecutive
fiscal quarter period ended during the time periods set forth below
(taken as one accounting period), to exceed the ratio set forth
below:
DATE RATIO
---- -----
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From the Closing Date until 4.5:1
the third anniversary of the
Closing Date
From the third anniversary of 4.0:1
the Closing Date and thereafter
(ii) The Parent shall not permit the ratio
of Consolidated Total Senior Debt to Consolidated
Adjusted EBITDA, as of the last day of each four
consecutive fiscal quarter period ended during the time
periods set forth below (taken as one accounting period)
to exceed the ratio set forth below:
DATE RATIO
---- -----
From the Closing Date until 4.0:1
the third anniversary of the
Closing Date
From the third anniversary of 3.5:1
the Closing Date and thereafter
(b) INTEREST COVERAGE RATIO. The Parent shall not permit
the ratio of Consolidated EBITDA to Consolidated Interest Expense
for each four consecutive fiscal quarter period ended during the
time periods set forth below (taken as one accounting period), to be
less than the ratio set forth below:
FOUR FISCAL
QUARTERS ENDING ON RATIO
------------------ -----
From the Closing Date 2.25:1
until the first anniversary
of the Closing Date
From the first anniversary 2.5:1
of the Closing Date until
the third anniversary of the
Closing Date
From the third anniversary 3.0:1
of the Closing Date and thereafter
(c) FIXED CHARGE COVERAGE RATIO. The Parent shall not
permit the ratio of (x) the sum of (i) Consolidated EBITDA plus (ii)
Consolidated Rental Expense to (y) Consolidated Fixed Charges for
each four consecutive fiscal quarter period (taken as one accounting
period), ending on or after the Closing Date to be less than 1.25:1.
(d) CAPITAL EXPENDITURES. The Parent and the Borrower
shall not make or incur (or commit to make or incur) and shall not
permit any of its Subsidiaries to make or incur (or commit to make
or incur) any Capital Expenditures, except Capital Expenditures of
the Parent and its Subsidiaries in any fiscal year of the Borrower
set forth below not in excess, in the aggregate of the amount (the
"Maximum Amount") set forth below opposite such fiscal year:
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FISCAL YEAR ENDING
CLOSEST TO DECEMBER 31 MAXIMUM AMOUNT
---------------------- --------------
1997 70,000,000
1998 67,000,000
1999 63,000,000
2000 70,000,000
2001 76,000,000
2002 84,000,000
PROVIDED that (a) up to $15,000,000 of any Capital Expenditures permitted to be
incurred during any fiscal year and not made in such fiscal year may be carried
over and expended during the next succeeding fiscal year (it being understood
and agreed that any Capital Expenditures made during such next succeeding fiscal
year shall count, FIRST, against the amount permitted to be carried over to such
next succeeding fiscal year pursuant to this proviso and, SECOND, against any
amounts permitted to be made during such next succeeding fiscal year as set
forth in the table above) and (b) the amount of Capital Expenditures permitted
to be incurred during any fiscal year may be increased to the extent of the then
available Retained Equity Proceeds and the Borrower's Share of Excess Cash Flow.
Any Permitted Acquisition that would otherwise constitute a Capital Expenditure
in accordance with GAAP shall not be included in the computation of the amount
of Capital Expenditures permitted under this Section 6.1(d). Upon the occurrence
of a Permitted Acquisition (other than the Acquisition), the Banks hereby agree
that the Maximum Amount for the fiscal year in which such Permitted Acquisition
occurs (the "Subject Year") and each fiscal year thereafter will increase by
$20,000 per store (net of any stores scheduled to be closed as a result of such
Permitted Acquisition) being acquired pursuant to such Permitted Acquisition,
with the amount of such increase for the Subject Year to be proportionately
decreased by multiplying such amount by a fraction where the numerator equals
the remaining number of full months remaining in the Subject Year and the
denominator is twelve.
SECTION 6.2 INDEBTEDNESS. The Parent shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume, suffer to exist or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, other than:
(a) Indebtedness hereunder and under the other Loan Documents and
any Indebtedness, if any, in relation to the Receivables Program;
(b) Indebtedness outstanding on the Closing Date and set forth on
Schedule 6.2 hereto (including, without limitation, the Senior Notes and the
Senior Subordinated Notes, including the guarantees thereof by the Parent, in
the aggregate principal amount not in excess of $300,000,000);
(c) Indebtedness of the Borrower or any of its Subsidiaries
permitted under Section 6.6;
(d) Indebtedness of the Borrower or any of its Subsidiaries with
respect to Capital Leases and other purchase money Indebtedness, in each case
incurred to finance Capital Expenditures permitted under Section 6.1(d), not in
excess of $6,000,000 in the aggregate at any one time outstanding; provided that
any such Indebtedness shall not exceed the purchase price or the fair market
value of the asset so financed;
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(e) Other Indebtedness created, incurred or assumed by the
Borrower after the date hereof not enumerated in clauses (a) through (d) above,
provided that (i) the aggregate outstanding principal amount of such
Indebtedness shall not exceed $50,000,000 at any one time outstanding (less the
amount by which the remaining outstanding principal amount of the Existing Notes
from time to time exceeds $1,000,000); (ii) up to $25,000,000 may be used for
the increase of the Total Revolving Loan Commitment pursuant to Section 2.30;
and (iii) to the extent the Indebtedness permitted to be incurred by this clause
(e) is not utilized to increase the Total Revolving Loan Commitment, such
Indebtedness shall be Permitted Subordinated Debt;
(f) Indebtedness incurred in the ordinary course of business owed by
(x) Subsidiaries of the Borrower to the Borrower or (y) by any Loan Party to any
other Loan Party;
(g) Unsecured letters of credit in an aggregate stated amount equal
to the L/C Sublimit minus the Letter of Credit Outstandings;
(h) Permitted Acquired Indebtedness;
(i) Any other unsecured Indebtedness of the Parent and its
Subsidiaries in an aggregate outstanding principal amount not to exceed at any
time $1,000,000; and
(j) Indebtedness of the Borrower resulting from the refinancing of
Indebtedness permitted by Sections (b) through (i) above; PROVIDED, HOWEVER,
that (i) the principal amount of any such refinancing Indebtedness (as
determined as of the date of the incurrence of such refinancing Indebtedness in
accordance with GAAP) does not exceed the principal or face amount of the
Indebtedness refinanced thereby on such date; (ii) the Weighted Average Life to
Maturity of such Indebtedness is not decreased; (iii) the covenants, defaults
and similar provisions applicable to such refinancing Indebtedness or
obligations are no more restrictive in any material respect than the
Indebtedness being refinanced and do not conflict in any material respect with
the provisions of this Agreement and (iv) such refinancing Indebtedness is
otherwise upon terms and conditions no more onerous or restrictive in any
material respect (as determined by the Required Banks) on the Borrower than the
Indebtedness being refinanced.
SECTION 6.3 LIENS. The Parent shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any of its property now owned or hereafter acquired,
other than:
(a) Liens existing on the Closing Date and set forth on Schedule 6.3
hereto;
(b) Liens created or contemplated by the Receivables Program
Documents on the Receivables of the Borrower and its Subsidiaries transferred to
the Receivables Subsidiary pursuant thereto;
(c) inchoate Liens for taxes, assessments or governmental charges
not yet due or which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves are
being maintained in accordance with GAAP;
(d) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by Law (other than
any Lien imposed by ERISA or pursuant to any Environmental Law) created in the
ordinary course of business for amounts not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted and with respect
to which adequate bonds have been posted or which are solely informational in
nature and do not, and do not purport to, create a security interest;
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(e) Liens (other than any Lien imposed by ERISA or pursuant to any
Environmental Law) incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(f) Easements (including construction, operating and reciprocal
easement agreements), rights-of-way, zoning and similar restrictions and other
similar charges, covenants or encumbrances not interfering with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries and which do
not detract materially from the value of the property to which they attach or
impair materially the use thereof by the Borrower or any of its Subsidiaries or
materially adversely affect the Liens of the Collateral Agent or the Banks
therein;
(g) Liens granted to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Security Documents securing the Secured
Obligations;
(h) Judgment Liens so long as the claims secured thereby do not
exceed $10,000,000 in the aggregate and are being contested in good faith
pursuant to appropriate proceedings;
(i) Liens created pursuant to Capital Leases and to secure other
purchase-money Indebtedness permitted pursuant to Section 6.2(d), PROVIDED that
such Liens are only in respect of the property or assets subject to, and secure
only, the respective Capital Lease or other purchase-money Indebtedness; and
(j) Liens in addition to those listed above provided that the
obligations secured thereby shall not exceed $50,000 for any such Lien or
$1,000,000 in the aggregate for all such Liens.
SECTION 6.4 RESTRICTION ON FUNDAMENTAL CHANGES.
(a) The Parent shall not, and shall not permit any of its
Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution), discontinue its business
or convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of its business or property,
whether now or hereafter acquired, except (i) as otherwise permitted under
Section 6.5, and (ii) any wholly-owned Subsidiary of the Borrower may merge into
or convey, sell, lease or transfer all or substantially all of its assets to,
the Borrower or any other wholly-owned Subsidiary of the Borrower.
(b) The Parent shall not and shall not permit any of its
Subsidiaries to, amend its certificate of incorporation or by-laws to the extent
such amendment is adverse to the Banks in any respect.
SECTION 6.5 SALE OF ASSETS. The Parent shall not, and shall not
permit any of its Subsidiaries to, convey, lease, sell, transfer or otherwise
dispose of (or agree to do so at any future time) all or any part of its
property or assets, except (i) sales of inventory in the ordinary course of
business; (ii) sales in the ordinary course of business of furniture, fixtures,
leasehold improvements and equipment which, consistent with past practice, is
uneconomic, obsolete or no longer useful in its business; (iii) sales of
Receivables pursuant to and in accordance with the provisions of the Receivables
Program Documents; and (iv) sales of other assets of the Borrower and its
Subsidiaries PROVIDED that (x) at least 80% of the aggregate consideration
therefor shall be in the form of cash or Cash Equivalents, (y) the aggregate Net
Cash Proceeds or net book value, whichever is greater, of all assets sold or
otherwise disposed of pursuant to this clause (iv) shall not exceed 5% of
Consolidated Net Tangible Assets during any fiscal year of the Borrower and (z)
the Net Cash Proceeds of each such sale are applied in accordance with the
provisions of Sections 2.12(a).
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SECTION 6.6 CONTINGENT OBLIGATIONS. The Parent shall not, and shall
not permit any of its Subsidiaries to, create or become or be liable with
respect to any Contingent Obligation, except:
(a) pursuant to the Parent Guaranty, Subsidiary Guaranty, the
Security Documents or the Receivables Program Documents; and
(b) Contingent Obligations which are in existence on the Closing
Date and which are set forth on Schedule 6.6, including, without limitation, the
guarantees, if any, by the Borrower of the Senior Notes and the Senior
Subordinated Notes.
SECTION 6.7 DIVIDENDS. The Parent shall not, and shall not permit
any of its Subsidiaries to (x) make any Restricted Payment or (y) declare or pay
any dividends (other than dividends payable solely in common stock), or return
any capital to, its stockholders or authorize or make any other distribution,
payment or delivery of property or cash to its stockholders as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, any shares of any
class of its capital stock now or hereafter outstanding (or any options or
warrants issued with respect to its capital stock), or set aside any funds for
any of the foregoing purposes (all the foregoing "Dividends"), except that
(a) Dividends may be made to the Borrower or any of its Subsidiaries
by any of its wholly-owned Subsidiaries;
(b) so long as there shall exist no Default or Event of Default
(both before and after giving effect to the payment thereof) the Borrower may
make Restricted Payments to the Parent, so long as the proceeds thereof are
promptly used by the Parent to pay operating and administrative expenses in the
ordinary course of business and other similar corporate overhead costs and
expenses; PROVIDED that the maximum amount of Restricted Payments made pursuant
to this clause (b) in any fiscal year of the Borrower shall not exceed $500,000
in the aggregate and shall only be made if there exists no Default or Event of
Default (both before and after giving effect to the payment thereof);
(c) so long as the Borrower is a member of the same consolidated
group as the Parent for federal income tax purposes, payments required by such
Person pursuant to the Tax Sharing Agreement as in effect on the Closing Date
and delivered to the Administrative Agent pursuant to Section 3.1(f) shall be
permitted; and
(d) the Parent may make, and the Borrower may pay cash Restricted
Payments to the Parent to enable the Parent to make, payments to repurchase the
Parent's common stock and/or options to purchase the Parent's common stock held
by directors, executive officers, member of management or employees of the
Parent or any of its Affiliates upon the death, disability, retirement or
termination of such director, executive officers, member of management or
employee, so long as (x) no Default or Event of Default then exists or would
exist after giving effect thereto and (y) the aggregate net amount of cash
expended by the Borrower and the Parent pursuant to this clause (v) in any
fiscal year shall not exceed $2,000,000.
SECTION 6.8 ADVANCES, INVESTMENTS AND LOANS. The Parent shall not,
and shall not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or directly or indirectly purchase or acquire any stock,
obligations or securities of, or any other interest in, or purchase all or
substantially all of the assets of, or make any capital contribution to any
Person (each an "Investment"), except that the following shall be permitted:
(a) accounts receivable owned by the Parent and its Subsidiaries, if
created in the ordinary course of the business of the Parent and its
Subsidiaries and payable or dischargeable in accordance with customary trade
terms;
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(b) (i) intercompany loans and advances permitted by Section 6.2(f)
and (ii) loans by the Borrower to the Parent to finance the cash portion of
Permitted Acquisitions, the proceeds of which shall be used within one Business
Day directly or indirectly by the Parent to consummate such Permitted
Acquisition, which loans shall be evidenced by an Intercompany Note pledged by
the Borrower to the Collateral Agent under the Pledge Agreement;
(c) loans and advances by the Borrower and its Subsidiaries to their
employees in the ordinary course of its business not exceeding $5,000,000 in the
aggregate at any one time outstanding;
(d) Investments by the Borrower in the Receivables Subsidiary to the
extent contemplated by the Receivables Program;
(e) evidences of Indebtedness issued by the purchaser of assets and
received by the Borrower or any of its Subsidiaries in connection with asset
sales to the extent permitted by Section 6.5(iv);
(f) extensions of credit to the customers of the Parent or its
Subsidiaries in the ordinary course of the business of the Parent or such
Subsidiary pursuant to any credit card programs to enable such customer to
purchase inventory from the Parent or any of its Subsidiaries;
(g) Investments by the Parent or the Borrower constituting a
Permitted Acquisition and related Investments by the Parent or the Borrower in
one or more of their Subsidiaries in connection with, and substantially
contemporaneously with, such Permitted Acquisition; PROVIDED that the Parent and
the Borrower shall have complied with all of the terms and conditions set forth
in the definition of Permitted Acquisition;
(h) other Investments by the Parent, the Borrower or any Subsidiary
not to exceed $5,000,000 in any fiscal year of the Borrower;
(i) Investments in customers of the Parent or its Subsidiaries
received in the ordinary course of business in exchange for receivables owed by
such customer to the Parent or such Subsidiary as a result of the workout of
such receivable or the bankruptcy of such customer; and
(j) the Borrower and its Subsidiaries may acquire and hold Cash
Equivalents.
SECTION 6.9 TRANSACTIONS WITH AFFILIATES. The Parent shall not, and
shall not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate (other than a Loan Party), other than (i) on terms
and conditions substantially as favorable to the Parent or such Subsidiary as
would be obtainable at the time in a comparable arm's-length transaction with a
Person other than an Affiliate, (ii) pursuant to the Receivables Program, (iii)
Restricted Payments permitted to be paid to the extent provided in Section 6.7,
(iv) leases in existence on the date hereof entered into with PR Investments and
described on Schedule 6.9 hereto, (v) the consulting agreement dated as of
February 1, 1997, by and among the Parent and Bernie Fuchs and described on
Schedule 6.9 hereto, and (vi) those Investments permitted pursuant to Section
6.8.
SECTION 6.10 LIMITATION ON VOLUNTARY PAYMENTS AND MODIFICATIONS OF
CERTAIN DOCUMENTS. The Parent shall not, and shall not permit any of its
Subsidiaries to, (a) make any voluntary or optional payment or prepayment on or
redemption or acquisition for value of (including, without limitation, by way of
depositing with the trustee with respect thereto money or securities before due
for the purpose of paying when due) or exchange of any Indebtedness other than
(i) the Indebtedness hereunder and under the other Loan Documents and (ii) so
long as no Default or Event of Default has occurred and is continuing, any
Indebtedness
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outstanding under the Existing Notes; PROVIDED that the amount to be paid for
each $1,000 principal amount of Existing Notes shall not exceed the amount to be
paid for a corresponding amount of the Existing Notes pursuant to the Tender
Offer, (b) amend, modify, supplement, or waive, or permit the amendment,
modification, supplementation, or waiver of, any provision of any Transaction
Document (other than the Loan Documents) PROVIDED, HOWEVER, that the Receivables
Program Documents and the Acquisition Documents may be amended, modified,
supplemented or waived in a manner not materially adverse to the Administrative
Agent or the Banks or (c) resign as Servicer under the Receivables Program.
SECTION 6.11 CHANGES IN BUSINESS. The Parent shall not, and shall
not permit any of its Subsidiaries to, enter into any business which is
substantially different from, or not reasonably incidental to, that conducted by
the Parent or such Subsidiary, as the case may be, on the Closing Date after
giving effect to the Transactions; PROVIDED that the Parent shall not incur, and
shall not become liable with respect to, any Indebtedness other than as
expressly permitted pursuant to Section 6.2.
SECTION 6.12 CERTAIN RESTRICTIONS. The Parent shall not, and shall
not permit any of its Subsidiaries or any Person controlling the Borrower to,
enter into any agreement (other than the Transaction Documents and agreements
evidencing Indebtedness outstanding on the Closing Date, in each case as in
effect on the Closing Date) which restricts the ability of the Parent or any of
its Subsidiaries (other than the Receivables Subsidiary) to (a) enter into
amendments, modifications or waivers of the Loan Documents, (b) sell, transfer
or otherwise dispose of its assets (other than the Receivables), (c) create,
incur, assume or suffer to exist any Lien upon any of its property (other than
the Receivables), (d) create, incur, assume, suffer to exist or otherwise become
liable with respect to any Indebtedness, or (e) pay any Dividend, provided that
Capital Leases or agreements governing purchase money Indebtedness which contain
restrictions of the types referred to in clauses (b) or (c) with respect to the
property covered thereby shall be permitted. The Parent shall not, and shall not
permit any of its Subsidiaries or any Person controlling the Borrower to, enter
into any amendment of the Receivables Program Documents as in effect on the
Closing Date or any refinancing of the Receivables Program that would materially
and adversely affect any Loan Party's ability to perform its Obligations under
this Agreement or any other Loan Document.
SECTION 6.13 SALES AND LEASEBACKS. The Parent shall not, and shall
not permit any of its Subsidiaries to, become liable, directly or indirectly,
with respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real or personal or mixed) whether now owned or hereafter
acquired, (i) which the Parent or such Subsidiary has sold or transferred or is
to sell or transfer to any other Person, or (ii) which the Parent or such
Subsidiary intends to use for sub stantially the same purposes as any other
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to any other Person in connection with such Lease.
SECTION 6.14 PLANS. The Parent shall not, nor shall it permit any
member of its ERISA Controlled Group to, take any action which would increase
the aggregate present value of the Unfunded Benefit Liabilities under all Plans
to an amount in excess of $15,000,000.
SECTION 6.15 LIMITATION ON DISPOSITIONS OF SUBSIDIARY STOCK. The
Parent shall not, nor shall it permit any of its Subsidiaries to, directly or
indirectly sell, assign, pledge or otherwise encumber or dispose of, or issue or
permit any of its Subsidiaries to issue to any other Person, any shares of
capital stock or other equity securities of (or warrants, rights or options to
acquire shares or other equity securities of) any of their Subsidiaries except
(i) to the extent permitted by the Security Documents, (ii) to qualify directors
if and to the extent required by applicable law, (iii) to the Borrower or any
wholly-owned Subsidiary of the Borrower and (iv) sales of equity securities
pursuant to the Receivables Program as in effect on the date hereof.
SECTION 6.16 FISCAL YEAR; FISCAL QUARTER. The Parent shall not, and
shall not permit any of its Subsidiaries to, change its fiscal year or any of
its fiscal quarters, except that any Subsidiary acquired after
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the date hereof shall be permitted to change its fiscal quarters and fiscal year
to conform to the fiscal quarters and fiscal year of the Parent.
SECTION 7. EVENTS OF DEFAULT.
SECTION 7.1 EVENTS OF DEFAULT. Each of the following events, acts,
occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or
as a result of compliance by any Person with any judgment, decree, order, rule
or regulation of any court or administrative or governmental body:
(a) FAILURE TO MAKE PAYMENTS. The Borrower or any Borrowing
Subsidiary shall (i) default in the payment when due of any principal of the
Loans or Swingline Loans, (ii) default, and such default shall continue
unremedied for three or more Business Days, in the payment when due of any
interest on the Loans or Swingline Loans or in the payment when due of any Fees
or any other amounts owing hereunder or (iii) default in the payment within two
Business Days of when due, of any reimbursement obligation in respect of the
honoring or drawing under any Letter of Credit.
(b) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made by any Loan Party herein or in any other Loan Document or in any
certificate or statement delivered pursuant hereto or thereto shall prove to be
false or misleading in any material respect on the date as of which made or
deemed made.
(c) BREACH OF COVENANTS.
(i) Any Loan Party shall fail to perform or observe any
agreement, covenant or obligation arising under Sections 5.1(g), 5.5
or 6.
(ii) Any Loan Party shall fail to perform or observe any
agreement, covenant or obligation arising under this Agreement
(except those described in subsections (a), (b) and (c)(i) above),
and such failure shall continue for fifteen days.
(iii) Any Loan Party shall fail to perform or observe
any agreement, covenant or obligation arising under any provision of
the Loan Documents other than this Agreement, which failure shall
continue after the end of the applicable grace period, if any,
provided therein.
(d) DEFAULT UNDER OTHER AGREEMENTS. Any Loan Party shall default in
the payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) of any amount owing in respect of any
Indebtedness (other than the Obligations) in the aggregate principal amount of
$2,000,000 or more; or any Loan Party shall default in the performance or
observance of any obligation or condition with respect to any such Indebtedness
or any other event shall occur or condition exist, if the effect of such
default, event or condition is to accelerate the maturity of any such
Indebtedness or to permit (without regard to any required notice or lapse of
time) the holder or holders thereof, or any trustee or agent for such holders,
to accelerate the maturity of any such Indebtedness, or any such Indebtedness
shall become or be declared to be due and payable prior to its stated maturity
other than as a result of a regularly scheduled payment.
(e) RECEIVABLES PROGRAM. Any default shall have occurred and be
continuing under any Receivable Program Document and as a result of such
default, the Receivables Program or any successor program may be terminated or
be suspended prior to the Final Maturity Date.
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(f) BANKRUPTCY, ETC. (i) Any Loan Party or any of its Subsidiaries
shall commence a voluntary case concerning itself under the Bankruptcy Code; or
(ii) an involuntary case is commenced against any Loan Party or any of its
Subsidiaries and the petition is not controverted within 10 days, or is not
dismissed within 60 days, after commencement of the case; or (iii) a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of any Loan Party or any of its Subsidiaries
or any Loan Party or any of its Subsidiaries commences any other proceedings
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to any Loan Party or any of its
Subsidiaries or there is commenced against any Loan Party or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or (iv) any order of relief or other order approving any such case or
proceeding is entered; or (v) any Loan Party or any of its Subsidiaries is
adjudicated insolvent or bankrupt; or (vi) any Loan Party or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of 60 days; or (vii) any Loan Party or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or (viii) any Loan Party or any
of its Subsidiaries shall fail to pay, or shall state that it is unable to pay,
or shall be unable to pay, its debts generally as they become due; or (ix) any
Loan Party or any of its Subsidiaries shall call a meeting of its creditors with
a view to arranging a composition or adjustment of its debts; or (x) any Loan
Party or any of its Subsidiaries shall by any act or failure to act consent to,
approve of or acquiesce in any of the foregoing; or (xi) any corporate action is
taken by any Loan Party or any of its Subsidiaries for the purpose of effecting
any of the foregoing.
(g) ERISA. (i) Any Termination Event shall occur, or (ii) any Plan
shall incur an "accumulated funding deficiency" (as defined in Section 412 of
the Code or Section 302 of ERISA), whether or not waived or (iii) any Loan Party
or any member of its ERISA Controlled Group shall fail to pay when due any
amount which it shall have become liable to pay to the PBGC, any Plan or a trust
established under Title IV of ERISA, or (iv) a condition shall exist by reason
of which the PBGC would be entitled to obtain a decree adjudicating that, for
financial reasons, an ERISA Plan must be terminated or a trustee must be
appointed to administer any ERISA Plan, or (v) any Loan Party or a member of its
ERISA Controlled Group is in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan, or (vi) any other event
or condition shall occur or exist with respect to any Plan which could subject
any Loan Party or any member of its ERISA Controlled Group to any tax, penalty
or other liability, which in any such case described in clauses (i) through (vi)
above could reasonably be expected to result in a Material Adverse Effect.
(h) SECURITY DOCUMENTS. Any of the Security Documents (i) shall for
any reason cease to be in full force and effect or the Borrower or any other
Loan Party which is a party to any of the Security Documents or any other Loan
Document shall so assert, or (ii) shall cease to give the Administrative Agent
the Liens, rights, powers and privileges purported to be created thereby
including, without limitation, a perfected first priority security interest in,
and Lien on, all of the Collateral in accordance with the terms thereof.
(i) PARENT GUARANTY AND SUBSIDIARY GUARANTY. The Parent Guaranty,
the Subsidiary Guaranty or any provision thereof shall cease to be in full force
and effect, or any Guarantor or any Person acting by or on behalf of any
Guarantor shall deny or disaffirm all or any portion of such Guarantor's
obligations hereunder or under such Parent Guaranty or Subsidiary Guaranty.
(j) CHANGE OF CONTROL. A Change of Control shall have occurred.
(k) JUDGMENTS. One or more judgments or decrees in an aggregate
amount of $2,000,000 or more shall be entered by a court or courts of competent
jurisdiction against the Parent and/or its Subsidiaries (other than any judgment
as to which, and only to the extent, a reputable insurance company
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has acknowledged coverage of such claim in writing) and (i) any such judgments
or decrees shall not be stayed, discharged, paid, bonded or vacated within 30
days or (ii) enforcement proceed ings shall be commenced by any creditor on any
such judgments or decrees.
(l) ENVIRONMENTAL MATTERS. (i) Any Environmental Claim shall have
been asserted against the Parent or any of its Subsidiaries or any Environmental
Affiliate thereof which, if determined adversely, could be reasonably expected
to have a Material Adverse Effect, or (ii) the Parent or any of its Subsidiaries
or Environmental Affiliates shall have failed to obtain any Environmental
Approval necessary for the management, use, control, ownership, or operation of
its business, property or assets or any such Environmental Approval shall be
revoked, terminated, or otherwise cease to be in full force and effect, in each
case, if the existence of such condition could be reasonably expected to have a
Material Adverse Effect.
SECTION 7.2 RIGHTS AND REMEDIES. Upon the occurrence of any Event of
Default described in Section 7.1(f) with respect to any Loan Party, the
Commitments and the Swingline Loan Commitment shall automatically and
immediately terminate and the unpaid principal amount of and any and all accrued
interest on the Loans and Swingline Loans and any and all accrued Fees and other
Obligations shall automatically become immediately due and payable, with all
additional interest from time to time accrued thereon and without presentation,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate and notice of acceleration), all of which are hereby
expressly waived by Borrower and each Borrowing Subsidiary, and the obligation
of each Bank and the Swingline Bank to make any Loan or Swingline Loan hereunder
shall thereupon terminate; and upon the occurrence and during the continuance of
any other Event of Default, the Administrative Agent shall at the request, or
may with the consent, of the Required Banks, by written notice to Borrower, (i)
declare that the Commitments and the Swingline Loan Commitment are terminated,
whereupon the Commitments and the Swingline Loan Commitment and the obligation
of each Bank and the Swingline Bank to make any Loan or Swingline Loan hereunder
shall immediately terminate, and (ii) declare the unpaid principal amount of and
any and all accrued and unpaid interest on the Loans and Swingline Loans and any
and all accrued Fees and other Obligations to be, and the same shall thereupon
be, immediately due and payable with all additional interest from time to time
accrued thereon and without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by
Borrower and each Borrowing Subsidiary.
Upon an Event of Default, each of the Parent and its Subsidiaries
shall permit any designated representative or representatives of the
Administrative Agent, including, but not limited to, environmental consultants
or other professionals, upon reasonable notice to Borrower or its Subsidiaries,
to enter any property owned or operated by the Borrower or its Subsidiaries for
the purpose of conducting an environmental investigation of said property. Said
investigations may include, but not be limited to, testing the integrity of
underground storage tanks; taking soil and groundwater borings and samples;
testing for the presence of radon; and collecting samples to test for the
presence of asbestos. Borrower shall reimburse Administrative Agent for all
reasonable costs and expenses incurred in connection with any investigation
conducted hereunder.
SECTION 8. THE ADMINISTRATIVE AGENT AND COLLATERAL AGENT.
SECTION 8.1 APPOINTMENT. Each Bank and the Swingline Bank hereby
irrevocably, subject to Section 8.9 hereof, designates and appoints Credit
Suisse First Boston as the Administrative Agent and Credit Suisse First Boston
as Collateral Agent (the Administrative Agent and the Collateral Agent for the
purposes of this Section are collectively referred to as the "Agent") of such
Bank and Swingline Bank under this Agreement and each other Loan Document, and
each such Bank and the Swingline Bank irrevocably authorizes Credit Suisse First
Boston as the Agent for such Bank and Swingline Bank, to take such action on
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its behalf under the provisions of this Agreement and each other Loan Document
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and each other Loan Document,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, or any fiduciary relationship with any Bank and the Swingline
Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities on the part of the Agent shall be read into this Agreement or
otherwise exist against the Agent. The provisions of this Section 8 are solely
for the benefit of the Agent, the Banks and the Swingline Bank and no Loan Party
shall have any rights as a third party beneficiary or otherwise under any of the
provisions hereof. In performing its functions and duties hereunder and under
the other Loan Documents, the Agent shall act solely as the agent of the Banks
and the Swingline Bank and does not assume nor shall be deemed to have assumed
any obligation or relationship of trust or agency with or for any Loan Party or
any of their respective successors and permitted assigns.
SECTION 8.2 DELEGATION OF DUTIES. The Agent may execute any of its
duties under this Agreement or the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
SECTION 8.3 EXCULPATORY PROVISIONS. The Agent shall not be (i)
liable for any action lawfully taken or omitted to be taken by it or any Person
described in Section 8.2 under or in connection with this Agreement or any other
Loan Document (except for its own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Banks or the Swingline Bank for any
recitals, statements, representations or warranties made by any Loan Party
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement, or any other Loan Document or for any failure of any Loan
Party to perform their obligations hereunder or thereunder. The Agent shall not
be under any obligation to any Bank or the Swingline Bank to ascer tain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of any Loan Party. This Section is intended
solely to govern the relationship between the Agent, on the one hand, and the
Banks and the Swingline Bank, on the other.
SECTION 8.4 RELIANCE BY AGENT. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limita tion, counsel to any Loan Party), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless the
Agent shall have received an executed Transfer Supplement in respect thereof.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless it shall first receive
such advice or concurrence of the Required Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by the Banks and the Swingline
Bank against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Banks, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Banks and the Swingline Bank and all
future holders of the Notes.
SECTION 8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Bank or the Swingline Bank or the Borrower
referring to this Agreement, describing such Default or Event of Default and
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stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Banks and the Swingline Bank. The Agent shall take such action with respect to
such Default or Event of Default as shall be directed by the Required Banks;
PROVIDED that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as the
Agent shall deem advisable and in the best interests of the Banks and the
Swingline Bank.
SECTION 8.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank and the
Swingline Bank expressly acknowledges that neither the Agent, nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Loan
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Bank and the Swingline Bank represents and warrants to the Agent
that it has, independently and without reliance upon the Agent or any other Bank
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Loan
Parties and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Bank and the Swingline Bank also represents that it will,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, operations, property,
prospects, financial and other condition and creditworthiness of the Loan
Parties. Except for notices, reports and other documents expressly required
under the Loan Documents to be furnished to the Banks and the Swingline Bank by
the Agent, the Agent shall not have any duty or responsibility to provide any
Bank or the Swingline Bank with any credit or other information concerning the
business, operations, property, prospects, financial and other condition or
creditworthiness of the Loan Parties which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
SECTION 8.7 INDEMNIFICATION. The Banks and the Swingline Bank agree
to indemnify the Agent and its officers, directors, employees, representatives
and agents (to the extent not reimbursed by the Loan Parties and without
limiting the obligation of the Loan Parties to do so), ratably according to
their Pro Rata Shares, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatso ever (including, without limitation,
the fees and disbursements of counsel for the Agent or such Person in connection
with any investigative, or judicial proceeding commenced or threatened, whether
or not the Agent or such Person shall be designated a party thereto) that may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, incurred by or asserted against the Agent or
such Person as a result of, or arising out of, or in any way related to or by
reason of, any of the Transactions or the execution, delivery or performance of
any Loan Document or any other Transaction Document (but excluding any such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Agent or such Person as finally determined by a court
of competent jurisdiction). In the event the Agent shall recover any amounts
paid by any Bank pursuant to this Section 8.7, it shall reimburse such payments
to each Bank on a Pro Rata basis.
SECTION 8.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Loan Parties as though the Agent were not the Agent
hereunder or under any other Loan Document. With respect to Loans made or
renewed by it and any Note issued to it, the Agent shall have the same rights
and powers under this Agreement as any Bank and may exercise the same as though
it were not the Agent, and the terms "Bank" and "Banks" shall include the Agent
in its individual capacity.
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SECTION 8.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30
days' written notice to the Borrower, the Banks and the Swingline Bank. If the
Agent shall resign as Agent under this Agreement, then the Required Banks during
such 30-day period shall appoint from among the Banks a successor agent which
shall be reasonably acceptable to the Borrower. If no successor shall have been
so appointed by the Required Banks and shall have accepted such appointment
within 30 days after the retiring Agent gives written notice of its resignation,
then the retiring Agent may, on behalf of the Banks and the Swingline Bank,
appoint a successor Agent, which shall be a bank with an office in New York, New
York, having a combined capital and surplus of at least $500,000,000 or an
Affiliate of any such bank which shall be reasonably acceptable to the Borrower.
Any such successor agent shall succeed to the rights, powers and duties of the
Agent and the term "Agent" shall mean such successor agent, effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement or any holders of the Notes. After
any retiring Agent's resignation hereunder as Agent, the provisions of this
Section 8 and Section 9.1 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
SECTION 9. MISCELLANEOUS.
SECTION 9.1 PAYMENT OF EXPENSES, INDEMNITY, ETC. The Parent, the
Borrower and each Borrowing Subsidiary shall:
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable out-of-pocket costs and expenses of the
Administrative Agent and the Collateral Agent in connection with the
negotiation, preparation, execution or delivery of the Loan Documents and the
documents and instruments referred to therein, the creation, perfection or
protection of the Liens in the Collateral (including, without limitation, fees
and expenses for title and lien searches and filing and recording fees); and the
reasonable fees and disbursements of Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel to the Administrative Agent and any other attorneys retained by
the Administrative Agent);
(b) pay all reasonable out-of-pocket costs and expenses of the
Administrative Agent and Collateral Agent in connection with any amendment,
waiver or consent relating to any of the Loan Documents (including, without
limitation, the reasonable fees and disbursements of counsel for the
Administrative Agent and Collateral Agent);
(c) pay all reasonable out-of-pocket costs and expenses of the
Administrative Agent, the Collateral Agent, the Swingline Bank and each Bank in
connection with the preservation of rights under, and enforcement of, the Loan
Documents and the documents and instruments referred to therein or in connection
with any restructuring or rescheduling of the Obligations (including, without
limitation, the reasonable fees and disbursements of counsel for each of the
Administrative Agent, the Collateral Agent, the Swingline Bank and each of the
Banks);
(d) pay, and hold the Administrative Agent, the Collateral Agent,
each of the Banks and the Swingline Bank harmless from and against, any and all
present and future stamp, excise and other similar taxes with respect to the
foregoing matters and hold the Administrative Agent, the Collateral Agent, each
Bank and the Swingline Bank harmless from and against any and all liabilities
with respect to or resulting from any delay or omission (other than to the
extent attributable to such Bank or the Swingline Bank) to pay such taxes; and
(e) indemnify the Administrative Agent, the Collateral Agent, each
Bank and the Swingline Bank, its officers, directors, employees,
representatives, affiliates and agents (each an "Indemnitee") from, and hold
each of them harmless against, any and all losses, liabilities, claims, damages,
expenses,
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obligations, penalties, actions, judgments, suits, costs or disbursements of any
kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel for such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, asserted against or incurred by any Indemnitee
as a result of, or arising out of, or in any way related to or by reason of, (i)
any of the Transactions or the execution, delivery or performance of any Loan
Document or any other Transaction Document, (ii) any violation by any Loan Party
or its Environmental Affiliate of any applicable Environmental Law, (iii) any
Environmental Claim arising out of the management, use, control, ownership or
operation of property or assets by any of the Loan Parties or any of their
Environmental Affiliates, including, without limitation, all on-site and
off-site activities involving Materials of Environmental Concern, (iv) the
breach of any environmental representation or warranty set forth in Section
4.19, (v) the grant to the Administrative Agent, the Collateral Agent, the Banks
or the Swingline Bank of any Lien in any property or assets of any of the Loan
Parties or any stock or other equity interest in any of the Loan Parties, and
(vi) the exercise by the Administrative Agent, the Collateral Agent, the Banks
or the Swingline Bank of their rights and remedies (including, without
limitation, foreclosure) under any agreements creating any such Lien (but
excluding, as to any Indemnitee, any such losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements incurred solely by reason of the gross negligence or willful
misconduct of such Indemnitee as finally determined by a court of competent
jurisdiction). The Borrower's and each Borrowing Subsidiary's obligations under
this Section shall survive the termination of this Agreement and the payment of
the Obligations.
SECTION 9.2 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Bank and the Swingline Bank is hereby authorized at
any time or from time to time, without presentment, demand, protest or other
notice of any kind to any Loan Party or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special, time or demand, provisional or final) and any
other indebtedness at any time held or owing by such Bank or Swingline Bank
(including, without limitation, by branches and agencies of such Bank or
Swingline Bank wherever located) to or for the credit or the account of any Loan
Party against and on account of the Obligations of the Loan Parties to such Bank
or Swingline Bank under this Agreement or under any of the other Loan Documents,
including, without limitation, all interests in Obligations purchased by such
Bank pursuant to Section 9.7, and all other claims of any nature or description
arising out of or connected with this Agreement or any other Loan Document,
irrespective of whether or not such Bank or Swingline Bank shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any of
them, shall be contingent or unmatured.
SECTION 9.3 NOTICES. Except as otherwise expressly provided herein,
all notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy), and shall be deemed to
have been duly given or made when delivered by hand, or five days after being
sent by certified or registered United States mail, postage prepaid, or, in the
case of telecopy notice, when sent, or, in the case of a nationally recognized
overnight courier service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at its address specified
opposite its signature below or on the appropriate Transfer Supplement, or to
such other address as may be designated by any party in a written notice to the
other parties hereto, provided that notices and communications to the
Administrative Agent shall not be effective until received by the Administrative
Agent.
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SECTION 9.4 SUCCESSORS AND ASSIGNS; PARTICIPATION; ASSIGNMENTS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Parent, the Borrower, each Borrowing Subsidiary, the
Banks, the Swingline Bank, the Administrative Agent, the Collateral Agent, all
future holders of the Notes and their respective successors and assigns, except
that neither the Parent, the Borrower nor any Borrowing Subsidiary may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Bank and the Swingline Bank. No Bank or Swingline Bank
may participate, assign or sell any of its Credit Exposure (as defined in clause
(b) below) except as required by operation of law, in connection with the
merger, consolidation or dissolution of any Bank or Swingline Bank or as
provided in this Section 9.4.
(b) PARTICIPATION. Any Bank may at any time sell to one or more
Persons (each a "Participant") participating interests in any Loan owing to such
Bank, any Note held by such Bank, any Commitment of such Bank, any Letter of
Credit issued by such Bank, any participation in any Letter of Credit issued by
an L/C Bank and or any other interest of such Bank hereunder (in respect of any
such Bank, its "Credit Exposure"). Notwithstanding any such sale by a Bank of
participating interests to a Participant, such Bank's rights and obligations
under this Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the holder of
any such Note for all purposes under this Agreement (except as expressly
provided below), and the Borrower and the Administrative Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. The Borrower and each Borrowing Subsidiary
agree that if any Obligations are due and unpaid, or shall have been declared or
shall have become due and payable upon the occurrence and during the continuance
of an Event of Default, each Participant shall be deemed, to the fullest extent
permitted by law, to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement and any Note to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement or any Note, provided that such right of setoff shall
be subject to the obligations of such Participant to share with the Banks as
provided in Section 9.7. The Borrower and each Borrowing Subsidiary also agree
that each Participant shall be entitled to the benefits of Sections 2.16, 2.17,
2.18, 2.19 and 9.1, PROVIDED that no Participant shall be entitled to receive
any greater amount pursuant to such sections than the transferor Bank would have
been entitled to receive in respect of the amount of the participating interest
transferred by such transferor Bank to such Participant had no such transfer
occurred. Each Bank agrees that any agreement between such Bank and any such
Participant in respect of such participating interest shall not restrict such
Bank's right to agree to any amendment, supplement, waiver or modification to
this Agreement or any other Loan Document, except where the result of any of the
foregoing would be to extend the final maturity of any Obligation or any
regularly scheduled installment thereof or reduce the rate or extend the time of
payment of interest or fees thereon or reduce the principal amount thereof or
release all or substantially all of the Collateral (except as expressly provided
in the Loan Documents).
(c) ASSIGNMENTS TO PURCHASING BANKS. Any Bank may, in the ordinary
course of its business and in accordance with applicable law, at any time assign
to any Bank or any affiliate thereof or, with the prior written consent of the
Borrower and the Administrative Agent, which consent shall not be unreasonably
withheld, to any other Person ("Purchasing Banks") all or any part of its Credit
Exposure pursuant to a supplement to this Agreement, substantially in the form
of Exhibit N hereto (a "Transfer Supplement"), executed by such Purchasing Bank,
such transferor Bank and the Administrative Agent; PROVIDED that (x) the minimum
amount of the Credit Exposure of any Bank so assigned shall not be less than
$5,000,000 (or if the assignor shall assign its entire Credit Exposure, any
lesser amount) and (y) such assignment must be on a pro rata basis as between
the Expansion Loan Commitment and Revolving Loan Commitment of such Transferor
Bank and; PROVIDED FURTHER that the prior written consent of the L/C Banks,
which shall not be unreasonably withheld, shall be required for assignments to
any Purchasing Bank unless such Purchasing Bank's long term indebtedness is
rated at or higher than
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BBB+ by Standard & Poor's or Baa1 by Moody's or if such rating is unavailable,
such Purchasing Bank's long term certificate of deposit rating is at or higher
than BBB+ by Standard & Poor's or Baa1 by Moody's. No L/C Bank shall at any time
assign or transfer to any Purchasing Bank its rights and obligations as L/C Bank
without (i) the prior written consent of the Borrower and the Administrative
Agent, which consent shall not be unreasonably withheld, and (ii) providing to
the Administrative Agent such documents and instruments executed by such L/C
Bank or assignee or transferee as the Administrative Agent may reasonably
request for purposes of effecting such assignment or transfer and the admission
of such assignee or transferee as L/C Bank. Upon (i) such execution of such
Transfer Supplement, (ii) delivery of an executed copy thereof to the Borrower
and the Administrative Agent and (iii) payment by such Purchasing Bank to such
transferor Bank of an amount equal to the purchase price agreed between such
transferor Bank and such Purchasing Bank and payment to the Administrative Agent
by such Purchasing or Transferor Bank a non-refundable processing fee of $3,500,
such transferor Bank shall be released from its obligations hereunder to the
extent of such assignment and such Purchasing Bank shall for all purposes be a
Bank party to this Agreement and shall have all the rights and obligations of a
Bank under this Agreement to the same extent as if it were an original party
hereto, and no further consent or action by the Borrower, the Banks or the
Administrative Agent shall be required. Such Transfer Supplement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Bank as a Bank and the resulting
adjustment of the Commit ments, if any, arising from the purchase by such
Purchasing Bank of all or a portion of the Credit Exposure of such transferor
Bank. If the transferor Bank shall then be in possession of a Note and if
requested by the Purchasing Bank, promptly after the consummation of any
transfer to a Purchasing Bank pursuant hereto, the transferor Bank, the
Administrative Agent and the Borrower shall, at the expense of the Purchasing
Bank, make appropriate arrangements so that a replacement Note is issued to such
transferor Bank and a new Note is issued to such Purchasing Bank, in each case
in principal amounts reflecting such transfer.
(d) DISCLOSURE OF INFORMATION. The Borrower and each Borrowing
Subsidiary authorizes each Bank to disclose to any Participant or Purchasing
Bank (each, a "Transferee") and any prospective Transferee any and all financial
and other information in such Bank's possession concerning the Borrower which
has been delivered to such Bank by the Borrower pursuant to this Agreement or
which has been delivered to such Bank by the Borrower in connection with such
Bank's credit evaluation of the Borrower and each Borrowing Subsidiary prior to
entering into this Agreement.
(e) FEDERAL RESERVE BANKS. Notwithstanding the limitations set forth
in paragraph (c) above, any Bank may at any time assign all or any portion of
its rights under this Agreement or any Note for purposes of assignment to a
Federal Reserve Bank without the prior written consent of the Borrower or the
Administrative Agent, PROVIDED that no such assignment shall release a Bank from
any of its obligations hereunder or substitute any such Federal Reserve Bank for
such Bank as a party hereto.
SECTION 9.5 AMENDMENTS AND WAIVERS. Neither this Agreement, any
Note, any other Loan Document to which the Parent, the Borrower or any Borrowing
Subsidiary is a party nor any terms hereof or thereof may be amended,
supplemented, modified or waived except in accordance with the provisions of
this Section. The Required Banks, the Parent, the Borrower and the Borrowing
Subsidiaries may, from time to time, enter into written amendments, supplements,
modifications or waivers for the purpose of adding, deleting, changing or
waiving any provisions to this Agreement, the Notes, or the other Loan Documents
to which the Parent, the Borrower or any Borrowing Subsidiary is a party,
PROVIDED, that no such amendment, supplement, modification or waiver shall (a)
extend the Final Maturity Date or reduce the rate or extend the time of payment
of interest on any Obligations, or reduce the principal amount of any
Obligations or reduce any fee payable to the Banks or the Swingline Bank
hereunder, or release all or substantially all of the Collateral (except as
expressly contemplated by the Loan Documents) or change the amount of any
Commitment of any Bank or Swingline Loan Commitment of the Swingline Bank, or
amend, modify or waive any provision of this Section 9.5 or the definition of
Required Banks, or consent to or permit the assignment or transfer by the
Borrower or any Borrowing Subsidiary of any of its rights and obligations under
this Agreement or any other Loan Document, in each case without the written
consent of all the Banks and the Swingline Bank
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effected thereby, (b) amend, modify or waive any provision of Section 8 or any
other provision of any Loan Document if the effect thereof is to affect the
rights or duties of the Administrative Agent, without the written consent of the
then Administrative Agent, (c) amend, modify or waive any provision of Sections
2.22 through and including 2.29 or any other provision of any Loan Document if
the effect thereof is to affect the rights or duties of an L/C Bank, without the
written consent of such L/C Bank, (d) release the Parent from any of its
obligations under Section 10 or (e) amend, modify or waive any provision of
Section 2.2(d), (e), (f) or (g) or any other provision of any Loan Document if
the effect thereof is to affect the rights and duties of the Swingline Bank,
without the written consent of the Swingline Bank. Any such amendment,
supplement, modification or waiver shall apply to each of the Banks and the
Swingline Bank equally and shall be binding upon the Parent, the Borrower, each
Borrowing Subsidiary, the Banks, the Administrative Agent, the Swingline Bank
and all future holders of the Notes. In the case of any waiver, the Parent, the
Borrower, each Borrowing Subsidiary, the Banks, the Swingline Bank and the
Administrative Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes, and any Default or Event of Default
waived shall be deemed to be cured and not continuing, but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.
SECTION 9.6 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Administrative Agent, the Collateral Agent, any Bank, the
Swingline Bank or any holder of a Note in exercising any right, power or
privilege hereunder or under any other Loan Document and no course of dealing
between any Loan Party and the Administrative Agent, the Collateral Agent, any
Bank, the Swingline Bank or the holder of any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Loan Document preclude any other or
further exercise thereof of the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Administrative
Agent, the Collateral Agent, any Bank, the Swingline Bank or the holder of any
Note would otherwise have. No notice to or demand on any Loan Party in any case
shall entitle any Loan Party to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the
Administrative Agent, the Banks, the Swingline Bank, the Collateral Agent or the
holder of any Note to any other or further action in any circumstances without
notice or demand.
SECTION 9.7 SHARING OF PAYMENTS. Each of the Banks agrees that if it
should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under the
Loan Documents, or otherwise) which is applicable to the payment of any
Obligations, of a sum which with respect to the related sum or sums received by
other Banks is in a greater proportion than the total of such Obligation then
owed and due to such Bank bears to the total of such Obligation then owed and
due to all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in such Obligations owing to such
Banks in such amount as shall result in a proportional participation by all of
the Banks in such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
SECTION 9.8 GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN THE
MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this Agreement or
any other Loan Document and any action for enforcement of any judgment in
respect thereof may be brought in the courts of
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the State of New York or of the United States of America for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Borrower and each Borrowing Subsidiary hereby accept for itself and in respect
of its property, generally and unconditionally, the non-exclusive jurisdiction
of the aforesaid courts and appellate courts from any thereof. The Borrower and
each Borrowing Subsidiary irrevocably consent to the service of process out of
any of the aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, the Borrower
at its address set forth opposite its signature below. The Borrower and each
Borrowing Subsidiary hereby irrevocably waive any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Loan Document brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of the Administrative
Agent, any Bank, the Swingline Bank or any holder of a Note to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrower or any Borrowing Subsidiary in any other
jurisdiction.
SECTION 9.9 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
SECTION 9.10 EFFECTIVENESS. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a counterpart
hereof and shall have delivered the same to the Administrative Agent which
delivery, in the case of the Banks and the Swingline Bank, may be given to the
Administrative Agent by telecopy (with the originals delivered promptly to the
Administrative Agent via overnight courier service).
SECTION 9.11 HEADINGS DESCRIPTIVE. The headings of the several
Sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
SECTION 9.12 MARSHALLING; RECAPTURE. Neither the Administrative
Agent, the Collateral Agent nor any Bank shall be under any obligation to
marshall any assets in favor of any Loan Party or any other party or against or
in payment of any or all of the Obligations. To the extent any Bank receives any
payment by or on behalf of any Loan Party, which payment or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to such Loan Party or its estate, trustee, receiver,
custodian or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such payment or repayment,
the obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of such Loan Party to such Bank as of the date
such initial payment, reduction or satisfaction occurred.
SECTION 9.13 SEVERABILITY. In case any provision in or obligation
under this Agreement or the Notes or the other Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 9.14 SURVIVAL. All indemnities set forth herein including,
without limitation, in Sections 2.16, 2.17, 2.18, 2.19, 2.27, 2.29, 8.7 and 9.1
and the limitation of liability set forth in Section 9.16 shall survive the
execution and delivery of this Agreement and the Notes, the issuance of and
reimbursement for any Letter of Credit and the making and repayment of the Loans
hereunder.
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SECTION 9.15 DOMICILE OF LOANS. Each Bank and the Swingline Bank may
transfer and carry its Loans or Letters of Credit at, to or for the account of
any branch office, subsidiary or affiliate of such Bank or Swingline Bank.
SECTION 9.16 LIMITATION OF LIABILITY. No claim may be made by any
Loan Party or any other Person against the Administrative Agent, the Collateral
Agent, any Bank, the L/C Banks, the Swingline Bank or the Affiliates, directors,
officers, employees, attorneys or agent of any of them for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any other Transactions, or any
act, omission or event occurring in connection therewith; and each Loan Party
hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
SECTION 9.17 CALCULATIONS; COMPUTATIONS. The financial statements to
be furnished to the Administrative Agent, the Banks and the Swingline Bank
pursuant hereto shall be made and prepared in accordance with GAAP consistently
applied throughout the periods involved and consistent with GAAP as used in the
preparation of the financial statements referred to in Section 4.5, and, except
as otherwise specifically provided herein, all computations of Excess Cash Flow,
Borrower's Share of Excess Cash Flow and Retained Equity Proceeds and
computations determining compliance with Section 6 hereof shall utilize GAAP.
All computations of interest (other than interest calculated by reference to the
Base Rate during such periods that the Base Rate is determined by reference to
the Prime Rate), Commitment Fees and other Fees shall be made on the basis of a
year of 360 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest,
Commitment Fee or other Fees are payable. All computations of interest
calculated by reference to the Base Rate during such periods that the Base Rate
is determined by reference to the Prime Rate shall be made on the basis of a
year of 365 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest is
payable.
SECTION 9.18 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARENT, THE BORROWER, EACH BORROWING SUBSIDIARY, THE
ADMINISTRATIVE AGENT, THE CO-AGENTS, THE COLLATERAL AGENT, THE BANKS, THE L/C
BANKS AND THE SWINGLINE BANK HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING HEREUNDER
OR THEREUNDER.
SECTION 9.19 NATURE OF BORROWERS' OBLIGATIONS. (a) The obligations
of the Borrower and the Borrowing Subsidiaries hereunder and under the other
Loan Documents are joint and several.
(b) The Borrower and each Borrowing Subsidiary agree that the
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement, the Notes and the other Loan Documents, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of any Secured Creditor with respect thereto. The
liability of the Borrower and each Borrowing Subsidiary shall be joint, several,
absolute and unconditional, in accordance with its terms and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (i) any change in the time, place or
manner of payment of, or in any other term of, all or any of the Obligations,
any waiver, indulgence, renewal, extension, amendment or modification of, or
addition, consent or supplement to, or deletion from, or any other action or
inac tion under, or in respect of the Credit Agreement, any Note, any other Loan
Document or any documents, instruments or agreements relating to the Obligations
or any other instrument or agreement referred to therein or any assignment or
transfer of any thereof; (ii) any lack of
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validity or enforceability of the Credit Agreement, any Note, any other Loan
Document or any other documents, instruments or agreements referred to therein
or any assignment or transfer of any thereof; (iii) any furnishing of any addi
tional security to the Secured Creditors or their assignees or any acceptance
thereof or any release of any security by the Secured Creditors, or their
assignees; (iv) any limitation on any party's liability or obligations under any
such instrument or agreement or any invalidity or unenforceability, in whole or
in part, of any such instrument or agreement, or any term thereof; (v) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to the Borrower, or any action
taken with respect to this Agreement by any trustee or receiver, or by any
court, in any such proceeding, whether or not the Borrower or any Borrowing
Subsidiary shall have notice or knowledge of any of the foregoing and each of
the Borrower or any Borrowing Subsidiary waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding; (vi)
any exchange, release or nonperfection of any other collateral, or any release,
or amendment or waiver of, or consent to, departure from any guaranty or
security, for all or any of the Obligations; (vii) any direction as to
application of payment by the Borrower, any Borrowing Subsidiary or by any other
party; (viii) any dissolution, termination or increase, decrease or change in
personnel by the Borrower or any Borrowing Subsidiary; or (ix) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Borrower or any Borrowing Subsidiary. This Agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Obligations is rescinded or must otherwise be returned
by any Secured Creditor upon the insolvency, bankruptcy or reorganization of the
Borrower, any Borrowing Subsidiary or any Guarantor or otherwise, all as though
such payment had not been made.
(c) The Borrower and each Borrowing Subsidiary hereby irrevocably
agrees to subordinate any Subrogation Rights (as defined below) to the rights of
any Secured Creditor to recover from the Borrower and any Borrowing Subsidiary
all Obligations. "Subrogation Rights" shall mean any and all rights of
subrogation, reimbursement, exoneration, contribution or indemnification, any
right to participate in any claim or remedy of the Secured Creditors or any
collateral which the Administrative Agent, any other Secured Creditor or the
Collateral Agent now has or hereafter acquires in connection with the payment,
performance or enforcement of the Borrower's or such Borrowing Subsidiary's
obligations under this Agreement or any Loan Document, whether or not such
claim, remedy or right arises in equity, or under contract, statute or common
law, including the right to take or receive, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim or other rights. To effectuate such subordination, the
Borrower and each Borrowing Subsidiary hereby agree that they shall not be
entitled to any payment by the Borrower or any Borrowing Subsidiary, as the case
may be, in respect of any Subrogation Right until all of the Obligations have
been indefeasibly paid in full. If any amount shall be paid to the Borrower or
any Borrowing Subsidiary in violation of the preceding sentence and the
Obligations shall not have been paid in full or any commitment of any Secured
Creditor under the Credit Agreement shall not have been irrevocably terminated,
such amount shall be deemed to have been paid to the Borrower or such Borrowing
Subsidiary for the benefit of, and held in trust for, the Administrative Agent
for the benefit of the Secured Creditors, and shall forthwith be paid to the
Administrative Agent to be credited and applied to the Obligations, whether
matured or unmatured. Each of the Borrower and each Borrowing Subsidiary
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by the Credit Agreement and that the
subordination set forth in this Section is knowingly made in contemplation of
such benefits.
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SECTION 10. PARENT GUARANTY.
SECTION 10.1 THE PARENT GUARANTY. In order to induce the
Administrative Agent and the Banks to enter into this Agreement and to extend
credit hereunder, and in recognition of the direct benefits to be received by
the Parent from the proceeds of the Loans and the issuance of the Letters of
Credit, the Parent hereby agrees with the Guaranteed Creditors as follows: the
Parent hereby unconditionally and irrevocably guarantees as primary obligor and
not merely as surety the full and prompt payment when due, whether upon
maturity, acceleration or otherwise, of any and all of the Guaranteed
Obligations of the Borrower or any Borrowing Subsidiary to the Guaranteed
Creditors. If any or all of the Guaranteed Obligations of the Borrower or any
Borrowing Subsidiary to the Guaranteed Creditors becomes due and payable
hereunder, the Parent irrevocably and unconditionally promises to pay such
indebtedness to the Guaranteed Creditors, or order, on demand, together with any
and all expenses which may be incurred by the Guaranteed Creditors in collecting
any of the Guaranteed Obligations. If claim is ever made upon any Guaranteed
Creditor for repayment or recovery of any amount or amounts received in payment
or on account of any of the Guaranteed Obligations and any of the aforesaid
payees repays all or part of said amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction over such payee
or any of its property or (ii) any settlement or compromise of any such claim
effected by such payee with any such claimant (including the Borrower or any
Borrowing Subsidiary), then and in such event the Parent agrees that any such
judgment, decree, order, settlement or compromise shall be binding upon the
Parent, notwithstanding any revocation of this Parent Guaranty, and the Parent
shall be and remain liable to the aforesaid payees hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by any such payee.
SECTION 10.2 BANKRUPTCY. Additionally, the Parent unconditionally
and irrevocably guarantees the payment of any and all of the Guaranteed
Obligations to the Guaranteed Creditors whether or not due or payable by the
Borrower or any Borrowing Subsidiary upon the occurrence of any of the events
specified in Section 7.1(f), and unconditionally promises to pay such
indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money
of the United States.
SECTION 10.3 NATURE OF LIABILITY. The liability of the Parent
hereunder is exclusive and independent of any security for or other guaranty of
the Guaranteed Obligations whether executed by the Parent, any other guarantor
or by any other party, and the liability of the Parent hereunder is not affected
or impaired by (a) any direction as to application of payment by the Borrower or
any Borrowing Subsidiary or by any other party, or (b) any other continuing or
other guaranty, undertaking or maximum liability of a guarantor or of any other
party as to the Guaranteed Obligations, or (c) any payment on or in reduction of
any such other guaranty or undertaking, or (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower or any Borrowing
Subsidiary, or (e) any payment made to any Guaranteed Creditor on the Guaranteed
Obligations which any such Guaranteed Creditor repays to the Borrower or any
Borrowing Subsidiary pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and Parent waives any
right to the deferral or modification of its obligations hereunder by reason of
any such proceeding.
SECTION 10.4 INDEPENDENT OBLIGATION. The obligations of the Parent
hereunder are independent of the obligations of any other guarantor, any other
party, the Borrower or any Borrowing Subsidiary, and a separate action or
actions may be brought and prosecuted against the Parent whether or not action
is brought against any other guarantor, any other party, the Borrower or any
Borrowing Subsidiary and whether or not any other guarantor, any other party,
the Borrower or any Borrowing Subsidiary be joined in any such action or
actions. The Parent waives, to the full extent permitted by law, the benefit of
any statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower or any Borrowing Subsidiary
shall operate to toll the statute of limitations as to the Parent. This Parent
Guaranty is a continuing
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one and all liabilities to which it applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon.
SECTION 10.5 AUTHORIZATION. The Parent authorizes the Guaranteed
Creditors without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or change
or extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the Parent Guaranty herein made shall apply
to the Guaranteed Obligations as so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower, any other Loan Party or others or otherwise act or refrain from
acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower, any Borrowing Subsidiary or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate the
payment of all or any part thereof to the payment of any liability (whether due
or not) of the Borrower or any Borrowing Subsidiary to its creditors other than
the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower or any Borrowing Subsidiary to the
Guaranteed Creditors regardless of what liability or liabilities of the Parent,
the Borrower or any Borrowing Subsidiary remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements referred
to herein, or otherwise amend, modify or supplement this Agreement or any of
such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of the
Parent from its liabilities under this Parent Guaranty.
SECTION 10.6 RELIANCE. It is not necessary for any Guaranteed
Creditor to inquire into the capacity or powers of the Borrower or any Borrowing
Subsidiary or the officers, directors, partners or agents acting or purporting
to act on their behalf, and any Guaranteed Obligations made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
SECTION 10.7 SUBORDINATION. Any of the indebtedness of the Borrower
or any Borrowing Subsidiary now or hereafter owing to the Parent, is hereby
subordinated to the Guaranteed Obligations of the Borrower and each Borrowing
Subsidiary owing to the Guaranteed Creditors; and if the Administrative Agent so
requests at a time when an Event of Default exists, all such indebtedness of the
Borrower or any Borrowing
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Subsidiary to the Parent shall be collected, enforced and received by the Parent
for the benefit of the Guaranteed Creditors and be paid over to the
Administrative Agent on behalf of the Guaranteed Creditors on account of the
Guaranteed Obligations of the Borrower and each Borrowing Subsidiary to the
Guaranteed Creditors, but without affecting or impairing in any manner the
liability of the Parent under the other provisions of this Parent Guaranty.
Prior to the transfer by the Parent of any note or negotiable instrument
evidencing any of the indebtedness of the Borrower or any Borrowing Subsidiary
to the Parent, the Parent shall mark such note or negotiable instrument with a
legend that the same is subject to this subordination. Without limiting the
generality of the foregoing, the Parent hereby agrees with the Guaranteed
Creditors that it will not exercise any right of subrogation which it may at any
time otherwise have as a result of this Parent Guaranty (whether contractual,
under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed
Obligations have been irrevocably paid in full in cash.
SECTION 10.8 WAIVER. (a) The Parent waives any right (except as
shall be required by applicable statute and cannot be waived) to require any
Guaranteed Creditor to (i) proceed against the Borrower, any Borrowing
Subsidiary, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from the Borrower, any Borrowing Subsidiary, any other
guarantor or any other party or (iii) pursue any other remedy in any Guaranteed
Creditor's power whatsoever. The Parent waives any defense based on or arising
out of any defense of the Borrower, any Borrowing Subsidiary, any other
guarantor or any other party, other than payment in full of the Guaranteed
Obligations, based on or arising out of the disability of the Borrower, any
Borrowing Subsidiary, any other guarantor or any other party, or the validity,
legality or unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
or any Borrowing Subsidiary other than payment in full of the Guaranteed
Obligations. The Guaranteed Creditors may, at their election, foreclose on any
security held by the Collateral Agent, or any other Guaranteed Creditor by one
or more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Guaranteed Creditors
may have against the Borrower, any Borrowing Subsidiary, any other party or any
security, without affecting or impairing in any way the liability of the Parent
hereunder except to the extent the Guaranteed Obligations have been paid. The
Parent waives any defense arising out of any such election by the Guaranteed
Creditors, even though such election operates to impair or extinguish any right
of reimbursement or subrogation or other right or remedy of the Parent against
the Borrower, any Borrowing Subsidiary, any other party or any security.
(b) The Parent waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Parent
Guaranty, and notices of the existence, creation or incurring of new or
additional Guaranteed Obligations. The Parent assumes all responsibility for
being and keeping itself informed of the Borrower's and each Borrowing
Subsidiary's financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations and the
nature, scope and extent of the risks which the Parent assumes and incurs
hereunder, and agrees that neither the Agents nor any Bank shall have any duty
to advise the Parent of information known to them regarding such circumstances
or risks.
SECTION 10.9 MAXIMUM LIABILITY. It is the desire and intent of the
Parent and the Guaranteed Creditors that this Parent Guaranty shall be enforced
against the Parent to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought. If,
however, and to the extent that, the obligations of the Parent under this Parent
Guaranty shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers), then the amount of the
Guaranteed Obligations of the Parent shall be deemed to be reduced and the
Parent shall pay the maximum amount of the Guaranteed Obligations which would be
permissible under applicable law.
80
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
written above.
SPECIALTY RETAILERS, INC.
By: /s/ Mark A. Hess
Name: Mark A. Hess
Title: Vice President, Financial Planning
Notice Address: 10201 Main Street
Houston, Texas 77025
STAGE STORES, INC.
By: /s/ James Marcum
Name: James A. Marcum
Title: Executive Vice President &
Chief Financial Officer
Notice Address: 10201 Main Street
Houston, Texas 77025
CREDIT SUISSE FIRST BOSTON, as Administrative
Agent and Collateral Agent, as a Bank and L/C Bank
and as a Swingline Bank
By: /s/ Chris Horgan
Title: Vice President
By: /s/ Ira Lubinsky
Title: Vice President
Notice Address: Eleven Madison Avenue
New York, New York 10010
Attn: Chris Horgan
Telephone: (212) 325-9157
Facsimile: (212) 325-8309
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard P. Degrey
Name: Richard P. Degrey
Title: Vice President
Notice Address: Commercial Finance Division
70 South Lake Avenue, Suite 900
Pasadena, CA 91101
Attn: Martin Valencia
Telephone: (818) 304-1862
Facsimile: (818) 304-1845
<PAGE>
BANK UNITED
By: /s/ Mario Chiodetti
Name: Mario Chiodetti
Title: Director
Notice Address: 3200 Southwest Freeway, 19th Floor
Houston, TX 77027
Attn: Mario Chiodetti
Telephone: (713) 543-6954
Facsimile: (713) 543-7927
<PAGE>
CREDITANSTALT BANKVEREIN
By: /s/ Carl G. Drake
Name: Carl G. Drake
Title: Senior Associate
By: /s/ Robert M. Biringer
Name: Robert M. Biringer
Title: Executive Vice President
Notice Address: Two Ravinia Drive, Suite 1680
Atlanta, GA 30346
Attn: Carl Drake
Telephone: (770) 390-1850
Facsimile: (770) 390-1851
<PAGE>
DEUTSCHE BANK AG, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By: /s/ Susan M. O'Connor
Name: Susan M. O'Connor
Title: Director
By: /s/ Joel D. Makowsky
Name: Joel D. Makowsky
Title: Assistant Vice President
Notice Address: 31 West 52nd Street, 24th Floor
New York, NY 10019
Attn: Susan O'Connor
Telephone: (212) 469-8208
Facsimile: (212) 469-7936
<PAGE>
HIBERNIA NATIONAL BANK
By: /s/ Troy J. Villafarra
Name: Troy J. Villafarra
Title: Vice President
Notice Address: 313 Carondelet Street
New Orleans, LA 70130
Attn: Troy Villafarra
Telephone: (504) 533-2738
Facsimile: (504) 533-5344
<PAGE>
ROYAL BANK OF SCOTLAND
By: /s/ Derek Bonnar
Name: Derek Bonnar
Title: Vice President
Notice Address: 88 Pine Street, 26th Floor
New York, NY 10005
Attn: Derek Bonnar
Telephone: (212) 269-1718
Facsimile: (212) 480-0791
<PAGE>
THE FUJI BANK, LIMITED
By: /s/ Philip C. Lauinger III
Name: Philip C. Lauinger III
Title: Vice President & Manager
Notice Address: 1221 McKinney Street, Suite 4100
Houston, TX 77010
Attn: Jay Fort
Telephone: (713) 650-7855
Facsimile: (713) 759-0048
<PAGE>
BANQUE PARIBAS
By: /s/ Scott Clingan
Name: Scott Clingan
Title: Vice President
By: /s/ Larry Robinson
Name: Larry Robinson
Title: Vice President
Notice Address: 1200 Smith Street, Suite 3100
Houston, Texas 77002
Attn: Scott Clingan
Telephone: (713) 659-4811
Facsimile: (713) 659-5234
<PAGE>
IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION
By: /s/
Name:
Title:
Notice Address: 9920 South La Cienega Boulevard
14th Floor
Inglewood, CA 90301
Attn: Jamie Harney
(Notification Methods)
Telephone: (310) 417-5656
Facsimile: (310) 417-5997
Attn: Judy Varner (Borrowings,
Paydowns, Interest,
Fees)
Telephone: (310) 417-5721
Facsimile: (310) 417-5997
<PAGE>
ANNEX 1 TO
CREDIT AGREEMENT
BANKS AND COMMITMENTS
NAME OF BANK REVOLVING COMMITMENT EXPANSION LOAN COMMITMENT
- ------------ -------------------- -------------------------
Credit Suisse First Boston $22,500,000 $22,500,000
Union Bank of California 17,500,000 17,500,000
Bank United 12,500,000 12,500,000
Creditanstalt 7,500,000 7,500,000
Deutsche Bank AG 7,500,000 7,500,000
Hibernia Bank 7,500,000 7,500,000
Royal Bank of Scotland 7,500,000 7,500,000
The Fuji Bank, Ltd 7,500,000 7,500,000
Banque Paribas 5,000,000 5,000,000
Imperial Bank 5,000,000 5,000,000
- ------------- ------------ ------------
Total $100,000,000 $100,000,000
EXHIBIT 4.2
================================================================================
SPECIALTY RETAILERS, INC.,
AS ISSUER
STAGE STORES, INC.,
AS GUARANTOR
$200,000,000
8 1/2% SENIOR NOTES DUE 2005
-----------------
INDENTURE
Dated as of June 17, 1997
-----------------
STATE STREET BANK AND TRUST COMPANY
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
310 (a)(1)...................................................... 8.10
(a)(2)...................................................... 8.10
(a)(3)...................................................... N/A
(a)(4)...................................................... N/A
(a)(5)...................................................... 8.10
(b)......................................................... 8.10
(c)......................................................... N/A
311 (a)......................................................... 8.11
(b)......................................................... 8.11
(c)......................................................... N/A
312 (a)......................................................... 2.05
(b)......................................................... 12.03
(c)......................................................... 12.03
313 (a)......................................................... 11.02
(b)(i)...................................................... 11.02
(b)(2)...................................................... 8.06
(c)......................................................... 8.06; 11.02
(d)......................................................... 8.06
314 (a)......................................................... 8.03; 11.02
(b)......................................................... 11.03
(c)(1)...................................................... 12.04
(c)(2)...................................................... 12.04
(c)(3)...................................................... N/A
(d)......................................................... 11.02;11.03
(e)......................................................... 12.05
(f)......................................................... N/A
315 (a)......................................................... 8.01
(b)......................................................... 8.05; 12.02
(c)......................................................... 8.01
(d)......................................................... 8.01
(e)......................................................... 7.11
316 (a)(1)(A)................................................... 7.05
(a)(1)(B)................................................... 7.04
(a)(2)...................................................... N/A
(b)......................................................... 7.07
317 (a)(1)...................................................... 7.08
(a)(2)...................................................... 7.09
(b)......................................................... 2.04
318 (a)......................................................... 12.01
(b)......................................................... N/A
(c)......................................................... 12.01
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
i
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES...................................................................... 1
RECITALS OF SRI AND STAGE.................................................... 1
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................................. 1
Section 1.02. Other Definitions....................................... 17
Section 1.03. Incorporation by Reference of Trust Indenture Act....... 17
Section 1.04. Rules of Construction................................... 18
ARTICLE II
THE NOTES
Section 2.01. Form and Dating; Designation as Designated Senior Debt.. 18
Section 2.02. Execution and Authentication............................ 19
Section 2.03. Registrar and Paying Agent.............................. 20
Section 2.04. Paying Agent to Hold Money In Trust..................... 20
Section 2.05. Lists of Holders of Notes............................... 21
Section 2.06. Transfer and Exchange................................... 21
Section 2.07. Replacement Notes....................................... 25
Section 2.08. Outstanding Notes....................................... 25
Section 2.09. Temporary Notes and Certificated Notes.................. 26
Section 2.10. Cancellation............................................ 27
Section 2.11. Defaulted Interest...................................... 27
Section 2.12. CUSIP Number............................................ 27
ARTICLE III
REDEMPTION
Section 3.01. Notices to Trustee...................................... 27
Section 3.02. Selection of Notes to be Redeemed....................... 28
Section 3.03. Notice of Redemption.................................... 28
Section 3.04. Effect of Notice of Redemption.......................... 29
Section 3.05. Deposit of Redemption Price............................. 29
Section 3.06. Notes Redeemed in Part.................................. 29
ARTICLE IV
- --------
NOTE: This Table of Contents shall not, for any reason, be deemed to be part
of the Indenture.
ii
<PAGE>
PAGE
CHANGE OF CONTROL
ARTICLE V
COVENANTS
Section 5.01. Payment of Principal, Premium and Interest.............. 31
Section 5.02. Maintenance of Office or Agency......................... 31
Section 5.03. SEC Reports............................................. 31
Section 5.04. Limitation On Debt...................................... 32
Section 5.05. Limitation On Restricted Payments....................... 33
Section 5.06. Limitation On Restrictions On Distributions from
Restricted Subsidiaries................................. 35
Section 5.07. Limitation On Sales of Assets and Subsidiary Stock...... 36
Section 5.08. Limitation On Transactions with Affiliates.............. 39
Section 5.09. Limitation On the Sale or Issuance of Capital Stock of
Restricted Subsidiaries................................. 39
Section 5.10. Limitation on Liens..................................... 40
Section 5.11. Limitation On Sale/Leaseback Transactions............... 40
Section 5.12. Accounts Receivable Subsidiaries........................ 40
Section 5.13. Future Guarantors....................................... 41
Section 5.14. Compliance Certificates................................. 41
Section 5.15. Further Instruments and Acts............................ 41
ARTICLE VI
SUCCESSORS
Section 6.01. When Stage and SRI May Merge or Transfer Assets......... 41
Section 6.02. Successor Company Substituted........................... 42
Section 6.03. When Subsidiary Guarantor May Merge or Transfer Assets.. 42
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01. Events of Default....................................... 43
Section 7.02. Acceleration............................................ 44
Section 7.03. Other Remedies.......................................... 44
Section 7.04. Waiver of Past Defaults................................. 45
Section 7.05. Control by Majority..................................... 45
Section 7.06. Limitation On Suits..................................... 45
Section 7.07. Unconditional Right of Holders of Notes to Receive
Payment................................................. 45
Section 7.08. Collection Suit by Trustee.............................. 46
Section 7.09. Trustee May File Proofs of Claim........................ 46
iii
<PAGE>
PAGE
Section 7.10. Priorities.............................................. 46
Section 7.11. Undertaking for Costs................................... 46
Section 7.12. Waiver of Stay, Extension and Usury Laws................ 47
ARTICLE VIII
TRUSTEE
Section 8.01. Duties of Trustee....................................... 47
Section 8.02. Rights of Trustee....................................... 48
Section 8.03. Individual Rights of Trustee............................ 49
Section 8.04. Trustee's Disclaimer.................................... 49
Section 8.05. Notice of Default....................................... 49
Section 8.06. Reports by Trustee to Holders of Notes.................. 49
Section 8.07. Compensation and Indemnity.............................. 49
Section 8.08. Replacement of Trustee.................................. 50
Section 8.09. Successor Trustee by Merger, Etc........................ 51
Section 8.10. Eligibility; Disqualification........................... 51
Section 8.11. Preferential Collection of Claims Against SRI........... 52
ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Liability on Notes; Defeasance............. 52
Section 9.02. Conditions to Defeasance................................ 53
Section 9.03. Application of Trust Money.............................. 54
Section 9.04. Repayment to SRI........................................ 54
Section 9.05. Indemnity for Government Obligations.................... 54
Section 9.06. Reinstatement........................................... 54
ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Without Consent of Holders of Notes.................... 55
Section 10.02. With Consent of Holders of Notes....................... 56
Section 10.03. Compliance with Trust Indenture Act.................... 57
Section 10.04. Revocation and Effect of Consents and Waivers.......... 57
Section 10.05. Notation On or Exchange of Notes....................... 57
Section 10.06. Trustee to Sign Amendments, Etc........................ 57
Section 10.07. Payment for Consents................................... 58
iv
<PAGE>
PAGE
ARTICLE XI
GUARANTIES
Section 11.01. Guaranties............................................. 58
Section 11.02. Limitation on Liability; Contribution.................. 59
Section 11.03. Successors and Assigns................................. 60
Section 11.04. No Waiver.............................................. 60
Section 11.05. Modification........................................... 60
Section 11.06. Release of Subsidiary Guarantor........................ 60
ARTICLE XII
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls........................... 61
Section 12.02. Notices................................................ 61
Section 12.03. Communication by Holders of Notes with Other Holders
of Notes............................................... 62
Section 12.04. Certificate and Opinion as to Conditions Precedent..... 62
Section 12.05. Statements Required in Certificate or Opinion.......... 62
Section 12.06. Rules by Trustee and Agents............................ 63
Section 12.07. No Personal Liability of Directors, Officers,
Employees, Incorporators and Stockholders.............. 63
Section 12.08. Governing Law.......................................... 63
Section 12.09. No Adverse Interpretation of Other Agreements.......... 63
Section 12.10. Successors............................................. 63
Section 12.11. Severability........................................... 63
Section 12.12. Counterpart Originals.................................. 63
Section 12.13. Table of Contents, Headings, Etc....................... 64
EXHIBIT A--Form of Initial Note
EXHIBIT B--Form of Exchange Note
v
<PAGE>
INDENTURE, dated as of June 17, 1997, among Specialty Retailers,
Inc. ("SRI"), a corporation duly organized and existing under the laws of the
State of Texas, as Issuer, Stage Stores, Inc. ("STAGE"), a corporation duly
organized and existing under the laws of the State of Delaware, as Guarantor,
and State Street Bank and Trust Company, a trust company duly organized and
existing under the laws of the Commonwealth of Massachusetts, as trustee (the
"TRUSTEE").
RECITALS OF SRI AND STAGE
SRI and Stage have duly authorized the execution and delivery of
this Indenture to provide for the issuance of up to $200,000,000 aggregate
principal amount of SRI's 8 1/2% Senior Notes Due 2005 issuable as provided in
this Indenture. All things necessary to make this Indenture a valid agreement of
SRI and Stage, in accordance with its terms, have been done, and SRI and Stage
have done all things necessary to make the Notes, when executed by SRI and Stage
and authenticated and delivered by the Trustee hereunder and duly issued by SRI,
the valid obligations of SRI and Stage as hereinafter provided.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. DEFINITIONS.
"ACCOUNTS RECEIVABLE FACILITY" means the program and the
transactions in effect on the Issue Date pursuant to the following principal
documents, each as in effect on the Issue Date, pursuant to which SRI
Receivables Purchase Co., Inc. ("SRPC") has acquired and securitized Receivables
originated by SRI: Receivables Purchase Agreement between SRI and SRPC; Pooling
and Servicing Agreement among SRI, as servicer, SRPC, as transferor, and Bankers
Trust (Delaware), as trustee; Series 1993-1 Supplement, Series 1933-2 Supplement
and Series 1995-1 Supplement, each between SRPC, as transferor, and Bankers
Trust (Delaware), as trustee; each related certificate purchase agreement and
placement agent agreement; Indenture between SRPC, as issuer, and Bankers Trust
(Delaware), as trustee and collateral agent; and Purchase Agreement between BT
Securities Corp., SRPC and SRI, pertaining to 12.5% Trust Certificate-Backed
Notes
"ACCOUNTS RECEIVABLE SUBSIDIARY" means a wholly owned Subsidiary of
Stage or a Subsidiary of such wholly owned Subsidiary, in each case which
engages in no activities other than in connection with the financing of
Receivables, including any Banking Subsidiary, and which is designated by the
Board of Directors as an Accounts Receivable Subsidiary pursuant to
<PAGE>
a board resolution set forth in an Officers' Certificate and delivered to the
Trustees, (a) no portion of the Debt or any other obligations (contingent or
otherwise) of which (i) is Guaranteed by Stage or any other Subsidiary of Stage,
(ii) is recourse to or obligates Stage or any other Subsidiary of Stage in any
way, other than pursuant to Customary Securitization Undertakings or (iii)
subjects any property or asset of Stage or any other Subsidiary of Stage,
directly or indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Customary Securitization Undertakings, (b) with which
none of Stage or any other Subsidiary of Stage has any contract, agreement,
arrangement or understanding other than on terms no less favorable to Stage or
such other Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of Stage, other than sales of Receivables in accordance
with clause (v) of the definition of "Asset Disposition" and fees payable in the
ordinary course of business in connection with servicing Receivables and (c)
with which neither Stage nor any other Subsidiary of Stage or has any obligation
(i) to subscribe for additional shares of Capital Stock therein or (ii) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results.
"ACQUISITION" means the acquisition by Stage of C.R. Anthony Company
pursuant to and in accordance with the terms of the Merger Agreement.
"AFFILIATE" means with respect to any specified Person any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Section 5.07 and Section 5.08 only, the term
"Affiliate" shall also mean any beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) of Capital Stock representing 10% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of Stage or of
rights or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner in accordance with the first sentence of this definition.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"ASSET DISPOSITION" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by Stage or any of its Restricted
Subsidiaries, including, without limitation, any disposition by means of a
merger, consolidation or similar transaction, other than (i) a disposition by a
Restricted Subsidiary to Stage or by Stage or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (ii) a disposition of property or assets (other than
shares of Capital Stock of a Restricted Subsidiary and which do not constitute
all or substantially all of the assets of any division or line of business of
Stage or any Restricted Subsidiary) at fair market value in the ordinary course
of business, (iii) for purposes of Section 5.07 only, a disposition that
constitutes a Restricted Payment or a Permitted Investment permitted pursuant to
Section 5.05, (iv) a transaction or series of related transactions for which
Stage or its Restricted Subsidiaries receive aggregate consideration of less
than $250,000, (v) contributions, dispositions or other transfers of Receivables
to an Accounts Receivable Subsidiary that is wholly owned, directly or
indirectly, by Stage in exchange for Capital Stock or an increase in paid-in
capital in such Accounts Receivable Subsidiary or sales of Receivables to an
Accounts Receivable
2
<PAGE>
Subsidiary for cash and promissory notes, in each case for consideration having
a value at least equal to 95% of the book value thereof as determined in
accordance with GAAP, and (vi) the disposition of all or substantially all of
the assets of Stage permitted under Article VI.
"ATTRIBUTABLE DEBT" means, in respect of a Sale/Leaseback
Transaction, as at the time of determination, the present value (discounted at
the interest rate borne by the Senior Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect
to any Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of
the products of numbers of years from the date of determination to the dates of
each successive scheduled principal payment of such Debt or redemption or
similar payment with respect to such Preferred Stock multiplied by the amount of
such payment, by (ii) the sum of all such payments.
"BANK DEBT" means all obligations pursuant to the New Credit
Agreement including reimbursement obligations in respect of letters of credit
and interest accruing at the contract rate specified therein on or after the
filing of any petition in bankruptcy or for reorganization relating to Stage or
SRI whether or not post-filing interest is an allowed claim in such proceeding.
"BANKING SUBSIDIARY" means a wholly owned Subsidiary of Stage or a
Subsidiary of a wholly owned Subsidiary of Stage, in each case chartered under
the banking laws of the United States or any state thereof, which engages in
activities permitted by applicable banking laws and the primary purpose of which
is to finance the Receivables arising out of sales of goods and services by
Stage and its Subsidiaries.
"BANKRUPTCY LAW" means title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.
"BEALLS HOLDING JUNIOR SUBORDINATED DEBENTURES" means the 7% Junior
Subordinated Debentures Due 2003 of Bealls Holding, Inc.
"BEALLS HOLDING SUBORDINATED NOTES" means the Subordinated Notes Due
2002 of Bealls Holding, Inc.
"BOARD OF DIRECTORS" means the Board of Directors of Stage or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL LEASE OBLIGATIONS" of any Person means any obligation which
is required to be classified and accounted for as a capital lease on the face of
a balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
3
<PAGE>
"CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in such Person (however designated), including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended.
"CONSOLIDATED EBITDA COVERAGE RATIO" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; PROVIDED, HOWEVER, that (1) if Stage or any Restricted
Subsidiary has Incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated EBITDA Coverage Ratio is an Incurrence of Debt, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been Incurred on
the first day of such period and the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
as if such discharge had occurred on the first day of such period, (2) if since
the beginning of such period Stage or any Restricted Subsidiary shall have made
any Asset Disposition, the EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or increased by an amount
equal to the EBITDA (if negative), directly attributable thereto for such
period, and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Debt of Stage or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to Stage and its continuing Restricted
Subsidiaries in connection with such Asset Dispositions for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Debt of such
Restricted Subsidiary to the extent Stage and its continuing Restricted
Subsidiaries are no longer liable for such Debt after such sale), (3) if since
the beginning of such period Stage or any Restricted Subsidiary (by merger or
otherwise) shall have made an Investment in any Restricted Subsidiary (or any
Person which becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Debt) as if such Investment or
acquisition occurred on the first day of such period, and (4) if since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into Stage or any Restricted Subsidiary since
the beginning of such period) shall have made any Asset Disposition or any
Investment that would have required an adjustment pursuant to clause (2) or (3)
above if made by Stage or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition or Investment occurred on
the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto, and the amount of Consolidated Interest Expense
associated with any Debt Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of Stage. If any Debt bears a floating rate of interest and
is being given pro forma effect, the interest of such Debt shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the
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entire period (taking into account any Interest Rate Agreement applicable to
such Debt if such Interest Rate Agreement has a remaining term in excess of 12
months).
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total
interest expense of Stage and its consolidated Restricted Subsidiaries
(excluding amortization of deferred financing costs), plus, to the extent not
included in such interest expense, (i) interest expense attributable to Capital
Lease Obligations, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs under Hedging Obligations (including amortization of
fees), (vii) Preferred Stock dividends in respect of all Redeemable Stock of
Stage and Preferred Stock dividends payable in cash in respect of all Preferred
Stock held by Persons other than Stage or a Wholly Owned Subsidiary, (viii)
interest incurred in connection with Investments in discontinued operations;
(ix) interest accruing on any Debt of any other Person to the extent such Debt
is Guaranteed by Stage or any of its Restricted Subsidiaries and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than Stage) in connection with Debt Incurred by such plan
or trust.
"CONSOLIDATED NET INCOME" means, for any period, the net income of
Stage and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall not
be included in such Consolidated Net Income (i) any net income of any Person if
such Person is not a Restricted Subsidiary, except that subject to the exclusion
contained in clause (iv) below, Stage's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person during such
period to Stage or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (iii) below); (ii) any net
income of any Person acquired by Stage or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income of any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to
Stage, except that (A) subject to the exclusion contained in clause (iv) below,
Stage's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Restricted Subsidiary during such
period to Stage or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to
another Restricted Subsidiary, to the limitation contained in this clause), and
(B) Stage's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income; (iv) any
gain or loss realized upon the sale or other disposition of any property, plant
or equipment of Stage or its consolidated Subsidiaries (including pursuant to
any sale-and-leaseback arrangement) which is not sold or otherwise disposed of
in the ordinary course of business and any gain or loss realized upon the sale
or other disposition of any Capital Stock of any Person; (v) extraordinary gains
or losses; and (vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 5.05 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
Stage or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted pursuant to
Section 5.05(a)(3)(D).
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"CONSOLIDATED NET WORTH" of any Person means the total of the
amounts shown on the balance sheet of such Person and its consolidated
subsidiaries, determined on a consolidated basis in accordance with GAAP, as of
the end of the most recent fiscal quarter of such Person ending at least 45 days
prior to the taking of any action for the purpose of which the determination is
being made, as (i) the par or stated value of all outstanding Capital Stock of
such Person, plus (ii) paid-in capital or capital surplus relating to such
Capital Stock, plus (iii) any retained earnings or earned surplus, less (A) any
accumulated deficit, (B) any amounts attributable to Redeemable Stock, and (C)
any amounts attributable to Exchangeable Stock.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of
the Trustee specified in Section 12.02 or such other address as to which the
Trustee may give notice to Stage.
"CURRENCY AGREEMENT" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"CUSTOMARY SECURITIZATION UNDERTAKINGS" means representations,
warranties, covenants and indemnities entered into by Stage or any of its
Restricted Subsidiaries in connection with a Receivables transaction with an
Accounts Receivable Subsidiary and which are reasonably customary in asset
securitization transactions involving accounts, general intangibles or other
rights to payment. All terms and provisions of the Accounts Receivable Facility
shall constitute Customary Securitization Undertakings.
"DEBT" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations of such Person and all
obligations of such Person under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business); (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) all Redeemable
Stock of such Person and, with respect to any Subsidiary of such Person, all
Preferred Stock (the amount of Debt represented thereby shall equal the greater
of its liquidation preference and the redemption, repayment or other repurchase
obligations with respect thereto, but excluding any accrued dividends); (vi) all
Hedging Obligations of such Person; (vii) all obligations of the type referred
to in clauses (i) through (v) of other Persons and all dividends of other
Persons for the payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including by
means of any Guarantee; and (viii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such
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obligation being deemed to be the lesser of the value of such property or assets
or the amount of the obligation so secured. The amount of Debt of any Person at
any date shall be the outstanding balance of such date of all unconditional
obligations as described above and the maximum liability upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date; PROVIDED, HOWEVER, that the amount outstanding at any time of any
Debt Incurred with original issue discount is the face amount of such Debt less
the remaining unamortized portion of the original issue discount of such Debt at
such time as determined in conformity with GAAP.
"DEEMED ASSET VALUE" means 75% of the fair market value, as
determined in good faith by the Board of Directors of Stage, of assets (other
than cash) received by Stage from the issuance or sale of its Capital Stock.
"DEFAULT" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"EBITDA" for any period means the sum of Consolidated Net Income
plus Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of Stage,
(b) depreciation expense, (c) amortization expense and (d) all other non-cash
items reducing such Consolidated Net Income (excluding any non-cash items to the
extent it represents an accrual of, or reserve for, cash disbursements for any
subsequent period) less all non-cash items increasing such Consolidated Net
Income, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of Stage shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same proportion) that the net
income of such Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be divided to Stage by such Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its stockholders.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE NOTES" means the 8 1/2% Senior Notes Due 2005 to be issued
pursuant to this Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"EXCHANGEABLE STOCK" means any Capital Stock which is exchangeable
or convertible into another security (other than Capital Stock of Stage which is
neither Exchangeable Stock nor Redeemable Stock).
"EXPANSION REVOLVING CREDIT FACILITY PROVISIONS" means the
provisions of the New Credit Agreement pursuant to which lenders thereunder have
committed to make available to SRI a reducing revolving credit facility.
"FB HOLDINGS SUBORDINATED NOTES" means the 7% Subordinated Notes Due
2000 of FB Holdings, Inc.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and
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pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants; (ii) statements and pronouncements of the
Financial Accounting Standards Board; (iii) in such other statements by such
other entity as approved by a significant segment of the accounting profession;
and (iv) the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in periodic
reports required to be filed pursuant to Section 13 of the Exchange Act,
including opinions and pronouncements in staff accounting bulletins and similar
written statements from the accounting staff of the SEC.
"GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise); or (ii) entered into for purposes of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business or guarantees of obligations of a Subsidiary in the ordinary course of
business if such obligations do not constitute Debt of such Subsidiary or
Customary Securitization Undertakings. The term "Guarantee" used as a verb shall
have a corresponding meaning.
"GUARANTOR" means Stage and each other Person that, pursuant to the
terms of this Indenture, Guarantees the Indenture Obligations.
"GUARANTY" means the guarantee by Stage or a Subsidiary Guarantor of
the Indenture Obligations pursuant to the terms of this Indenture.
"GUARANTY AGREEMENT" means a supplemental indenture, in form
satisfactory to the Trustee, pursuant to which a Guarantor becomes subject to
the applicable terms and conditions of this Indenture.
"HEDGING OBLIGATIONS" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"HOLDER" means the Person in whose name a Note is registered on the
Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning.
"INDENTURE" means this Indenture, as amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
"INITIAL NOTES" means the 8 1/2% Senior Notes Due 2005 issued under
this Indenture on or about the date hereof.
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"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect Stage or any Restricted Subsidiary against fluctuations in interest
rates.
"INVESTMENT" in any Person means any loan or advance to, any
acquisition of Capital Stock, equity interest, obligation or other security of,
or capital contribution or other investment in, or any other credit extension to
(including by way of Guarantee of any Debt of), such Person. For purposes of the
definition of "Unrestricted Subsidiary", the definition of "Restricted Payment"
and Section 5.05 of this Indenture, (i) "Investment" shall include the portion
(proportionate to Stage's equity interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of Stage at the time that such
Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that if
such designation is made in connection with the acquisition of such Subsidiary
or the assets owned by such Subsidiary, the "Investment" in such Subsidiary
shall be deemed to be the consideration paid in connection with such
acquisition; PROVIDED, FURTHER, HOWEVER, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, Stage shall be deemed to continue to have
a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) Stage's "Investment" in such Subsidiary at the time of
such redesignation less (y) the portion (proportionate to Stage's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"ISSUE DATE" means the date on which the Notes are originally
issued.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday, payment may be made at that place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period.
"LIEN" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"MASTER TRUST" means a trust organized for the purpose securitizing
Receivables held by an Accounts Receivable Subsidiary that does not engage in
any business other than (a) the purchase of Receivables or participation
interests therein, (b) the issuance and distribution of indebtedness and other
interests in such trust to (i) the Accounts Receivable Subsidiary or (ii) to
other parties for cash or cash equivalents on an arms-length basis, (c) the
servicing of Receivables and any indebtedness or interests in such trust and (d)
activities ancillary to the actions described in clauses (a), (b) and (c).
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as
of March 5, 1997, by and between Stage and C.R. Anthony Company.
"NET AVAILABLE CASH" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other
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obligations relating to such properties or assets that are the subject of such
Asset Disposition or received in any other noncash form) therefrom, in each case
net of (i) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a consequence
of such Asset Disposition; (ii) all payments made on any Debt which is secured
by any assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary consent to
such Asset Disposition, or by applicable law be repaid out of the proceeds from
such Asset Disposition; (iii) all distributions and other payments required to
be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition; and (iv) the deduction of appropriate amounts
provided by the sellers as a reserve, in accordance with GAAP, against any
liabilities associated with the property or other assets disposed in such Asset
Disposition and retained by Stage or any Restricted Subsidiary after such Asset
Disposition.
"NET CASH PROCEEDS" means with respect to any issuance or sale of
Capital Stock, the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NEW CREDIT AGREEMENT" means the agreement to be dated June 17, 1997
among SRI, Credit Suisse First Boston, as administrative agent, and the other
lenders party thereto, and their respective successors and assigns, together
with all other instruments, documents and agreements related thereto, as the
same may be amended, supplemented, waived and otherwise modified from time to
time in accordance with the terms thereof, and any agreement (and all other
related instruments, documents and agreements) governing Debt Incurred to
refund, replace or refinance, in whole or in part, the borrowings and
commitments then outstanding or permitted to be outstanding under such New
Credit Agreement or a successor New Credit Agreement, whether by the same or any
other lender or group of lenders.
"NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible common
stock of such corporation; PROVIDED, HOWEVER, that Non-Convertible Capital Stock
shall not include any Redeemable Stock or Exchangeable Stock.
"NOTES" means the Initial Notes, the Exchange Notes and the Private
Exchange Notes, treated as a single class.
"OFFICER" means with respect to any Person the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, Controller, Secretary or any
Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of a
Person by two Officers of such Person, one of whom must be the principal
executive officer, principal financial officer, treasurer or principal
accounting officer of such Person.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be an employee of or counsel to Stage or the Trustee.
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"PERMITTED INVESTMENT" means an Investment by Stage or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is reasonably
related to the business of Stage; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, Stage or a
Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is
reasonably related to the business of Stage; (iii) Temporary Cash Investments;
(iv) receivables owing to Stage or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms
may include such concessionary trade terms as Stage or any such Restricted
Subsidiary deems reasonable under the circumstances; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business consistent with past practices of Stage or such
Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to
Stage or any Restricted Subsidiary or in satisfaction of judgments; (viii) other
Investments in an aggregate amount not to exceed $5 million; (ix) Investments in
an Accounts Receivable Subsidiary received in consideration of contributions or
sales of Receivables permitted pursuant to clause (v) of the definition of
"Asset Disposition;" (x) Investments in a Banking Subsidiary in an aggregate
amount not to exceed $10 million; (xi) Investments in an Accounts Receivable
Subsidiary in an aggregate amount not to exceed the amount of dividends and
other distributions made to Stage or any of its Restricted Subsidiaries from
such Accounts Receivable Subsidiary; PROVIDED, HOWEVER, that the amount of such
Investments actually made shall reduce the amount included in the calculation
made pursuant to Section 5.05(a)(3)(D) to the extent that the amount of
dividends and other distributions by the Accounts Receivable Subsidiary to which
such Investments relate shall have otherwise increased the amount included in
the calculation made pursuant to Section 5.05(a)(3)(D); and (xii) any Person to
the extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to the covenant
described under Section 5.07.
"PERMITTED LIENS" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure surety or
appeal bonds to which such Person is party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings or other Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review; (c) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings; (d) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit
do not constitute Debt; (e) minor survey exceptions, minor encumbrances,
easements or reservations of, or rights of others for, licenses, rights of way,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real property or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not Incurred in
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connection with Debt and which do not in the aggregate materially adversely
affect the value of said properties or materially impair their use in the
operation of the business of such Person; (f) Liens securing Debt Incurred to
finance the construction, purchase or lease of, or repairs, improvements or
additions to, property of such Person; PROVIDED, HOWEVER, that the Lien may not
extend to any other property owned by such Person or any of its Subsidiaries at
the time the Lien is Incurred, and the Debt secured by the Lien may not be
Incurred more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien; PROVIDED, FURTHER, HOWEVER, that all such Debt
does not exceed 10% of Total Assets at the time of Incurrence; (g) Liens to
secure Debt permitted under the provisions described in clause (b)(2) and (b)(3)
of Section 5.04; (h) Liens existing on the Issue Date; (i) Liens on property or
shares of Capital Stock of another Person at the time such other Person becomes
a Subsidiary of such Person; PROVIDED, HOWEVER, that such Liens are not created,
incurred or assumed in connection with, or in contemplation of, such other
Person becoming such a Subsidiary; PROVIDED, FURTHER, HOWEVER, that such Lien
may not extend to any other property owned by such Person or any of its
Subsidiaries; (j) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or Subsidiary of such Person;
PROVIDED, HOWEVER, that such Liens are not created, incurred or assumed in
connection with, or in contemplation of, such acquisition; PROVIDED, FURTHER,
HOWEVER, that the Liens may not extend to any other property owned by such
Person or any of its Subsidiaries; (k) Liens securing Debt or other obligations
of a Subsidiary of such Person owing to such Person or a wholly owned Subsidiary
of such Person; (l) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Debt that is, and is permitted to be under this Indenture,
secured by a Lien on the same property securing such Hedging Obligations; (m)
Liens on Receivables in connection with the contribution or sale of such
Receivables to an Accounts Receivable Subsidiary; and (n) Liens to secure any
Refinancing (or successive Refinancings) as a whole, or in part, of any Debt
secured by any Lien referred to in the foregoing clauses (f), (h), (i) and (j);
PROVIDED, HOWEVER, that (x) such new Lien shall be limited to all or part of the
same property that secured the original Lien (plus improvements to or on such
property) and (y) the Debt secured by such Lien at such time is not increased to
any amount greater than the sum of (A) the outstanding principal amount or, if
greater, committed amount of the Debt described under clauses (f), (h), (i) or
(j) at the time the original Lien became a Permitted Lien and (B) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement. Notwithstanding the
foregoing, "Permitted Liens" will not include any Lien described in clauses (f),
(i) or (j) above to the extent such Lien applies to any Additional Assets
acquired directly or indirectly from Net Available Cash pursuant to the covenant
described under Section 5.07. References to "Debt" in the foregoing definition
of Permitted Liens include Debt and the related interest or other obligations.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
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"PRIVATE EXCHANGE" means the offer by SRI, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
the Initial Purchasers, in exchange for the Initial Notes held by the Initial
Purchasers as part of their initial distribution, a like aggregate principal
amount of Private Exchange Notes.
"PRIVATE EXCHANGE NOTES" means the 8 1/2% Senior Notes Due 2005 to
be issued pursuant to this Indenture in connection with a Private Exchange
effected pursuant to the Registration Rights Agreement.
"PUBLIC EQUITY OFFERING" means an underwritten primary public
offering of common stock of Stage pursuant to an effective registration
statement under the Securities Act.
"RECEIVABLES" means accounts, general intangibles or other rights to
payment from obligors arising from extension of credit to obligors, together
with any financing charges or other fees or charges related thereto, and any
related assets which are transferred under the Accounts Receivable Facility or
which are customarily transferred in connection with asset securitization
transactions involving accounts, general intangibles or other rights to payment.
"REDEEMABLE STOCK" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated Maturity
of the Notes.
"REFINANCE" means, in respect of any Debt, to refinance, extend,
renew, refund, repay, prepay, redeem, defease, exchange or retire, or to issue
other Debt in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"REFINANCING DEBT" means Debt that Refinances any Debt of Stage or
any Restricted Subsidiary existing on the Issue Date or Incurred in compliance
with the Indentures including Debt that Refinances Refinancing Debt; PROVIDED,
HOWEVER, that (i) such Refinancing Debt has a Stated Maturity no earlier than
the Stated Maturity of the Debt being Refinanced; (ii) such Refinancing Debt has
an Average Life at the time such Refinancing Debt is Incurred that is equal to
or greater than the Average Life of the Debt being Refinanced; (iii) such
Refinancing Debt has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accredited value) then outstanding or committed (plus fees and
expenses, including any premium and defeasance costs) under the Debt being
Refinanced; and (iv) with respect to any Refinancing Debt of Debt other than
Senior Debt, such Refinancing Debt shall rank no more senior, and shall be at
least as subordinated, in right of payment to the Notes as the Debt being so
extended, renewed, refunded or refinanced; PROVIDED, FURTHER, HOWEVER, that
Refinancing Debt shall not include (x) Debt of a Subsidiary that Refinances Debt
of Stage, or (y) Debt of Stage or a Restricted Subsidiary that Refinances Debt
of an Unrestricted Subsidiary.
"REGISTERED EXCHANGE OFFER" means an offer by SRI, pursuant to the
Registration Rights Agreement, to certain Holders of Initial Notes, to issue and
deliver to such Holders, in exchange for the Initial Notes, a like aggregate
principal amount of Exchange Notes registered under the Securities Act.
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"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated June 11, 1997 among SRI, Stage and the Initial Purchasers.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee,
any officer within the Corporate Trust Department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers.
"RESTRICTED SUBSIDIARY" means any Subsidiary of Stage that is not an
Unrestricted Subsidiary, and in all cases shall include SRI.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to
property now owned or hereafter acquired whereby Stage or a Restricted
Subsidiary transfers such property to a Person and Stage or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"SECURED DEBT" means any Debt of Stage or any Guarantor secured by a
Lien.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" of any Person means (I) (i) Debt of such Person,
whether outstanding on the Issue Date or thereafter Incurred and (ii) accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to such Person to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the applicable
Notes; PROVIDED, HOWEVER, that Senior Debt shall not include (1) any obligation
of such Person to any subsidiary of such Person, (2) any liability for Federal,
state, local or other taxes owed or owing by such Person, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Debt of such Person (and any accrued and unpaid interest
in respect thereof) which is subordinate or junior in any respect to any other
Debt or other obligation of such Person, (5) that portion of any Debt which at
the time of Incurrence is Incurred in violation of an Indenture, (6) Debt owed
to, due, or guaranteed on behalf of, any director, officer or employee of such
Person or any subsidiary of such Person (including, without limitation, amounts
owed for compensation), and (7) Debt which when Incurred and without respect to
any election under Section 1111(b) of Title 11 United States Code, is without
recourse to such Person and (II) the Bank Debt.
"SENIOR SUBORDINATED NOTES" means the $100 million aggregate
principal amount of 9% Senior Subordinated Notes Due 2007 of SRI issued pursuant
to the Indenture, dated as of the date hereof, among SRI, Stage and State Street
Bank and Trust Company as trustee.
"SHELF REGISTRATION STATEMENT" means the registration statement
issued by SRI in connection with the offer and sale of Initial Notes or Private
Exchange Notes, pursuant to the Registration Rights Agreement.
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"SIGNIFICANT SUBSIDIARY" of any Person means any Restricted
Subsidiary that would be a "significant subsidiary" of such Person as defined in
Rule 1-02 of Regulation S-X, promulgated by the SEC.
"STATED MATURITY" means with respect to any security the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"SUBORDINATED OBLIGATION" of any Person means any Debt of such
Person (whether outstanding on Issue Date or hereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement, including, without limitation, the Senior Subordinated Notes, the
Bealls Holding Subordinated Notes, the FB Holdings Subordinated Notes and the
Bealls Holding Junior Subordinated Debentures.
"SUBSIDIARY" means any corporation, association, partnership or
other business entity of which more than 50% of the total voting power of shares
of Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) Stage; (ii) Stage and one or more Subsidiaries;
or (iii) one or more Subsidiaries.
"SUBSIDIARY GUARANTOR" means each Subsidiary that becomes a
Guarantor pursuant to the terms of this Indenture.
"TANGIBLE PROPERTY" means all land, buildings, machinery and
equipment and leasehold interests and improvements which would be reflected on a
balance sheet of Stage prepared in accordance with generally accepted accounting
principles, excluding (i) all rights, contracts and other intangible assets of
any nature whatsoever; and (ii) all inventories and other current assets.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof or in a money market mutual fund registered under the Investment Company
Act of 1940, the principal of which is invested solely in such direct or
guaranteed obligations, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000 (or
the foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above and (iv) investments in commercial paper, maturing not more than 90
days after the date of acquisition, issued by a corporation (other than an
Affiliate of Stage) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United
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States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investor Service, Inc. or
"A-1" (or higher) according to Standard & Poor's Ratings Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TOTAL ASSETS" means the total consolidated assets of Stage and its
Subsidiaries, as shown on the most recent balance sheet of Stage.
"TRANSFER RESTRICTED NOTES" means Notes that bear or are required to
bear the legend set forth in Section 2.06(d).
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture, and
thereafter such term shall mean such successor serving hereunder.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of Stage that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; (ii) any Subsidiary of an
Unrestricted Subsidiary and (iii) any Accounts Receivable Subsidiary. The Board
of Directors may designate any Subsidiary of Stage (including any newly acquired
or newly formed Subsidiary), to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries own any Capital Stock or Debt of, or holds
any Lien on any property of, Stage or any other Subsidiary of Stage that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets of greater than $1,000, such designation
would be permitted pursuant to Section 5.05; and PROVIDED, FURTHER, HOWEVER,
that (1) no Subsidiary of Stage that is a Restricted Subsidiary on the Issue
Date may be designated an Unrestricted Subsidiary and (2) no Subsidiary holding,
directly or indirectly, any assets held by Stage or a Restricted Subsidiary on
the Issue Date may be designated an Unrestricted Subsidiary. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) Stage could Incur $1.00 of additional Debt pursuant to Section
5.04(a) and (y) no Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be by Stage to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect to
such designation and an Officer's Certificate certifying that such designation
complied with the foregoing provisions.
"VOTING STOCK" of a corporation means all classes of Capital Stock
of such corporation then outstanding and normally entitled (without regard to
any contingency) to vote in the election of directors.
"WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by
Stage or another Wholly Owned Subsidiary.
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"WORKING CAPITAL FACILITY PROVISIONS" means the provisions of the
New Credit Agreement pursuant to which lenders thereunder have committed to make
available to SRI and certain other Subsidiaries a revolving credit and letter of
credit facility.
Section 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM ARTICLE/SECTION
"AFFILIATE TRANSACTION".................... Section 5.08
"AGENT MEMBER"............................. Section 2.01
"CHANGE OF CONTROL"........................ Article IV
"COVENANT DEFEASANCE"...................... Section 9.01
"DEFAULT AMOUNT"........................... Section 7.02
"EVENT OF DEFAULT"......................... Section 7.01
"GLOBAL NOTE".............................. Section 2.01
"INDENTURE OBLIGATIONS".................... Section 11.01
"INITIAL PURCHASERS"....................... Section 2.01
"LEGAL DEFEASANCE"......................... Section 9.01
"NOTE REGISTER"............................ Section 2.03
"OFFER".................................... Section 5.07
"OFFER AMOUNT"............................. Section 5.07
"OFFER PERIOD"............................. Section 5.07
"PAYING AGENT"............................. Section 2.03
"PARENT CORPORATION"....................... Article IV
"PAYMENT DEFAULT".......................... Section 7.01
"PURCHASE AGREEMENT"....................... Section 2.01
"PURCHASE DATE"............................ Section 5.07
"QIB"...................................... Section 2.01
"REGISTRAR"................................ Section 2.03
"REGULATION S"............................. Section 2.01
"RESTRICTED PAYMENT"....................... Section 5.05
"RULE 144A"................................ Section 2.01
"SPECIFIED CORPORATION".................... Article IV
"SUCCESSOR COMPANY"........................ Section 6.01
Section 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
(i) "INDENTURE SECURITIES" means the Notes;
(ii) "INDENTURE SECURITY HOLDER" means a Noteholder;
(iii) "INDENTURE TO BE QUALIFIED" means this Indenture;
(iv) "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee;
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(v) "OBLIGOR" upon the Notes means SRI and any successor obligor
upon the Notes.
All other terms used in this Indenture that are (i) defined by the
TIA; (ii) defined by TIA reference to another statute; or (iii) defined by SEC
rule under the TIA have the meanings so assigned to them.
Section 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) the word "or" shall not be deemed to be exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular; and
(v) provisions apply to successive events and transactions.
ARTICLE II
THE NOTES
Section 2.01. FORM AND DATING; DESIGNATION AS DESIGNATED SENIOR DEBT.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Exchange Notes, the
Private Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT B, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Notes may have such
notations, legends or endorsements approved as to form by SRI and required, as
applicable, by law, stock exchange rule, agreements to which SRI is subject
and/or usage. Each Note shall be dated the date of its authentication. The Notes
shall be issuable only in denominations of $1,000 and integral multiples
thereof. The terms of the Notes set forth in EXHIBIT A and EXHIBIT B are part of
the terms of this Indenture. The Notes are hereby designated as "Designated
Senior Debt" for purposes of the Indenture governing the Senior Subordinated
Notes.
The Notes are being offered and sold by SRI pursuant to a Purchase
Agreement (the "PURCHASE AGREEMENT"), dated June 11, 1997, among SRI, Stage and
Credit Suisse First Boston Corporation, Bear, Stearns & Co. Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation as Initial Purchasers (the "INITIAL
PURCHASERS").
(a) GLOBAL NOTES. The Notes offered and sold to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) (a
"QIB") in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act
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("Regulation S"), in each case as provided in the Purchase Agreement, shall be
issued initially in the form of one permanent global Note in definitive, fully
registered form without interest coupons with the global Note legend and
restricted Note legend set forth in Exhibit A hereto (the "Global Note"), which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, as custodian for the Depository (or with such other custodian
as the Depository may direct), and registered in the name of the Depository or a
nominee of the Depository, duly executed by SRI and Stage and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Note may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depository or its nominee as hereinafter
provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to
the Global Note deposited with or on behalf of the Depository.
SRI and Stage shall execute and the Trustee shall, in accordance
with this Section 2.01(b), authenticate and deliver initially one Global Note
that (a) shall be registered in the name of the Depository or the nominee of the
Depository and (b) shall be delivered by the Trustee to the Depository or
pursuant to the Depository's instructions or held by the Trustee as custodian
for the Depository.
Members of, or participants in, the Depository ("AGENT MEMBERS")
shall have no rights under this Indenture with respect to the Global Note held
on their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Note, and the Depository may be treated by
Stage, the Trustee and any agent of SRI or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent SRI, the Trustee or any agent of SRI or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices of such Depository governing the
exercise of the rights of a holder of a beneficial interest in the Global Note.
(c) CERTIFICATED NOTES. Except as provided in Section 2.06 or 2.09,
owners of beneficial interests in the Global Note will not be entitled to
receive physical delivery of certificated Notes. Certificated Notes will bear
the restricted securities legend set forth on EXHIBIT A unless removed in
accordance with Section 2.06(d).
Section 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of SRI shall sign the Notes for SRI by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time such Note is authenticated such Note shall be valid
nevertheless.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that a Note has been authenticated in accordance with the terms of this
Indenture.
The Trustee, upon a written order of SRI set forth in an Officers'
Certificate, shall authenticate and deliver (1) Notes for original issue in an
aggregate principal amount of $200,000,000, and (2) Exchange Notes or Private
Exchange Notes for issue only in a Registered
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Exchange Offer or a Private Exchange, respectively, pursuant to the Registration
Rights Agreement, for a like principal amount of Notes. Such order shall specify
the amount of the Notes to be authenticated, the date on which the original
issue of Notes is to be authenticated and whether the Notes are to be Initial
Notes, Exchange Notes or Private Exchange Notes. The aggregate principal amount
of Notes outstanding at any time may not exceed $200,000,000 except as provided
in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to SRI to
authenticate the Notes. Unless limited by the terms of such appointment, any
such authenticating agent may authenticate the Notes whenever the Trustee may do
so. Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent of the Trustee. An authenticating
agent has the same rights as an Agent to deal with SRI or an Affiliate of SRI.
Section 2.03. REGISTRAR AND PAYING AGENT.
SRI shall maintain (i) an office or agency where the Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "REGISTRAR"); and (ii) an office or agency where the Notes may
be presented for payment ("PAYING AGENT"). The Registrar shall keep a register
of the Holders of Notes and of the transfer and exchange of such Notes (the
"NOTE REGISTER"). SRI may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" shall include any such
additional paying agent. SRI may change any Paying Agent, Registrar or
co-registrar without prior notice to any Holder of a Note. SRI shall notify the
Trustee and the Trustee shall notify the Holders of the Notes of the name and
address of any Agent not a party to this Indenture. SRI or any of its
domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar or co-registrar. SRI shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. Any such agency agreement shall implement the provisions
of this Indenture that relate to such Agent. If SRI fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such, as appropriate, and shall be entitled to appropriate
compensation in accordance with Section 8.07.
SRI initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes in
accordance with Section 5.02.
Section 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
On or prior to each due date of the principal of, premium, if any,
and interest on any Note, SRI shall deposit with the Paying Agent a sum
sufficient to pay such principal, premium, if any, and interest when so becoming
due. SRI shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of the Holders
of the Notes or the Trustee all money held by the Paying Agent for the payment
of principal of, premium, if any, and interest on the Notes, and shall notify
the Trustee of any Default by SRI in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. SRI at any time may require a Paying Agent to pay all
money held by it to the Trustee. Upon payment over to the Trustee, the Paying
Agent (if other than SRI) shall have no further liability for the money
delivered to the Trustee. If SRI acts as Paying Agent, it shall segregate and
hold in a separate trust fund for the benefit of the Holders of the Notes all
money held by it as Paying Agent.
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Section 2.05. LISTS OF HOLDERS OF NOTES.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders of Notes. If the Trustee is not the Registrar, SRI shall furnish to
the Trustee at least three Business Days before each interest payment date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes, including the aggregate principal amount of
Notes held by each such Holder of Notes.
Section 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF CERTIFICATED NOTES. Certificated Notes
shall be issued in registered form and shall be transferable only upon the
surrender of certificated Notes for registration of transfer. When certificated
Notes are presented to the Registrar with a request to register the transfer or
to exchange them for an equal principal amount of certificated Notes of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; PROVIDED, HOWEVER, that any
certificated Notes presented or surrendered for registration of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar and the Trustee duly
executed by the Holder thereof or by his attorney duly authorized in
writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.06(b) or pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:
(A) if such certificated Notes are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect
(in the form set forth on the reverse of the Note); or
(B) if such certificated Notes are being transferred to SRI a
certification to that effect (in the form set forth on the reverse
of the Note); or
(C) if such certificated Notes are being transferred pursuant
to an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act: (i) a certificate to that
effect (in the form set forth on the reverse of the Note), and (ii)
if SRI or Registrar so requests, evidence reasonably satisfactory to
them as to the compliance with the restrictions set forth in the
legend set forth in Section 2.06(d)(i).
(b) RESTRICTIONS ON TRANSFER OF A CERTIFICATED NOTE FOR A BENEFICIAL
INTEREST IN THE GLOBAL NOTE. A certificated Note may not be exchanged for a
beneficial interest in the Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a certificated
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
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(i) certification, in the form set forth on the reverse of the Note,
that such certificated Note is being transferred to a QIB in accordance
with Rule 144A under the Securities Act or to a non-U.S. person in
accordance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Notes Custodian to make, an adjustment on its books and records
with respect to such Global Note to reflect an increase in the aggregate
principal amount of the Notes represented by the Global Note,
then the Trustee shall cancel such certificated Note and cause, or direct the
Notes Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Notes Custodian, the
aggregate principal amount of Notes represented by the Global Note to be
increased accordingly. If no Global Note is then outstanding, SRI shall issue
and the Trustee shall authenticate, upon written order of SRI in the form of an
Officers' Certificate, a new Global Note in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES.
(i) The transfer and exchange of the Global Note or beneficial
interests therein shall be effected through the Depository, in accordance
with this Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depository therefor, if
applicable.
(ii) Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in Section 2.09), the Global Note may not be
transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(iii) In the event that the Global Note is exchanged for Notes in
definitive form pursuant to Section 2.09, prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Notes, such Notes may be exchanged only in
accordance with such procedures as are substantially consistent with the
provisions of this Section 2.06 (including the certification requirements
set forth on the reverse of the Notes intended to ensure that such
transfers comply with Rule 144A or Regulation S, as the case may be) and
such other procedures as may from time to time be adopted by SRI.
(d) LEGEND.
(i) Except as permitted by the following paragraphs (ii) and (iii)
each Note certificate evidencing the Global Note and any certificated
Notes (and all Notes issued in exchange therefor or substitution thereof)
shall bear a legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN
A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
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AND UNDER APPLICABLE STATE SECURITIES LAWS, AND THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS
HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF SRI THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by the Global Note)
pursuant to Rule 144 under the Securities Act in the case of any Transfer
Restricted Note that is represented by the Global Note, the Registrar
shall permit the Holder thereof to request the issuance of a certificated
Note that does not bear the legend set forth above and rescind any
restrictions on the transfer of such Transfer Restricted Note, if the sale
or exchange was made in reliance on Rule 144 and the Holder certifies to
that effect in writing to the Registrar (such certification to be in the
form set forth on the reverse of the Note).
(iii) After a transfer of any Notes or Private Exchange Notes during
the period of the effectiveness of a Shelf Registration Statement with
respect to such Notes or Private Exchange Notes, as the case may be, all
requirements pertaining to legends on such Note or such Private Exchange
Note will cease to apply, the requirements requiring any such Note or such
Private Exchange Note issued to certain Holders be issued in global form
will cease to apply, and a certificated Note or Private Exchange Note
without legends will be available to the transferee of the Holder of such
Notes or Private Exchange Notes or upon receipt of directions to transfer
such Holder's interest in the Global Note, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Notes pursuant to which Holders of such Notes are offered
Exchange Notes in exchange for their Notes, all requirements pertaining to
such Notes that Notes issued to certain Holders be issued in global form
will cease to apply and certificated Notes with the restricted securities
legend set forth in Exhibit A hereto will be available to Holders of such
Notes that do not exchange their Notes and Exchange Notes in certificated
form will be available to Holders that exchange such Notes in such
Registered Exchange Offer.
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(v) Upon the consummation of a Private Exchange with respect to
the Notes pursuant to which Holders of such Notes are offered Private
Exchange Notes in exchange for their Notes, all requirements pertaining to
such Notes that Notes issued to certain holders be issued in global form
will still apply, and Private Exchange Notes in global form with the
restricted securities legend set forth in Exhibit A hereto will be
available to Holders that exchange such Notes in such Private Exchange.
(e) CANCELLATION OR ADJUSTMENT OF GLOBAL NOTE. At such time as all
beneficial interests in the Global Note have either been exchanged for
certificated Notes, redeemed, repurchased or cancelled, such Global Note shall
be returned to the Depository for cancellation or retained and cancelled by the
Trustee. At any time prior to such cancellation, if any beneficial interest in
the Global Note is exchanged for certificated Notes, redeemed, repurchased or
cancelled, the principal amount of Notes represented by such Global Note shall
be reduced and an adjustment shall be made by the Trustee or the Notes Custodian
to reflect such reduction on the books and records of the Notes Custodian for
such Global Note with respect to such Global Note.
(f) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF NOTES.
(i) To permit registration of transfers and exchanges, SRI and
Stage shall execute and the Trustee shall authenticate certificated
Notes and the Global Note at the Registrar's or co-registrar's
request.
(ii) SRI may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with
any transfer or exchange pursuant to this Section 2.06.
(iii) SRI shall not be required to make and the Registrar or
co-registrar need not register transfers or exchanges of
certificated Notes selected for redemption (except, in the case of
any certificated Note to be redeemed in part, the portion thereof
not to be redeemed), or any Notes for a period of 15 days before a
selection of Notes to be redeemed or 15 days before an interest
payment date.
(iv) Prior to the due presentation for registration of
transfer of any Note, SRI, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose
name a Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such
Note and for all other purposes whatsoever, whether or not such Note
is overdue, and none of SRI, the Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the
contrary.
(v) All Notes issued upon any transfer or exchange pursuant to
the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Notes
surrendered upon such transfer or exchange.
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(g) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of the Global Note, a member of, or a
participant in the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership
interest in the Notes or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than
the Depository) of any notice (including any notice of redemption)
or the payment of any amount, under or with respect to such Notes.
All notices and communications to be given to the Holders and all
payments to be made to Holders under the Notes shall be given or
made only to or upon the order of the registered Holders (which
shall be the Depository or its nominee in the case of the Global
Note). The rights of beneficial owners in the Global Note shall be
exercised only through the Depository subject to the applicable
rules and procedures of the Depository. The Trustee may rely and
shall be fully protected in relying upon information furnished by
the Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with
respect to any transfer of any interest in any Note (including any
transfers between or among Depository participants, members or
beneficial owners in the Global Note) other than to make any
required delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine
the same to determine substantial compliance as to form with the
express requirements hereof.
Section 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or SRI and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, SRI shall issue, Stage shall execute and the Trustee shall
authenticate a replacement Note if SRI's and the Trustee's reasonable
requirements for the replacements of Notes are met. If required by the Trustee
or SRI, an indemnity bond shall be supplied by the Holder that is sufficient in
the judgment of the Trustee, SRI and Stage to protect SRI, Stage, the Trustee,
any Agent or any authenticating agent from any loss which any of them may suffer
if a Note is replaced.
Every replacement Note shall be an obligation of SRI.
Section 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee, except for those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding. A Note
does not cease to be outstanding because Stage, a Subsidiary of Stage or an
Affiliate of Stage holds such Note.
If a Note is replaced pursuant to Section 2.07, it shall cease to be
outstanding unless the Trustee receives proof satisfactory to it that such
replaced Note is held by a bona fide
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purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note
and replacement thereof pursuant to Section 2.07.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the Notes
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Holders of Notes on
that date pursuant to the terms of this Indenture, then on and after that date
such Notes (or portions thereof) shall cease to be outstanding and interest
thereon shall cease to accrue.
Section 2.09. TEMPORARY NOTES AND CERTIFICATED NOTES.
(a) Until definitive Notes are ready for delivery, SRI may prepare,
SRI shall execute and the Trustee shall authenticate temporary Notes. Temporary
Notes shall be substantially in the form of definitive Notes but may have such
variations as SRI and the Trustee consider appropriate for temporary Notes.
Without unreasonable delay, SRI shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes. Until such exchange, temporary
Notes shall be entitled to the same rights, benefits and privileges as
definitive Notes.
(b) The Global Note deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.01 shall be
transferred to the beneficial owners thereof in the form of certificated Notes
in an aggregate principal amount equal to the principal amount of such Global
Note, in exchange for such Global Note, only if such transfer complies with
Section 2.06 and (i) the Depository notifies SRI that it is unwilling or unable
to continue as Depository for such Global Note or if at any time such Depository
ceases to be a "clearing agency" registered under the Exchange Act and a
successor depository is not appointed by SRI within 90 days of such notice, (ii)
an Event of Default has occurred and is continuing or (iii) SRI, in its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of certificated Notes under this Indenture.
(c) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to State
Street Bank and Trust Company, N.A., an Affiliate of the Trustee located in the
Borough of Manhattan, The City of New York, to be so transferred, in whole or
from time to time in part, without charge, and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Global Note, an equal
aggregate principal amount of Notes of authorized denominations. Any portion of
the Global Note transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depository shall direct.
Any Note delivered in exchange for an interest in the Global Note shall, except
as otherwise provided by Section 2.06(d), bear the restricted securities legend
set forth in Exhibit A hereto.
(d) Subject to the provisions of Section 2.09(c), the registered
Holder of the Global Note may grant proxies and otherwise authorize any person,
including agent members, participants and persons that may hold interests
through agent members, to take any action which a Holder is entitled to take
under this Indenture or the Notes.
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(e) In the event of the occurrence of any of the events specified in
Section 2.09(b), SRI will promptly make available to the Trustee a reasonable
supply of certificated Notes in definitive, fully registered form without
interest coupons.
Section 2.10. CANCELLATION.
SRI at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation, and shall destroy such
cancelled Notes (subject to the record retention requirement of the Exchange
Act), and, upon the request of SRI, deliver a certificate of such destruction to
SRI, unless SRI directs cancelled Notes to be returned to them. SRI may not
issue new Notes to replace Notes it has redeemed paid or delivered to the
Trustee for cancellation.
Section 2.11. DEFAULTED INTEREST.
If SRI defaults in a payment of interest on the Notes, SRI shall pay
such defaulted interest in any lawful manner. SRI may pay such defaulted
interest to the Persons who are Holders of the Notes on a subsequent special
record date, which date shall be at the earliest practicable date but in all
events at least five Business Days prior to the payment date, in each case at
the rate provided in the Notes. SRI shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days prior to the special
record date, SRI shall mail or cause to be mailed to each Holder of a Note a
notice that states such special record date, such related payment date and the
amount of any such defaulted interest to be paid to Holders of the Notes.
Section 2.12. CUSIP NUMBER.
SRI in issuing the Notes may use a "CUSIP" number, and, if SRI shall
do so, the Trustee shall use such CUSIP number in notices of redemption or
exchange as a convenience to Holders; PROVIDED, HOWEVER, that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in such notice or on the Notes and that reliance may be
placed only on the other identification numbers printed on the Notes. SRI will
notify the Trustee of any change in a CUSIP number.
ARTICLE III
REDEMPTION
Section 3.01. NOTICES TO TRUSTEE.
If SRI elects to redeem Notes pursuant to paragraph 5 of the Notes,
SRI shall notify the Trustee in writing of the redemption date, the principal
amount of Notes to be redeemed and the paragraph of the Notes pursuant to which
the redemption will occur.
SRI shall give each notice to the Trustee provided for in this
Section 3.01 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from SRI to the
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effect that such redemption will comply with the conditions herein. If fewer
than all of the Notes are to be redeemed, the record date relating to such
redemption shall be selected by SRI and given to the Trustee, which record date
shall not be less than 15 days after the date of notice to the Trustee, unless
the Trustee consents to a shorter period.
Section 3.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed pro rata or by lot or by a method that complies
with applicable legal, securities exchange and Depository Trust Company
requirements, if any, and that the Trustee in its sole discretion considers to
be fair and appropriate. The Trustee shall make the selection from outstanding
Notes not previously called for redemption. The Trustee may select for
redemption portions of the principal of Notes that have denominations larger
than $1,000. Notes and portions of Notes the Trustee selects shall be in amounts
of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply
to Notes called for redemption also apply to portions of Notes called for
redemption. The Trustee shall notify SRI promptly of the Notes or portions of
Notes to be redeemed.
Section 3.03. NOTICE OF REDEMPTION.
SRI shall at least 30 days but not more than 60 days before a
redemption date mail or cause to be mailed, by first class-mail, a notice of
redemption to each Holder of Notes which are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price,
(iii) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed, and that after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued;
(iv) the name and address of the Paying Agent;
(v) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(vi) that, unless SRI defaults in making such redemption payment or
the Paying Agent is prohibited from making such payment pursuant to the terms of
this Indenture, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(vii) the paragraph of the Notes and/or the Section of this
Indenture pursuant to which the Notes called for redemption are being redeemed;
and
(viii)that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
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At SRI's request, at least five Business Days prior to the date upon
which such notice is to be mailed unless the Trustee consents to a shorter
period, the Trustee shall give the notice of redemption in SRI's name and at
SRI's expense. In such event, SRI shall provide the Trustee with the information
required by this Section 3.03.
Section 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption shall become due and payable on the redemption date
and at the redemption price stated in such notice of redemption. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
such notice of redemption, plus accrued interest to the redemption date. Failure
to give notice to a Holder of a Note or any defect in any notice shall not
affect the validity of any notice to any other Holder of a Note.
Section 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any redemption date, SRI shall deposit with the
Paying Agent (or, if SRI or a Subsidiary is the Paying Agent, shall segregate
and hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date. The Trustee or the Paying
Agent shall promptly return to SRI any money deposited with the Trustee or the
Paying Agent by SRI in excess of the amounts necessary to pay the redemption
price of, and accrued interest on, all Notes to be redeemed on that date other
than Notes or portions of Notes called for redemption which have been delivered
by SRI to the Trustee for cancellation.
Section 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, SRI shall issue
and the Trustee shall authenticate for the Holder of the Notes (at the expense
of SRI) a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
ARTICLE IV
CHANGE OF CONTROL
(a) Upon the occurrence of a Change of Control (as defined below),
each Holder of a Note shall have the right to require SRI to repurchase such
Holder's Notes at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest (if any) to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
(b) The occurrence of any of the following events shall constitute a
"CHANGE OF CONTROL" under this Indenture:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall
be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right
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is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total voting power of the Voting Stock
of Stage;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of Stage
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of Stage was approved
by a majority of the directors of Stage 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 the Board of Directors of Stage then in
office;
(iii) the merger or consolidation of Stage or SRI with or into
another Person or the merger of another Person with or into Stage or SRI,
as the case may be, or the sale or transfer in one or a series of
transactions of all or substantially all the assets of Stage or SRI, as
the case may be, to another Person, and, in the case only of any such
merger or consolidation, the securities of Stage or SRI, as the case may
be, that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of Stage
or SRI, as the case may be, are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving corporation that represent
immediately after such transaction, at least a majority of the aggregate
voting power of the Voting Stock of the surviving corporation; PROVIDED,
HOWEVER, that the merger or consolidation of Stage with or into SRI or the
merger or consolidation of SRI with or into Stage shall not be deemed a
Change of Control; or
(iv) Stage shall hold, directly or indirectly, less than 100% of the
Capital Stock of SRI or less than 100% of the Voting Stock of SRI; and
PROVIDED, FURTHER, that a Change of Control shall occur if at any time
that Stage does not directly hold such Capital Stock or Voting Stock of
SRI, the entity holding such Capital Stock or Voting Stock of SRI shall
not be a Restricted Subsidiary and a Subsidiary Guarantor.
(c) Within 30 days following any Change of Control, SRI shall mail a
notice to each Holder with a copy to the Trustee stating: (i) that a Change of
Control has occurred and that such Holder has the right to require SRI to
purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest on the relevant interest payment date); (ii) the
material circumstances and facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization, each after giving effect to such Change of Control); (iii) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed in the event of a Change of Control); and
(iv) the instructions determined by SRI, consistent with the covenant described
hereunder, that a Holder must follow in order to have its Notes purchased.
(d) SRI shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Article IV. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Article IV, SRI shall comply
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with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Article IV by virtue thereof.
ARTICLE V
COVENANTS
Section 5.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
SRI shall duly and punctually pay the principal of (and premium, if
any) and interest on the Notes in accordance with the terms of this Indenture
and the Notes.
Section 5.02. MAINTENANCE OF OFFICE OR AGENCY.
SRI shall maintain an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
notices and demands to or upon SRI or any Guarantor in respect of the Notes and
this Indenture may be served. SRI shall give prompt written notice to the
Trustee of the location, and any change in such location, of such office or
agency. If at any time SRI shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
SRI also from time to time may designate one or more additional
offices or agencies for any or all such purposes and from time to time may
rescind any such designation; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve SRI of its obligation to maintain an
office or agency pursuant to Section 2.03 or this Section 5.02. SRI shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
Section 5.03. SEC REPORTS.
So long as any of the Notes remain outstanding, Stage shall cause
copies of all quarterly and annual financial reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which Stage is required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, including
without limitation, Forms 8-K, 10-Q and 10-K, to be so filed with the SEC and to
be filed with the Trustee and mailed to the Holders at their addresses appearing
in the Note Register maintained by the Registrar, in each case, at the times
specified for such filing with the SEC. If Stage is not subject to the
requirements of such Section 13 or 15(d) of the Exchange Act, Stage shall
nevertheless continue to file with the SEC, in conformity with Section 13 or
Section 15(d) of the Exchange Act, and provide the Trustee and Holders of Notes
with such annual and quarterly reports (without exhibits in the case of
documents provided to the Trustee and Holders of Notes) and such information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which are specified in
Section 13 or Section 15(d) of the Exchange Act, including without limitation,
Forms 8-K, 10-Q and 10-K. SRI and Stage shall also comply with the provisions of
TIA ss. 314(a).
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Section 5.04. LIMITATION ON DEBT.
(a) Stage shall not Incur, and shall not permit any Restricted
Subsidiary to Incur, directly or indirectly, any Debt unless the Consolidated
EBITDA Coverage Ratio at the date of such Incurrence exceeds 2.25 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), Stage and its
Restricted Subsidiaries may Incur the following Debt: (1) the Notes and the
Senior Subordinated Notes; (2) Debt Incurred by Stage and its Restricted
Subsidiaries pursuant to the Working Capital Facility Provisions of the New
Credit Agreement or any other working capital facility which, when taken
together with the outstanding principal amount of all unreimbursed letters of
credit and the outstanding principal amount of all other Debt Incurred pursuant
to this clause (2), does not exceed at any time in an aggregate principal amount
the greater of (A) $125 million and (B) the sum of (i) 50% of the book value of
the inventory of Stage and its Restricted Subsidiaries and (ii) 85% of the book
value of Receivables (or interests in a Master Trust comprised of Receivables
including, without limitation, "Transferor Certificates" under the Accounts
Receivable Facility) of Stage, its Restricted Subsidiaries and any Accounts
Receivable Subsidiary, but only to the extent that such Receivables (or Master
Trust interests) are owned by Stage, any of its Restricted Subsidiaries or any
Accounts Receivable Subsidiary and may be transferred by Stage, any Restricted
Subsidiary or any Accounts Receivable Subsidiary to a third party for fair value
without the consent of existing investors in such Receivables or Master Trust;
(3) Debt Incurred by Stage and its Restricted Subsidiaries pursuant to the
Expansion Revolving Credit Facility Provisions of the New Credit Agreement or
Debt Incurred under any other credit or loan agreement or any indenture in each
case which Refinances Debt Incurred under such Expansion Revolving Credit
Facility provisions or any Debt that previously Refinanced such Debt in
accordance with this clause (3) during the term thereof or concurrent with the
termination thereof, which, when taken together with the principal amount of all
other Debt Incurred pursuant to this clause (3), does not exceed $100 million
outstanding at any one time; (4) Debt of Stage owed to and held by a Wholly
Owned Subsidiary and Debt of a Wholly Owned Subsidiary owed to and held by Stage
or another Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent
issuance or transfer of any Capital Stock which results in such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer of such Debt
(other than to a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Debt by the issuer thereof; (5) Debt of a
Restricted Subsidiary Incurred and outstanding on or prior to the date on which
such Restricted Subsidiary became a Restricted Subsidiary or was acquired by
Stage (other than Debt Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by Stage); (6) Debt of Stage and
its Restricted Subsidiaries outstanding on the Issue Date (other than Debt
described in clause (1), (2), (3), (4) or (5)); (7) Refinancing Debt in respect
of Debt Incurred pursuant to paragraph (a) or pursuant to clause (1) or (6) or
this clause (7); (8) Hedging Obligations to the extent directly related to Debt
permitted to be Incurred by Stage pursuant to the Indentures; and (9) Debt in an
aggregate principal amount which, together with all other Debt of Stage and its
Restricted Subsidiaries then outstanding (other than Debt permitted by clauses
(1) through (8) of this paragraph (b) or paragraph (a) above) does not exceed
$25 million.
(c) Notwithstanding the foregoing paragraphs (a) and (b) above,
Stage shall not, and shall not permit any Restricted Subsidiary to, Incur any
Debt if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Debt shall be subordinated to the
applicable Notes at least to the same extent as the Subordinated Obligations.
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(d) For purposes of determining compliance with the foregoing
covenant, (i) in the event that an item of Debt meets the criteria of more than
one of the types of Debt described in paragraph (b), Stage, in its sole
discretion, will classify such item of Debt and only be required to include the
amount and type of such Debt in one of the clauses of paragraph (b), (ii) an
item of Debt may be divided and classified in more than one of the types of debt
in paragraph (b) and (iii) Guarantees of Debt otherwise included in the
determination of particular amounts of Debt of Stage or any Restricted
Subsidiary shall not also be included.
Section 5.05. LIMITATION ON RESTRICTED PAYMENTS.
(a) Stage shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to:
(i) declare or pay any dividend (either in cash or property) or make
any distribution on or in respect of, or redeem, repurchase, retire or
otherwise acquire, its Capital Stock or the Capital Stock of any
Restricted Subsidiary (including any payment in connection with any merger
or consolidation involving Stage) or similar payment to the direct or
indirect holders of its Capital Stock (except dividends or distributions
payable solely in its Non-Convertible Capital Stock or in options,
warrants or other rights to purchase its Non-Convertible Capital Stock and
except dividends or distributions payable to Stage or a Restricted
Subsidiary), and other than pro rata dividends or other distributions made
by a Restricted Subsidiary of Stage that is not a Wholly Owned Subsidiary
to minority shareholders (or owners of an equivalent interest in the case
of a Restricted Subsidiary that is an entity other than a corporation),
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of Stage or a Restricted Subsidiary (other than such Capital
Stock owned by Stage or any Wholly Owned Subsidiary),
(iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations (other than
the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition);
(iv) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance or other acquisition, retirement or Investment being herein
referred to as a "Restricted Payment"),
if at the time Stage or such Restricted Subsidiary makes such Restricted Payment
or after giving effect thereto: (1) a Default shall have occurred and be
continuing (or would result therefrom); (2) Stage, after giving pro forma effect
to such Restricted Payment, would not be permitted to Incur at least an
additional $1.00 of Debt pursuant to Section 5.04(a); or (3) the aggregate
amount of such Restricted Payment and all other Restricted Payments since the
Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income
(excluding any extraordinary or nonrecurring charges in connection with the
Refinancing and the Acquisition) accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter during which the
Notes were originally issued to the end of the most recent fiscal quarter ending
at least 45 days (or, if less, the number of days after the end of such fiscal
quarter as the consolidated
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financial statements of Stage shall be provided to Holders pursuant to the
Indentures) prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the
aggregate Net Cash Proceeds and aggregate Deemed Asset Value received by Stage
from the issue or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) subsequent to the Issue Date (other than an issuance or sale
to a Subsidiary or an employee stock ownership plan or similar trust); (C) the
amount by which Debt of Stage is reduced on Stage's balance sheet upon the
conversion or exchange (other than by a Subsidiary) subsequent to the Issue
Date, of any Debt of Stage convertible or exchangeable for Capital Stock (other
than Redeemable Stock or Exchangeable Stock) of Stage (less the amount of any
cash, or the fair value of any other property, distributed by Stage upon such
conversion or exchange); (D) an amount equal to the sum of (i) the net reduction
in Investments in Unrestricted Subsidiaries resulting from dividends, repayments
of loans or advances or other transfers of assets, in each case to Stage or any
Restricted Subsidiary from Unrestricted Subsidiaries (except as provided in
clause (xi) of the definition of "Permitted Investment"), and (ii) the portion
(proportionate to the equity interest of Stage in such Subsidiary) of the fair
market value of the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary; PROVIDED,
HOWEVER, that the foregoing sum shall not exceed, in the case of an Unrestricted
Subsidiary, the amount of Investments previously made (and treated as a
Restricted Payment) by Stage or any Restricted Subsidiary in such Unrestricted
Subsidiary; and (E) $5 million.
(b) The provisions of the foregoing paragraph (a) shall not
prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of Stage made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of Stage (other than
Redeemable Stock or Exchangeable Stock of Stage and other than Capital
Stock issued or sold to a Subsidiary or an employee stock ownership plan);
PROVIDED, HOWEVER, that (A) such purchase or redemption shall be excluded
in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from clause (3)(B) of
paragraph (a) above;
(ii) any purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations of Stage made by exchange
for, or out of the proceeds of the substantially concurrent sale of, Debt
of Stage which is permitted to be Incurred pursuant to Section 5.04;
PROVIDED, HOWEVER, that such purchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations of
Stage from Net Available Cash to the extent permitted under Section 5.07;
PROVIDED, HOWEVER, that such purchase or redemption shall be excluded in
the calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this provision; PROVIDED, HOWEVER, that at the time of declaration of
such dividend, no other Default shall have occurred and be continuing (or
would result therefrom); and PROVIDED, FURTHER, HOWEVER, that such
dividend shall be included in the calculation of the amount of Restricted
Payments;
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(v) the repurchase of shares of, or options to purchase shares of,
common stock of Stage or any of its Subsidiaries from employees, former
employees, directors or former directors of Stage or any of its
Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such individuals
purchase or sell or are granted the option to purchase or sell, shares of
such common stock; PROVIDED, HOWEVER, that the aggregate amount of such
repurchases shall not exceed $5 million in any calendar year; and
PROVIDED, FURTHER, HOWEVER, that such repurchases shall be excluded in the
calculation of the amount of Restricted Payments;
(vi) the issuance of securities or payment of cash to consummate the
Acquisition in accordance with the terms of the Merger Agreement;
PROVIDED, HOWEVER, that such issuance or payment shall be excluded in the
calculation of the amount of Restricted Payments; and
(vii) Restricted Payments, in addition to those otherwise permitted
pursuant to this covenant, in an aggregate amount not to exceed $15
million; PROVIDED, HOWEVER, that such payments shall be excluded in the
calculation of the amount of Restricted Payments.
Section 5.06. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES.
Stage shall not, and shall not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock or pay any Debt or other obligation owed to Stage or any Restricted
Subsidiary,
(ii) make any loans or advances to Stage or any Restricted
Subsidiary or
(iii) transfer any of its property or assets to Stage or any
Restricted Subsidiary, except:
(a) any encumbrance or restriction pursuant to the New Credit Agreement or any
agreement in effect on the Issue Date or pursuant to the issuance of the Notes;
(b) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement relating to any Debt Incurred by such Restricted
Subsidiary on or prior to the date on which such Restricted Subsidiary was
acquired by Stage (other than Debt Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by Stage), and
outstanding on such date; (c) any encumbrance or restriction pursuant to an
agreement effecting a Refinancing of Debt Incurred pursuant to an agreement
referred to in clause (a) or (b) or contained in any amendment to an agreement
referred to in clause (a) or (b); PROVIDED, HOWEVER, that the encumbrances and
restrictions contained in any such refinancing agreement or amendment are no
less favorable to the Holders than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such agreements; (d) any such
encumbrance or restriction consisting of customary nonassignment provisions in
leases governing leasehold interests to the extent such provisions restrict the
transfer of the lease or other customary non-assignment provisions in contracts
(other than contracts that constitute Debt)
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entered into in the ordinary course of business to the extent such provisions
restrict the transfer of the assets subject to such contracts; (e) in the case
of clause (iii) above, restrictions contained in security agreements or
mortgages securing Debt of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements or mortgages; (f) encumbrances or restrictions imposed by operation
of applicable law; (g) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
the Capital Stock or assets of such Restricted Subsidiary pending the closing of
such sale or disposition; and (h) any encumbrance or restriction on the sale of
Receivables arising under agreements in connection with such sales between Stage
or a Restricted Subsidiary and an Accounts Receivable Subsidiary.
Section 5.07. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) Stage shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Disposition unless:
(i) Stage or such Restricted Subsidiary receives consideration at
the time of such Asset Disposition at least equal to the fair market
value, as determined in good faith by the Board of Directors (including as
to the value of all non-cash consideration), of the shares and assets
subject to such Asset Disposition and at least 75% of the consideration
thereof received by Stage or such Restricted Subsidiary is in the form of
cash or cash equivalents, and
(ii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by Stage or SRI (or such Restricted
Subsidiary, as the case may be):
(A) FIRST, to the extent Stage or SRI elects (or is required
by the terms of any Senior Debt), to prepay, repay or purchase
Senior Debt (other than Debt owed to Stage or SRI or an Affiliate of
Stage or SRI) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash;
(B) SECOND, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), at the
election of Stage to the investment by Stage or any Wholly Owned
Subsidiary in assets to replace the assets that were the subject of
such Asset Disposition or an asset or assets that (as determined by
the Board of Directors) will be used in the business of Stage and
the Wholly Owned Subsidiaries existing on the Issue Date or in
businesses reasonably related thereto, in each case within the later
of one year from the date of such Asset Disposition or the receipt
of such Net Available Cash;
(C) THIRD, to the extent of the balance of such Net Available
Cash after application and in accordance with clauses (A) and (B),
to make an offer to purchase the Notes (and any other Senior Debt of
SRI designated by SRI) pursuant to and subject to the conditions
contained in the applicable Indenture; and
(D) FOURTH, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A), (B) and (C),
to (x) the acquisition by Stage or any Wholly Owned Subsidiary of
Tangible Property or (y) the
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prepayment, repayment or purchase of Debt (other than any Redeemable
Stock) of Stage or SRI (other than Debt owed to an Affiliate of
Stage or SRI) or Debt of any Restricted Subsidiary (other than Debt
owed to Stage or SRI or an Affiliate of Stage or SRI), in each case
within one year from the later of the receipt of such Net Available
Cash and the date the offer described in paragraph (b) below is
consummated; PROVIDED, HOWEVER, that in connection with any
prepayment, repayment or purchase of Debt pursuant to clause (A),
(C) or (D) above, Stage, SRI or such Restricted Subsidiary shall
retire such Debt and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal
amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this paragraph, Stage and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash
in accordance with this paragraph except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are
not applied in accordance with this paragraph exceeds $10 million.
Pending application of Net Available Cash pursuant to this
paragraph, such Net Available Cash shall be invested in Permitted
Investments or to reduce loans outstanding under any working capital
facility.
For the purposes of this Section 5.07, the following are deemed to
be cash or cash equivalents: (x) the express assumption of Debt of Stage or any
Restricted Subsidiary and the release of Stage or such Restricted Subsidiary
from all liability on such Debt in connection with such Asset Disposition and
(y) securities received by Stage or any Restricted Subsidiary from the
transferee that are converted by Stage or such Restricted Subsidiary into cash
within 90 days of the receipt of such securities.
(b) In the event of an Asset Disposition that requires the purchase
of the Notes (and other Senior Debt) pursuant to clause (a)(ii)(C) above, SRI
will be required to purchase Notes tendered pursuant to an offer by SRI for the
Notes (and such other Debt) (the "Offer") at a purchase price of 100% of the
principal amount the Notes on the date of such offer (without premium) plus
accrued but unpaid interest (or, in respect of such other Debt, such lesser
price, if any, as may be provided for by the terms of such Debt) in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in Section 5.07 (c). If the aggregate purchase price of Notes (and any
such other Debt) tendered pursuant to any such offer is less than the Net
Available Cash allotted to the purchase thereof, SRI will be required to apply
the remaining Net Available Cash in accordance with clause (a)(ii)(D) above. SRI
shall not be required to make any such offers to purchase Notes (and other
Senior Debt) pursuant to this covenant if the Net Available Cash available
therefor is less than $10 million (which lesser amount shall be carried forward
for purposes of determining whether any such offer is required with respect to
any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after SRI becomes
obligated to make an Offer, SRI shall be obligated to deliver to the Trustee and
send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Notes purchased by SRI either in whole or in part
(subject to prorating as hereinafter described in the event the Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "PURCHASE
DATE") and shall contain such information concerning the business of Stage and
its Subsidiaries which Stage in good faith believes will enable such Holders to
make an informed decision (which at a minimum will include (i) the most recently
filed Annual Report on Form 10-K (including audited consolidated financial
statements) of Stage, the
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most recent subsequently filed Quarterly Report on Form 10-Q and any Current
Report on Form 8-K of Stage filed subsequent to such Quarterly Report, other
than Current Reports describing Asset Dispositions otherwise described in the
offering materials (or corresponding successor reports or, if Stage shall not at
such time be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, a corresponding report prepared pursuant to Section 5.03), (ii) a
description of material developments in the business of Stage and its
Subsidiaries subsequent to the date of the latest of such Reports, and (iii) if
material, appropriate pro forma financial information) and all instructions and
materials necessary to tender Notes pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, SRI shall deliver to the Trustee an
Officers' Certificate as to (i) the amount of the Offer (the "OFFER AMOUNT"),
(ii) the allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and (iii) the compliance of such
allocation with the provisions of Section 5.07(a). On such date, SRI shall also
irrevocably deposit with the Trustee or with a paying agent other than SRI in
Temporary Cash Investments, maturing on the last day prior to the Purchase Date
or on the Purchase Date if funds are immediately available by open of business,
an amount equal to the Offer Amount to be held for payment in accordance with
the provisions of this Section. Upon the expiration of the period for which the
Offer remains open (the "OFFER PERIOD"), SRI shall deliver to the Trustee for
cancellation the Notes or portions thereof which have been properly tendered to
and are to be accepted by SRI. The Trustee shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price. In
the event that the aggregate purchase price of the Notes delivered by SRI to the
Trustee is less than the Offer Amount, the Trustee shall deliver the excess to
SRI immediately after the expiration of the Offer Period for application in
accordance with this Section.
(3) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to SRI at the
address specified in the notice at least three Business Days prior to the
Purchase Date. Holders shall be entitled to withdraw their election if the
Trustee or SRI receives, not later than one Business Day prior to the Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note which was delivered for purchase
by the Holder and a statement that such Holder is withdrawing his election to
have such Note purchased. If at the expiration of the Offer Period the aggregate
principal amount of Notes (and any other Senior Debt included in the Offer)
surrendered pursuant to the Offer exceeds the Offer Amount, SRI shall select the
Notes and other Senior Debt to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by SRI so that only Notes and other
Senior Debt in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Notes are purchased only in part shall be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered.
(4) At the time SRI delivers Notes to the Trustee which are to be
accepted for purchase, SRI shall also deliver an Officers' Certificate stating
that such Notes are to be accepted by SRI pursuant to and in accordance with the
terms of this Section 5.07. A Note shall be deemed to have been accepted for
purchase at the time the Trustee, directly or through an agent, mails or
delivers payment therefor to the surrendering Holder.
(d) SRI shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the
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repurchase of Notes pursuant to this Section 5.07. To the extent that the
provisions of any securities laws or regulations conflict with provisions of
this Section 5.07, SRI shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
clause by virtue thereof.
Section 5.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Stage shall not, and shall not permit any Restricted Subsidiary
to, enter into any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate (including any
Accounts Receivable Subsidiary) of Stage (an "Affiliate Transaction") unless (i)
the terms of such Affiliate Transaction are (A) set forth in writing and (B) as
favorable to Stage or such Restricted Subsidiary as terms that would be
obtainable at the time for a comparable transaction or series of related
transactions in arm's-length dealings with an unrelated third Person, (ii) if
such Affiliate Transaction involves an amount in excess of $3 million, a
majority of the disinterested members of the Board of Directors of Stage have
approved, by resolution, and determined in good faith that such Affiliate
Transaction meets the criteria set forth in (i)(B) above and (iii) if such
Affiliate Transaction involves an amount in excess of $7.5 million (other than a
contribution, disposition or other transfer of Receivables to an Accounts
Receivable Subsidiary as permitted under the Indentures and the related
customary contractual arrangements and Customary Securitization Undertakings),
such Affiliate Transaction is determined by a nationally recognized investment
banking firm to be fair from a financial standpoint to Stage or such Restricted
Subsidiary, as the case may be.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to the covenant
described in Section 5.05, (ii) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Board of Directors of Stage, (iii) loans or advances to employees in the
ordinary course of business, but in any event not to exceed $5 million in the
aggregate outstanding at any one time, (iv) the payment of reasonable and
customary fees to directors of Stage and its Restricted Subsidiaries, (v) any
transaction between Stage and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries, (vi) any written agreement as in effect on the Issue Date and as
amended from time to time, PROVIDED that any such amendment is not less
favorable in any material respect to Stage and its Subsidiaries than the terms
in effect on the Issue Date, and (vii) indemnification payments to directors and
officers of Stage in accordance with applicable state laws.
Section 5.09. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES.
Stage shall not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except:
(i) to Stage or a Wholly Owned Subsidiary;
(ii) if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary remains a Restricted
Subsidiary; or
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(iii) if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made under Section
5.05 if made on the date of such issuance, sale or other disposition. In
connection with any such sale or disposition of Capital Stock, Stage or
any such Restricted Subsidiary shall comply with Section 5.07. Nothing
herein shall limit or modify SRI's obligations under Article IV above.
Section 5.10. LIMITATION ON LIENS.
Stage shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, incur or permit to exist any Lien of any nature
whatsoever on any of its properties (including Capital Stock of a Restricted
Subsidiary), whether owned at the Issue Date or thereafter acquired, other than
Permitted Liens, without effectively providing that the Senior Notes shall be
secured equally and ratably with (or prior to) the obligations so secured for so
long as such obligations are so secured.
Section 5.11. LIMITATION ON SALE/LEASEBACK TRANSACTIONS.
Stage shall not, and shall not permit any Restricted Subsidiary to, enter
into any Sale/Leaseback Transaction with respect to any property unless:
(i) Stage or such Restricted Subsidiary would be entitled to (A)
Incur Debt in an amount equal to the Attributable Debt with respect to
such Sale/Leaseback Transaction pursuant to Section 5.04; and (B) create a
Lien on such property securing such Attributable Debt without equally and
ratably securing the Notes pursuant to Section 5.10;
(ii) the net proceeds received by Stage or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to
the fair value (as determined by the Board of Directors) of such property;
and
(iii) Stage applies the proceeds of such transaction in compliance
with Section 5.07.
Section 5.12. ACCOUNTS RECEIVABLE SUBSIDIARIES.
Stage (a) shall not permit any Accounts Receivable Subsidiary to
sell any Receivables purchased from Stage or any of its Subsidiaries or
participation interests therein to any other Person except on an arms-length
basis and solely for consideration in the form of cash, cash equivalents,
promissory notes of such Person or Debt of or other interests in a Master Trust;
PROVIDED, HOWEVER, that such Accounts Receivable Subsidiary may not sell such
Debt or other interests to any other Person except on an arms-length basis and
solely for consideration in the form of cash or cash equivalents; (b) shall not
permit any Accounts Receivable Subsidiary to incur Debt in an amount in excess
of the book value of such Accounts Receivable Subsidiary's total assets, as
determined in accordance with GAAP; and (c) shall not, and shall not permit any
of its Subsidiaries to, sell Receivables to an Accounts Receivable Subsidiary if
(i) such Accounts Receivable Subsidiary, pursuant to or within the meaning of
Bankruptcy Law, (A) commences a voluntary case, (B) consents to the entry of an
order for relief against it in an involuntary case, (C) consents to the
appointment of a Custodian of it or for all or substantially all of its property
or (D) makes a general assignment for the benefit of its creditors or (ii) a
court of competent
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jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for
relief against such Accounts Receivable Subsidiary, (B) appoints a Custodian of
such Accounts Receivable Subsidiary or for all or substantially all of the
property of such Accounts Receivable Subsidiary or (C) orders the liquidation of
such Accounts Receivable Subsidiary.
Section 5.13. FUTURE GUARANTORS.
Stage and SRI shall cause each Restricted Subsidiary (other than
SRI) to promptly execute and deliver to the Trustee a Guaranty Agreement
pursuant to which such Restricted Subsidiary will Guarantee the Indenture
Obligations on the terms and conditions set forth in this Indenture including,
without limitation, pursuant to Articles XII and XIII hereof.
Section 5.14. COMPLIANCE CERTIFICATES.
Each of SRI and Stage shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of SRI or Stage, as applicable, and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether SRI or Stage, as applicable,
has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such Officers'
Certificate, that to the best of his or her knowledge SRI or Stage, as
applicable, has kept, observed, performed and fulfilled each covenant contained
in this Indenture and is not in default in the performance or observance of any
of the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action each is taking or
proposes to take with respect thereto). Each of SRI and Stage shall also comply
with TIA ss. 314(a)(4).
Section 5.15. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee, SRI, Stage and any other Guarantors
will execute and deliver such further instruments and do such further acts as
may be reasonably necessary or proper to carry out more effectively the purpose
of this Indenture.
ARTICLE VI
SUCCESSORS
Section 6.01. WHEN STAGE AND SRI MAY MERGE OR TRANSFER ASSETS.
Neither Stage nor SRI shall consolidate with or merge with or into,
or convey, transfer or lease, in one transaction or a series of transactions,
all or substantially all its properties and assets to any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company"), if
other than Stage or SRI, as the case may be, shall be a Person organized and
existing under the laws of the United States of America, any State thereof or
the District of Columbia and the Successor Company expressly assumes, by an
indenture supplemental thereto, executed and delivered to the Trustee, in form
acceptable to the Trustees, all the obligations of Stage or SRI, as the case may
be, under the Notes and this Indenture; (ii) immediately after giving effect to
such transaction, on a pro forma basis (and treating any Debt which becomes an
obligation of the Successor Company or any Subsidiary as a result of such
transaction as having
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been Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction, on a pro forma basis, the
Successor Company would be able to Incur at least a $1.00 of additional Debt
pursuant to Section 5.04(a); (iv) immediately after giving effect to such
transaction, on a pro forma basis, the Successor Company shall have Consolidated
Net Worth in an amount at least equal to the Consolidated Net Worth of Stage or
SRI, as the case may be, prior to such transaction minus any costs incurred in
connection with such transaction; and (v) Stage or SRI, as the case may be,
shall have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture. The foregoing shall
not prohibit the consummation of the Acquisition by Stage and SRI on the terms
set forth in the Merger Agreement.
Section 6.02. SUCCESSOR COMPANY SUBSTITUTED.
The Successor Company shall be the successor to Stage or SRI, as the
case may be, and shall succeed to, and be substituted for, and may exercise
every right and power of, Stage or SRI, as the case may be, under the
Indentures, but the predecessor Person in the case of a conveyance, transfer or
lease shall not be released from the obligation to pay the principal of and
interest on the Notes, in the case of SRI, or from the obligations under the
Guaranties, in the case of Stage.
Section 6.03. WHEN SUBSIDIARY GUARANTOR MAY MERGE OR TRANSFER ASSETS.
No Subsidiary Guarantor shall, and Stage or SRI, as the case may be,
shall not permit any Subsidiary Guarantor to, consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless: (i)
the resulting, surviving or transferee Person (if not such Subsidiary Guarantor)
shall be a Person organized and existing under the laws of the jurisdiction
under which such Subsidiary Guarantor was organized or under the laws of the
United States of America, or any State thereof or the District of Columbia, and
such Person shall expressly assume, by Guaranty Agreement, in a form
satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor,
if any, under its Guaranty; (ii) immediately after giving effect to such
transaction or transactions on a pro forma basis (and treating any Debt which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at the time of
such transaction), no Default shall have occurred and be continuing; and (iii)
Stage or SRI, as the case may be, delivers to the Trustee an Officers'
Certificate and Opinion of Counsel, each stating that such consolidation, merger
or transfer and such Guaranty Agreement, if any, comply with the Indenture.
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ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01. EVENTS OF DEFAULT.
Each of the following shall constitute an "EVENT OF DEFAULT":
(a) a default in any payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days;
(b) a default in the payment of the principal of, or premium, if
any, on any Note when the same becomes due and payable at its Stated Maturity,
upon redemption, upon declaration, upon required repurchase or otherwise;
(c) the failure by Stage, SRI or any Guarantor to comply with its
obligations under Article VI.
(d) the failure by Stage or SRI to comply for 30 days after the
notice specified below with any of its obligations in the covenants described
above under Article IV (other than a failure to purchase Notes) or under Section
5.03, 5.04, 5.05, 5.06, 5.07 (other than a failure to purchase Notes), 5.08,
5.09, 5.10, 5.11, 5.12 or 5.13;
(e) the failure by Stage, SRI or any Guarantor to comply with any of
its agreements in the Notes or the Indentures (other than those referred to in
(a), (b), (c) or (d) above) and such failure continues for 60 days after the
notice specified below;
(f) a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any Debt
for money borrowed by Stage or any of its Subsidiaries (or the payment of which
is Guaranteed by Stage or any of its Subsidiaries) whether such Debt or
Guarantee now exists, or is created after the date of the Indentures, which
default (i) is caused by failure to pay principal of such Debt at the final
maturity thereof or failure to pay principal of or interest on such Debt prior
to the expiration of the grace period provided in such Debt on the date of such
default ("PAYMENT DEFAULT") or (ii) results in the acceleration of such Debt
prior to its express maturity and, in each case, the principal amount of any
such Debt, together with the principal amount of any other such Debt under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $15 million or more;
(g) Stage, SRI or any Significant Subsidiary of Stage pursuant to or
within the meaning of any Bankruptcy Law: (1) commences a voluntary case, (2)
consents to the entry of an order for relief against it in an involuntary case,
(3) consents to the appointment of a Custodian of it or for all or substantially
all of its property, or (4) makes a general assignment for the benefit of its
creditors;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (1) is for relief against Stage, SRI or any
Significant Subsidiary of Stage in an involuntary case, (2) appoints a Custodian
of Stage, SRI or any Significant Subsidiary of Stage or for all or any
substantial part of the property of Stage, SRI or any Significant Subsidiary
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of Stage, or (3) orders the liquidation or winding up of Stage, SRI or any
Significant Subsidiary of Stage, and the order or decree remains unstayed and in
effect for 60 consecutive days;
(i) any final non-appealable judgment or decree in excess of $15
million is rendered against Stage, SRI or a Significant Subsidiary of Stage and
is not discharged and either an enforcement proceeding has been commenced upon
such judgment or decree or such judgment or decree shall remain undischarged for
a period of 60 days; or
(j) any Guaranty ceases to be in effect (other than in accordance
with the terms of the Indentures) or any Guarantor denies or disaffirms its
Guaranty obligations.
A Default under clause (d) or (e) is not an Event of Default until
the relevant Trustee or the Holders of at least 25% in principal amount of the
Notes notify SRI of the Default and SRI does not cure such Default within the
time specified after receipt of such notice.
SRI shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default pursuant to clause (c), (d), (e), (f), (g), (h), (i) or (j)
and any event which with the giving of notice or the lapse of time would become
any such Event of Default, its status and what action SRI is taking or proposes
to take in respect thereof.
Section 7.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (g) or clause (h) of Section 7.01) occurs and is continuing, the Trustee
by notice to SRI, or the Holders of at least 25% in aggregate principal amount
of the then outstanding Notes by written notice to SRI and the Trustee, may
declare the principal of and accrued but unpaid interest on all the Notes to be
due and payable (collectively, the "DEFAULT AMOUNT"). Upon such a declaration,
the Default Amount shall be due and payable immediately. In case of an Event of
Default specified in clause (g) or clause (h) of Section 7.01, all outstanding
Notes shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders of the Notes.
The Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived. No such rescission shall
affect any subsequent or other Default or impair any right consequent thereto.
Section 7.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes and this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any such Notes in the proceeding. A delay
or omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon any Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in such Event of Default. No remedy
shall be exclusive of any other remedy. All remedies shall be cumulative to the
extent permitted by law.
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Section 7.04. WAIVER OF PAST DEFAULTS.
Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive an existing Default and its consequences, except (i) a Default
in the payment of the principal of, premium, if any, or interest on, the Notes;
or (ii) a Default in respect of a provision that under Section 10.02 cannot be
amended without the consent of each Holder affected thereby. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereto.
Section 7.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the terms of this Indenture or if, subject
to Section 8.01, the Trustee reasonably determines that such action, if taken,
would be unduly prejudicial to the rights of other Holders of Notes or would
involve the Trustee in personal liability.
Section 7.06. LIMITATION ON SUITS.
Except to enforce the right to receive payment of principal,
premium, if any, or interest when due, no Holder of a Note may pursue any remedy
with respect to this Indenture or the Notes, unless:
(i) such Holder has previously given the Trustee notice that an
Event of Default is continuing;
(ii) Holders of at least 25% in principal amount of the Notes then
outstanding have requested the Trustee to pursue the remedy;
(iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and
(v) Holders of a majority in principal amount of the Notes then
outstanding have not given the Trustee a direction inconsistent with such
request within such 60-day period.
A Holder of a Note shall not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 7.07. UNCONDITIONAL RIGHT OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on such Note, on or after the respective due dates expressed in such
Note, or to bring suit for the enforcement of any such
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payment on or after such respective dates, shall not be impaired or affected
without the consent of any such Holder of a Note.
Section 7.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 7.01(a) or Section
7.01(b) occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against SRI for the entire amount then
due and owing, plus the amounts provided for in Section 8.07.
Section 7.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders of the Notes allowed in any judicial proceedings
relative to Stage, Stage's creditors or Stage's property, and, unless prohibited
by law or applicable regulations, may vote on behalf of the Holders of Notes in
any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder of a Note to make payments to the Trustee, and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders of Notes, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due to Trustee under Section 8.07.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder of a Note any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder of a Note thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder of a Note in any such proceeding.
Section 7.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article VII, it
shall pay out the money in the following order:
(i) FIRST: to the Trustee for amounts due to it under Section 8.07;
(ii) SECOND: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any, and interest,
respectively; and
(iii) THIRD: to SRI.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 7.10.
Section 7.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
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attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 7.11 shall not apply to a suit by the Trustee, a suit by a Holder
of a Note pursuant to Section 7.07, or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 7.12. WAIVER OF STAY, EXTENSION AND USURY LAWS.
SRI (to the extent that it may lawfully do so) shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and SRI (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VIII
TRUSTEE
Section 8.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee shall not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct or bad faith, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 8.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
a direction received by it pursuant to Section 7.05.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraph
(a), paragraph (b) and paragraph (c) of this Section 8.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if the Trustee shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with SRI.
(g) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 8.01 and to the provisions of the TIA.
Section 8.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely upon any document reasonably believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in any such document.
(b) Before the Trustee acts or refrains from taking any act, the
Trustee may require an Officers' Certificate or an Opinion of Counsel or both.
The Trustee shall not be liable for any action taken or omitted to be taken by
it in good faith in reliance on such Officers' Certificate or such Opinion of
Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent; PROVIDED, HOWEVER, that any such
agent is appointed by the Trustee with due care.
(d) The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith which it reasonably believes to be authorized or
within its rights or powers conferred upon it by this Indenture; PROVIDED,
HOWEVER, that the Trustee's conduct does not constitute negligence, willful
misconduct or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by the Trustee hereunder in good faith and in accordance
with the advice or opinion of such counsel.
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Section 8.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with SRI, Stage or any or their
Affiliates with the same rights as it would have if the Trustee were not the
Trustee hereunder. However, in the event the Trustee acquires any conflicting
interest in accordance with the TIA it must eliminate such conflicting interest
within 90 days, apply to the SEC for permission to continue as Trustee or
resign. Any Paying Agent, Registrar or co-registrar may do the same with like
rights. The Trustee shall at all times remain subject to Section 8.10 and
Section 8.11.
Section 8.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for SRI's use of the proceeds of the Notes and it shall not be
responsible for any statement contained herein or any statement contained in the
Notes or any other document in connection with the sale of the Notes or pursuant
to this Indenture other than the Trustee's certificates of authentication.
Section 8.05. NOTICE OF DEFAULT.
If a Default occurs and is continuing and if such Default is known
to the Trustee, the Trustee shall mail to each Holder of a Note a notice of such
Default within 90 days (or such shorter period as may be required by applicable
law) after such Default occurs. Except in the case of a Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 8.06. REPORTS BY TRUSTEE TO HOLDERS OF NOTES.
Within 60 days after each July 15, beginning with July 15 following
the date of this Indenture, the Trustee shall mail to Holders of the Notes a
brief report dated as of such reporting date that complies with TIA ss. 313(a)
to the extent such a report is required by TIA ss. 313(a). The Trustee also
shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to Stage and filed with the SEC and each stock exchange on
which the Notes may be listed. Stage shall promptly notify the Trustee upon the
Notes being listed on any stock exchange and any delisting thereof.
Section 8.07. COMPENSATION AND INDEMNITY.
SRI shall pay to the Trustee from time to time reasonable
compensation for the Trustee's acceptance of this Indenture and its services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. SRI shall reimburse the Trustee
for all reasonable out-of-pocket expenses incurred or made by it in the course
of its services hereunder. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts.
SRI shall indemnify the Trustee against any and all loss, liability
or reasonable expense incurred by it in connection with the administration of
this trust and the performance of
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its duties under this Indenture, except any such loss, liability or expense
attributable to the negligence, willful misconduct or bad faith of the Trustee.
The Trustee shall notify SRI promptly of any claim for which it may
seek indemnity. Failure by the Trustee to so notify SRI shall not relieve SRI of
its obligations hereunder except to the extent that SRI may be materially
prejudiced by such failure. SRI shall defend the claim and the Trustee shall
cooperate in the defense of such claim. The Trustee may have separate counsel
and SRI shall pay the reasonable fees and expenses of such counsel. SRI need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own negligence, willful misconduct
or bad faith. SRI need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
SRI's payment obligations under this Section 8.07 shall survive the
satisfaction and discharge of this Indenture.
To secure SRI's payment obligations under this Section 8.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except such money or property that is held by it in
trust for the benefit of Holders of Notes to pay principal and interest on
particular Notes.
If the Trustee shall incur expenses after the occurrence of a
Default specified in Section 7.01(vii) or Section 7.01(viii), such expenses
(including the reasonable fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under Bankruptcy Law.
Section 8.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 8.08.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying SRI in writing. The Holders of Notes of not less
than a majority in principal amount of the Notes then outstanding may remove the
Trustee by so notifying the Trustee and SRI in writing. SRI shall remove the
Trustee if:
(i) the Trustee fails to comply with Section 8.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a Custodian or other public officer takes charge of the
Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), SRI shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes
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office, the Holders of a majority in principal amount of the then outstanding
Notes may appoint a successor Trustee to replace the successor Trustee appointed
by SRI.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, SRI or the Holders
of Notes of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Holder of a Note who has
been a Holder of a Note for at least six months fails to comply with Section
8.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
Any successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to SRI. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all of the rights, powers and duties of the Trustee under
this Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Note. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the Lien provided for
in Section 8.07. Notwithstanding replacement of the Trustee pursuant to this
Section 8.08, SRI's obligations under Section 8.07 shall continue for the
benefit of the retiring Trustee.
Section 8.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business or assets to,
another corporation or banking association, the resulting, surviving or
transferee entity without any further act shall constitute the successor
Trustee; PROVIDED, HOWEVER, that such entity shall be otherwise qualified and
eligible under this Article VIII.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor Trustee, and deliver such Notes so
authenticated, and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have.
Section 8.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture at all times shall have a Trustee which satisfies the
requirements of TIA 310(a). Trustee shall be a corporation organized and doing
business under the laws of the United States of America or of any State thereof
authorized under such laws to exercise corporate trustee power, shall be subject
to supervision or examination by federal or state authority and shall have a
combined capital and surplus of at least $50 million as set forth in its most
recently published annual report of condition. The Trustee shall be subject to
TIA ss. 310(b).
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Section 8.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST SRI.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee which has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE.
(a) When (i) SRI delivers to the Trustee all outstanding Notes
(other than Notes replaced pursuant to Section 2.07) for cancellation; or (ii)
all outstanding Notes have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III of this
Indenture and SRI irrevocably deposits with the Trustee funds sufficient to pay
at maturity or upon redemption all outstanding Notes including interest thereon
to maturity or such redemption date (other than Notes replaced pursuant to
Section 2.07), and if in either case SRI pays all other sums payable hereunder
by SRI, then this Indenture shall, subject to Section 9.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of SRI accompanied by an Officers' Certificate and an
Opinion of Counsel and at the cost and expense of SRI.
(b) Subject to Section 9.01(c) and Section 9.02, SRI at any time may
terminate (i) all of Stage's and SRI's obligations under the Notes and this
Indenture ("LEGAL DEFEASANCE"); or (ii) Stage's and SRI's obligations under
Article IV, Section 5.03, Section 5.04, Section 5.05, Section 5.06, Section
5.07, Section 5.08, Section 5.09, Section 5.10, Section 5.11, Section 5.12,
Section 5.13, Section 6.01(iii), Section 6.01(iv), Section 7.01(d), Section
7.01(f), Section 7.01(g) (with respect only to Significant Subsidiaries of Stage
other than SRI), Section 7.01(h) (with respect only to Significant Subsidiaries
of Stage other than SRI) and Section 7.01(i) ("COVENANT DEFEASANCE"). SRI may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If SRI exercises its legal defeasance option, payment of the Notes
may not be accelerated because of an Event of Default. If SRI exercises its
covenant defeasance option, payment of the Notes may not be accelerated because
of an Event of Default specified in Section 7.01(d), Section 7.01(f), Section
7.01(g) (with respect only to Significant Subsidiaries of Stage other than SRI),
Section 7.01(h) (with respect only to Significant Subsidiaries of Stage other
than SRI), Section 7.01(i) or the failure of SRI to comply with Sections
6.01(iii) and 6.01(iv). If SRI exercises its legal defeasance option or its
covenant defeasance option, each Guarantor will be released from all of its
obligations with respect to its Guaranties.
Upon satisfaction of the conditions set forth herein and at the
request of SRI, the Trustee shall acknowledge in writing the discharge of those
obligations of SRI terminated thereby.
(c) Notwithstanding clause (a) and clause (b) above, Stage's and
SRI's obligations contained in Section 2.03, Section 2.04, Section 2.05, Section
2.06, Section 2.07, Section 8.07, Section 8.08 and this Article IX shall survive
until the Notes have been paid in full.
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Thereafter, SRI's obligations contained in Section 8.07, Section 9.04 and
Section 9.05 shall survive.
Section 9.02. CONDITIONS TO DEFEASANCE.
SRI may exercise its legal defeasance option or its covenant
defeasance option only if:
(i) SRI irrevocably deposits in trust with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to maturity or redemption, as the case may be;
(ii) SRI delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that
the payments of principal and interest when due and without reinvestment
on the deposited U.S. Government Obligations plus any deposited money
without investment will provide cash at such times and in such amounts as
will be sufficient to pay principal and interest when due on all the Notes
to maturity or redemption, as the case may be;
(iii) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Section 7.01(g) or Section 7.01(h) in
either case with respect to Stage or SRI occurs which is continuing at the
end of the period;
(iv) the deposit does not constitute a default under any other
agreement binding on Stage or SRI;
(v) SRI delivers to the Trustee an Opinion of Counsel to the effect
that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the U.S. Investment
Company Act of 1940, as amended;
(vi) in the case of the legal defeasance option, SRI shall have
delivered to the Trustee an Opinion of Counsel in the United States
stating that (1) SRI has received from, or there has been published by,
the Internal Revenue Service a ruling, or (2) since the date of this
Indenture there has been a change in the applicable U.S. Federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of Notes will not recognize
income, gain or loss for U.S. Federal income tax purposes as a result of
such defeasance and will be subject to U.S. Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred;
(vii) in the case of the covenant defeasance option, SRI shall have
delivered to the Trustee an Opinion of Counsel in the United States to the
effect that the Holders of Notes will not recognize income, gain or loss
for U.S. Federal income tax purposes as a result of such covenant
defeasance and will be subject to U.S. Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred; and
(viii)SRI delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Notes as contemplated by this Article IX
have been complied with.
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Before or after a deposit, SRI may make arrangements satisfactory to
the Trustee for the redemption of the Notes at a future date in accordance with
Article III.
Section 9.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article IX. The Trustee shall apply the
deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal
of, and premium, if any, and interest on the Notes.
Section 9.04. REPAYMENT TO SRI.
The Trustee and the Paying Agent shall promptly turn over to SRI
upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to SRI upon request any money held by them for the
payment of principal or interest that remains unclaimed for two years, and,
thereafter, Holders of Notes entitled to the money shall look to SRI for payment
as general creditors.
Section 9.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS.
SRI shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
Section 9.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article IX by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
Stage's and SRI's obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article IX until such time as the Trustee or Paying Agent is permitted to apply
all such money or U.S. Government Obligations in accordance with this Article
IX; PROVIDED, HOWEVER, that, if SRI has made any payment of interest on or
principal of any of the Notes because of the reinstatement of its obligations,
SRI shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
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ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
SRI, Stage and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder of a Note:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to provide for the assumption of the obligations of Stage, SRI
or a Guarantor to the Holders of the Notes pursuant to Article VI;
(iii) to provide for uncertificated Notes in addition to or in place
of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code);
(iv) to add guarantees with respect to the Notes;
(v) to release a Guaranty, when permitted by the Indenture;
(vi) to secure the Notes;
(vii) to add to the covenants of Stage and its Subsidiaries
hereunder for the benefit of the Holders of Notes or to surrender any
right or power conferred upon Stage, SRI or any Guarantor;
(viii)to make any change that would not adversely affect the rights
hereunder of any Holder of a Note; or
(ix) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of SRI accompanied by resolutions of the Boards of
Directors of Stage and SRI authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 10.06, the Trustee shall join with Stage and SRI in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations which may be contained therein, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture which affects its
own rights, duties or immunities under this Indenture or otherwise.
After an amendment, supplement or waiver under this Section 10.01
becomes effective, SRI shall mail to the Holders of Notes affected thereby a
notice briefly describing any such amendment, supplement or waiver. Any failure
of SRI to mail such notice, or any defect therein, shall not in any way impair
or affect the validity of any such amended or supplemental Indenture or waiver.
Subject to Section 7.04 and Section 7.07, the Holders of a majority in
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aggregate principal amount of the Notes then outstanding may waive compliance by
Stage or SRI in any particular instance with any provision of this Indenture or
the Notes.
Section 10.02. WITH CONSENT OF HOLDERS OF NOTES.
SRI, Stage and the Trustee may amend or supplement this Indenture,
the Notes or any amended or supplemental Indenture with the written consent of
the Holders of Notes of at least a majority in aggregate principal amount of the
Notes then outstanding. However, without the consent of each Holder of a Note
affected, any amendment, supplement or waiver may not:
(i) reduce the amount of Notes the Holders of which must consent to
an amendment;
(ii) reduce the rate of or extend the time for payment of interest
on any Note;
(iii) reduce the principal of or extend the Stated Maturity of any
Note;
(iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed in accordance with
Article III;
(v) make any Notes payable in money other than that stated in the
Note;
(vi) impair the right of any Holder of a Note to receive payment of,
principal of and interest on such Holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Notes; or
(vii) make any change in Section 7.04 or Section 7.07 or the second
sentence of this Section 10.02.
Upon the request of SRI accompanied by resolutions of the Boards of
Directors of Stage and SRI authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory with the Trustee of the consent of the Holders of Notes as
aforesaid and upon receipt by the Trustee of the documents described in Section
10.06, the Trustee shall join with Stage and SRI in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 10.02 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, SRI shall mail to the Holders of Notes affected thereby a
notice briefly describing any such amendment, supplement or waiver. Any failure
of SRI to mail such notice, or any defect therein, shall not in any way impair
or affect the validity of any such amended or supplemental Indenture or waiver.
Subject to Section 7.04 and Section 7.07, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance by Stage or
SRI in any particular instance with any provision of this Indenture or the
Notes.
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Section 10.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in an amended or supplemental Indenture that complies with the TIA
as then in effect.
Section 10.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS.
Until an amendment, supplement or waiver becomes effective, a
consent to such amendment, supplement or waiver by a Holder of a Note is a
continuing and binding consent by the Holder of a Note and every subsequent
Holder of a Note or portion of a Note that evidences the same Debt as the
consenting Holder's Note, even if a notation of the consent or waiver is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver shall become effective in
accordance with its terms and thereafter shall bind every Holder of a Note.
SRI may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Notes entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, such Persons which were Holders of Notes at
such record date (or their duly designated proxies), and only such Persons,
shall be entitled to give such consent or to revoke any consent previously given
or to take any such action, whether or not such Persons continue to be Holders
of Notes after such record date. No such consent shall be valid or effective for
more than 120 days after such record date.
Section 10.05. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment or supplement changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver such Note to the Trustee.
The Trustee may place an appropriate notation on the Note regarding the changed
terms and return it to the Holder of such Note. Alternatively, if SRI or the
Trustee so determines, SRI in exchange for such Note shall issue and the Trustee
shall authenticate a new Note that reflects such changed terms. Failure to make
the appropriate notation or to issue a new Note shall not affect the validity of
such amendment or supplement.
Section 10.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article X if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment or
supplement the Trustee shall be entitled to receive, and (subject to Section
8.01) shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that such amendment or supplement is authorized or
permitted pursuant to this Indenture.
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Section 10.07. PAYMENT FOR CONSENTS.
Neither Stage, SRI, any Affiliate of Stage nor any Subsidiary,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Note for or as an
inducement to any consent, amendment, supplement or waiver with respect to any
term or provision of this Indenture or the Notes, unless such consideration is
offered to be paid or agreed to be paid to all Holders of Notes that consent,
waive or agree to amend or supplement in the time frame set forth in the
solicitation documents relating to any such consent, waiver or agreement to
amend or supplement.
ARTICLE XI
GUARANTIES
Section 11.01. GUARANTIES.
Each Guarantor hereby unconditionally and irrevocably guarantees,
jointly and severally, to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment of principal of and interest on the
Notes when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of SRI under this Indenture and
the Notes and (b) the full and punctual performance within applicable grace
periods of all other obligations of SRI under this Indenture and the Notes (all
the foregoing being hereinafter collectively called the "Indenture
Obligations"). Each Guarantor further agrees that the Indenture Obligations may
be extended or renewed, in whole or in part, without notice or further assent
from such Guarantor and that such Guarantor will remain bound under this Article
XI notwithstanding any extension or renewal of any Indenture Obligation.
Each Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Indenture Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Notes or the Indenture Obligations. The obligations of each Guarantor
hereunder shall not be affected by (a) the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any right or remedy against the
Company or any other Person under this Indenture, the Notes or any other
agreement or otherwise; (b) any extension or renewal of any thereof; (c) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Notes or any other agreement; (d) the release of any
security held by any Holder or the Trustee for the Indenture Obligations or any
of them; (e) the failure of any Holder or the Trustee to exercise any right or
remedy against any other guarantor of the Indenture Obligations; or (f) any
change in the ownership of such Guarantor.
Each Guarantor further agrees that its Guaranty herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Indenture
Obligations.
Except as expressly set forth in Sections 9.01(b), 11.02 and 11.06,
the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or
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termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Indenture Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor herein shall not
be discharged or impaired or otherwise affected by the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any remedy under this
Indenture, the Notes or any other agreement, by any waiver or modification of
any thereof, by any default, failure or delay, willful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to any
extent vary the risk of such Guarantor or would otherwise operate as a discharge
of such Guarantor as a matter of law or equity.
Each Guarantor further agrees that its Guaranty herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Indenture
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of SRI or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of SRI to pay the principal of or
interest on any Indenture Obligation when and as the same shall become due,
whether at maturity, by acceleration, by redemption or otherwise, or to perform
or comply with any other Indenture Obligation, each Guarantor hereby promises to
and will, upon receipt of written demand by the Trustee, forthwith pay, or cause
to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid amount of such Indenture Obligations, (ii) accrued and unpaid
interest on such Indenture Obligations (but only to the extent not prohibited by
law) and (iii) all other monetary Indenture Obligations of SRI to the Holders
and the Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Indenture Obligations guaranteed hereby until
payment in full of all Indenture Obligations guaranteed hereby until payment in
full of all Indenture Obligations. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the Indenture Obligations Guaranteed hereby may be
accelerated as provided in Article VII for the purposes of such Guarantor's
Guaranty herein, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Indenture Obligations guaranteed
hereby, and (y) in the event of any declaration of acceleration of such
obligations as provided in Article VII, such Indenture Obligations (whether or
not due and payable) shall forthwith become due and payable by such Guarantor
for the purposes of this Section.
Each Guarantor also agrees to pay any and all costs and expenses
(including attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Section.
Section 11.02. LIMITATION ON LIABILITY; CONTRIBUTION.
Any term or provision of this Indenture to the contrary
notwithstanding, the maximum, aggregate amount of the Indenture Obligations
guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum
amount that can be hereby guaranteed without rendering this Indenture, as it
relates to such Subsidiary Guarantor, voidable under applicable federal, state
or foreign law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally, after giving effect to
all other contingent and fixed liabilities of such Subsidiary Guarantor and
after giving effect to any
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collections from or payments made by or on behalf of any other Subsidiary under
its Guaranty or pursuant to its contribution obligations under this Indenture.
Each Subsidiary Guarantor shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under its Guaranty.
Section 11.03. SUCCESSORS AND ASSIGNS.
This Article XI shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Notes shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions of this Indenture.
Section 11.04. NO WAIVER.
Neither a failure nor a delay on the part of either the Trustee or
the Holders in exercising any right, power or privilege under this Article XI
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege.
The rights, remedies and benefits of the Trustee and the Holders herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which either may have under this Article XI at law, in
equity, by statute or otherwise.
Section 11.05. MODIFICATION.
No modification, amendment or waiver of any provision of this
Article XI, nor the consent to any departure by any Guarantor therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on any
Guarantor in any case shall entitle such Guarantor to any other for further
notice or demand in the same, similar or other circumstances.
Section 11.06. RELEASE OF SUBSIDIARY GUARANTOR.
Upon the sale or other disposition (including by way of
consolidation or merger) of a Subsidiary Guarantor or the sale or disposition of
all or substantially all the assets of such Subsidiary Guarantor (in each case
other than to Stage or SRI or an Affiliate of Stage or SRI) permitted by the
Indenture, including any sale pursuant to foreclosure on a pledge of the stock
of such Subsidiary Guarantor securing the Bank Debt in accordance with the
applicable provisions of the Uniform Commercial Code, such Subsidiary Guarantor
shall be deemed released from all obligations under this Article XI without any
further action required on the part of the Trustee or any Holder. At the request
of SRI, the Trustee shall execute and deliver an appropriate instrument
evidencing such release.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss. 318(c), such imposed duties shall control.
Section 12.02. NOTICES.
Any notice or communication by SRI, Stage, any Subsidiary Guarantor
or the Trustee to the other is duly given if in writing and delivered in person
or mailed by first class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery,
to the other's address:
If to SRI or Stage or any Subsidiary Guarantor:
c/o Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Telecopier No.: (713) 669-2709
Attention: James Marcum
If to the Trustee:
State Street Bank and Trust Company
Two International Place (4th Floor)
Boston, Massachusetts 02110
Telecopier No: (617) 664-5371
Attention: Corporate Trust Department
(Specialty Retailers, Inc.
8 1/2% Senior Notes Due 2005)
SRI or the Trustee, by notice each to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders of
Notes) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder of a Note shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
Note Register. Any notice or communication shall also be so mailed to any Person
described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail
a notice or communication to a Holder of a Note or any defect in such notice
shall not affect its sufficiency with respect to other Holders of Notes.
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If a notice or communication is mailed in the manner set forth above
within the time prescribed, such notice or communication shall be deemed to be
duly given whether or not the addressee receives it.
If SRI mails a notice or communication to Holders of Notes, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders of Notes pursuant to TIA ss. 312(b) may communicate with
other Holders of Notes with respect to their rights under this Indenture or the
Notes. SRI and Stage, the Trustee, the Registrar, the Paying Agent and any other
Person shall have the protection of TIA ss. 312(c).
Section 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by Stage, SRI or a Guarantor to the
Trustee to take any action under this Indenture, Stage, SRI or such Guarantor,
as the case may be, shall furnish to the Trustee:
(i) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all conditions and covenants have been satisfied.
Section 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant contained in this Indenture shall include:
(i) a statement that the Person making such certificate or opinion
has read such condition or covenant;
(ii) a statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether such condition or
covenant has been satisfied; and
(iv) a statement as to whether, in the opinion of such Person. such
condition or covenant has been satisfied.
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Section 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders of Notes. The Registrar and Paying Agent may make reasonable rules
and set reasonable requirements for their functions.
Section 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of
Stage, SRI or any Guarantor, as such, shall have any liability for any
obligations of Stage, SRI or such Guarantor under the Notes or this Indenture or
for any claim based on, in respect of, or by reason of, such obligations. Each
Holder of a Note by accepting a Note waives and releases all such liability.
Such waiver and release form a part of the consideration for issuance of the
Notes.
Section 12.08. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of Stage or its Subsidiaries. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 12.10. SUCCESSORS.
All agreements of Stage, SRI and the Guarantors contained in this
Indenture and the Notes shall bind such entities and their respective
successors. All agreements of the Trustee in this Indenture shall bind the
Trustee and its successors.
Section 12.11. SEVERABILITY.
In case any provision of this Indenture or the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
such signed copy shall be deemed to be an original, and all of such signed
copies together shall represent one and the same agreement.
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Section 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience only,
and shall not, for any reason, be deemed to be part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
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SIGNATURES
SPECIALTY RETAILERS, INC.,
as Issuer
By: /S/ JAMES MARCUM
Name: James Marcum
Title:Executive Vice President &
Chief Financial Officer
Attest:
/S/ MARK HESS
Name: Mark Hess
Title:Vice President, Financial Planning
STAGE STORES, INC.,
as Guarantor
By: /S/ JAMES MARCUM
Name: James Marcum
Title:Executive Vice President &
Chief Financial Officer
Attest:
/S/ MARK HESS
Name: Mark Hess
Title:Vice President, Financial Planning
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /S/ JILL OLSON
Name: Jill Olson
Title:Assistant Vice President
Attest:
/S/ JACQUELINE RIVERA
Name: Jacqueline A. Rivera
Title:Assistant Secretary
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EXHIBIT A
[FORM OF FACE OF NOTE]
SPECIALTY RETAILERS, INC.
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO SRI OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.*
[Restricted Notes Legend]
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND UNDER APPLICABLE STATE
SECURITIES LAWS, AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER
OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF SRI THAT (A) THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii)
PURSUANT
- --------
* This legend should only be added if the Note is issued in global form.
A-1
<PAGE>
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i)
THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
A-2
<PAGE>
No. Principal Amount $
CUSIP No. 847514AJ5
8 1/2% Senior Notes Due 2005
SPECIALTY RETAILERS, INC., a Texas corporation, promises to pay to
, or registered assigns, the principal sum of
Dollars on July 15, 2005.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Note are set forth on the reverse side
of this Note.
Dated: June 17, 1997
[SEAL] SPECIALTY RETAILERS, INC.
By
Title:
By
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND
TRUST COMPANY,
as Trustee, certifies
that this is one of the
Notes referred to in the
Indenture.
By
Authorized Signatory
A-3
<PAGE>
[FORM OF REVERSE SIDE OF NOTE]
8 1/2% Senior Notes Due 2005
1. INTEREST
SPECIALTY RETAILERS, INC., a Texas corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called "SRI"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above PROVIDED, HOWEVER, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
interest will accrue on this security at a rate of 9% per annum from and
including the date on which any such Registration Default shall occur but
excluding the date on which all Registration Defaults have been cured.
SRI will pay interest semi-annually on January 15 and July 15 of
each year, commencing January 15, 1998. Interest on the Notes will accrue from
the most recent date to which interest has been paid, or, if no interest has
been paid, from June 17, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. SRI shall pay interest on overdue
principal at the rate borne by the Notes.
2. METHOD OF PAYMENT
SRI will pay interest on the Notes (except defaulted interest) to
the Persons who are registered Holders of Notes at the close of business on the
January 1 or July 1 next preceding the interest payment date even if Notes are
cancelled after the record date and on or before the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
SRI will pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts.
However, SRI may pay principal and interest by check payable in such money. It
may mail an interest check to a Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts
trust company (the "TRUSTEE"), will act as Paying Agent and Registrar. SRI may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
SRI or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. INDENTURE
SRI issued the Notes under an Indenture dated as of June 17, 1997
(the "INDENTURE"), between SRI, Stage Stores, Inc. ("Stage") as Guarantor and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and the TIA for a statement of
those terms.
A-4
<PAGE>
The Notes are unsecured senior obligations of SRI limited to
$200,000,000 aggregate principal amount (subject to Section 2.07 of the
Indenture). The Indenture imposes certain limitations on the incurrence of
additional indebtedness by Stage and certain of its Subsidiaries, the payment of
dividends on, and the redemption of, capital stock of Stage and certain of its
Subsidiaries, the making of Investments, restrictions on distributions from
certain Subsidiaries, the use of proceeds from the sale of assets and Subsidiary
stock, transactions with affiliates, liens, sale/leaseback transactions and
certain matters regarding Accounts Receivable Subsidiaries. The Indenture also
restricts the ability of Stage, SRI and certain of the Subsidiaries of Stage to
consolidate or merge with or into, or to transfer all or substantially all its
assets to, another person. All of these limitations, however, are subject to a
number of important qualifications contained in the Indenture.
5. OPTIONAL REDEMPTION
The Notes will be redeemable, at SRI's option, in whole or in part,
at any time and from time to time on or after July 15, 2001, upon not less than
30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address, appearing in the Note Register, at the following
redemption prices (expressed in percentages of principal amount at maturity),
plus accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12- month period
commencing on or after July 15 of the years set forth below:
REDEMPTION
YEAR PRICE
---- -----
2001..............................104.250%
2002..............................102.125%
2003 and thereafter...............100.000%
In addition, at any time and from time to time prior to July 15,
2000, SRI may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the net cash proceeds of one or more Public Equity Offerings ,
at a redemption price (expressed as a percentage of principal amount) of
108.50%, plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); PROVIDED, HOWEVER, that at least $130,000,000
aggregate principal amount at maturity of the Notes must remain outstanding
after each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption shall be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Notes to be redeemed
at its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued interest on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Notes (or
such portions thereof) called for redemption.
A-5
<PAGE>
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Notes will have the right to
require SRI to repurchase all or any part of the Notes of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Notes to be
repurchased plus accrued and unpaid interest (if any) to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. SENIOR NOTE GUARANTIES
As provided in the Indenture and subject to certain limitations
therein set forth, the obligations of SRI under the Indenture and this Note are
guaranteed on a senior unsecured basis by Stage and may in the future be
guaranteed on a senior unsecured basis by certain Subsidiaries of Stage.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. Holders of Notes may transfer or
exchange Notes in accordance with the Indenture. The Registrar may require a
Holder of a Note, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Note selected for redemption (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed) or any Notes for a period of
15 days before a selection of Notes to be redeemed or 15 days before an interest
payment date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the sole owner
of such Note for all purposes.
11. UNCLAIMED MONEY
Subject to applicable abandoned property law, if money for the
payment of principal or interest remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to SRI at its request. After any such
payment, Holders entitled to the money must look only to SRI and not to the
Trustee or Paying Agent for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, SRI at any time may terminate some or
all of its obligations under the Notes and the Indenture if SRI deposits with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Notes to redemption or maturity, as the case may be.
A-6
<PAGE>
13. AMENDMENT; WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount outstanding of the Notes; and (ii) any
default or compliance with any provision may be waived with the written consent
of the Holders of a majority in principal amount of the Notes then outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of a Note, SRI, Stage and the Trustee may amend the Indenture or the
Notes to cure any ambiguity, omission, defect or inconsistency, or to comply
with Article VI of the Indenture, or to provide for uncertificated Notes in
addition to or in place of certificated Notes, or to add guarantees with respect
to the Notes or add additional covenants or surrender rights and powers
conferred on Stage, SRI or any Guarantor, or to release a Guaranty, when
permitted by the Indenture, or to secure the Notes, or to make any change that
would not adversely affect the rights of any Holder of a Note or to comply with
requirements of the SEC in connection with the qualification of the Indenture
under the TIA.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest; (ii) default in payment of principal or premium if
any, on the Notes at maturity, upon redemption, upon declaration, upon required
repurchase or otherwise; (iii) failure by Stage, SRI or any Guarantor to comply
with other covenants in the Indenture or the Notes, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
at final maturity or failure to pay within any applicable grace period) of other
Debt of Stage or any of its Subsidiaries if the amount accelerated (or so
unpaid) aggregates $15 million or more; (v) certain events of bankruptcy or
insolvency with respect to Stage, SRI or any Significant Subsidiary of Stage;
(vi) certain judgments or decrees for the payment of money in excess of $15
million; and (vii) certain events with respect to the Guaranties of the Notes by
Stage and certain Subsidiaries of Stage. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding may declare the principal of and accrued
but unpaid interest on all the Notes to be due and payable immediately. Certain
events of bankruptcy or insolvency are Events of Default which will result in
the Notes being due and payable immediately upon the occurrence of such Events
of Default.
Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default (except a
Default in payment of principal or interest) if it determines that withholding
such notice is in the interest of the Holders of Notes.
A-7
<PAGE>
15. TRUSTEE DEALINGS WITH SRI, STAGE AND THEIR AFFILIATES
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by SRI or their Affiliates and may otherwise deal with SRI, Stage or their
Affiliates with the same rights it would have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of SRI, Stage
or any Guarantor or the Trustee shall not have any liability for any obligations
of SRI, Stage or any Guarantor under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations. By accepting a Note,
each Holder of a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
17. AUTHENTICATION
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the face of this Note.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT
Each Holder of a Note, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
20. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP NUMBERS
Pursuant to the recommendation promulgated by the Committee on
Uniform Security Identification Procedures SRI has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use such CUSIP numbers in
notices of
A-8
<PAGE>
redemption as a convenience to Holders of Notes. No representation is made as to
the accuracy of such numbers either as printed on the Notes or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
--------------------------
SRI will furnish to any Holder of a Note upon written request and
without charge to such Holder of a Note a copy of the Indenture which contains
the text of this Note in larger type. Requests may be made to:
Specialty Retailers, Inc.
c/o Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: James Marcum
A-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, complete the form below:
I or we assign and transfer this Note to:
[PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE]
[INSERT ASSIGNEE'S SOC. SEC. OR TAX I.D. NO. ]
and irrevocably appoint ___________________ agent to transfer this Note on
the books of SRI. The agent may substitute another to act for him.
Date: Your Signature:
Sign exactly as your name appears on the face of this Note.
Signature Guarantee: ____________________________________________________
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan association or
credit union) with membership in an approved signature guarantee
medallion program pursuant to Securities and Exchange Commission
Rule 17Ad- 15.]
A-10
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF RESTRICTED NOTES
This certificate re ates to $_________ principal amount of Notes held in (check
applicable space) ____ book-entry or _____ definitive form by the undersigned.
The undersigned (check one box below):
|_| has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Note or
Notes in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above); or
|_| has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
The undersigned confirms that such Notes are being:
CHECK ONE BOX BELOW:
(1) |_| acquired for the undersigned's own account, without
Transfer (in satisfaction of Section 2.06(a)(ii)(A) of the
Indenture); or
(2) |_| transferred to SRI; or
(3) |_| transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
(4) |_| transferred pursuant to and in compliance with Regulation
S under the Securities Act of 1933, as amended; or
(5) |_| transferred pursuant to and in compliance with Rule 144
under the Securities Act of 1933, as amended; or
(6) |_| transferred pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered holder thereof; PROVIDED, HOWEVER, that if box (2), (3) or (4) is
checked, SRI or the Trustee may require evidence reasonably satisfactory to them
as to the compliance with the restrictions set forth in the legend on the face
of this Note.
----------------------------
Signature
A-11
<PAGE>
Signature Guarantee:
----------------------------------------------
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan
association or credit union) with membership in an
approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule
17Ad-15.]
A-12
<PAGE>
OPTION OF HOLDER OF NOTE TO ELECT PURCHASE
If you elect to have this Note purchased by SRI pursuant to Article
IV or Section 5.07 of the Indenture, check the box:
[ ]
If you elect to have only part of this Note purchased by SRI
pursuant to Article IV or Section 5.07 of the Indenture, state the amount:
$
Date: Your Signature:
(Sign exactly as your name
appears on the face of the
Note)
Signature Guarantee:
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan association or
credit union) with membership in an approved signature guarantee
medallion program pursuant o Securities and Exchange Commission Rule
17Ad- 15.]
A-13
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
<TABLE>
<S> <C> <C>
AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN PRINCIPAL AMOUNT OF THIS SIGNATURE OF AUTHORIZED
DATE OF PRINCIPAL AMOUNT OF THIS PRINCIPAL AMOUNT OF THIS GLOBAL NOTE FOLLOWING SIGNATORY OF TRUSTEE OR NOTES
EXCHANGE GLOBAL NOTE GLOBAL NOTE SUCH DECREASE OR INCREASE CUSTODIAN
</TABLE>
A-14
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE AND
PRIVATE EXCHANGE NOTE]
*
**
SPECIALTY RETAILERS, INC.
No. $
CUSIP:
8 1/2% Senior Notes Due 2005
Specialty Retailers, Inc., a Texas corporation, promises to pay to
or registered assigns, the principal sum of
Dollars on July 15, 2005.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Note are set forth on the other side
of this Note.
SPECIALTY RETAILERS, INC.
by
Dated: _________________
[Seal]
----------------------------
Title:
----------------------------
Title
- ------------------------
* If the Note is to be issued in global form add the Global Notes Legend
from Exhibit A and the attachment to Exhibit A captioned "[TO BE ATTACHED TO
GLOBAL NOTES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".
** If the Note is a Private Exchange Note issued in a Private Exchange to
the Initial Purchasers holding an unsold portion of its initial allotment, add
the restricted securities legend from Exhibit A and include the "Certificate to
be Delivered upon Exchange or Registration of Transfer of Restricted Notes" from
Exhibit A.
B-1
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND
TRUST COMPANY,
as Trustee, certifies
that this is one of the
Notes referred to
in the Indenture.
by
--------------------
Authorized Signatory
B-2
<PAGE>
[FORM OF REVERSE SIDE OF NOTE]
8 1/2% Senior Notes Due 2005
1. INTEREST
SPECIALTY RETAILERS, INC., a Texas corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called "SRI"), promises to pay interest on the
principal amount of this Note at the rate per annum shown above PROVIDED,
HOWEVER, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, interest will accrue on this security at a rate of 9% per
annum form and including the date on which any such Registration Default shall
occur but excluding the date on which all Registration Defaults have been cured.
SRI will pay interest semi-annually on January 15 and July 15 of
each year, commencing January 15, 1998. Interest on the Notes will accrue from
the most recent date to which interest has been paid, or, if no interest has
been paid, from June 17, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. SRI shall pay interest on overdue
principal at the rate borne by the Notes.
2. METHOD OF PAYMENT
SRI will pay interest on the Notes (except defaulted interest) to
the Persons who are registered Holders of Notes at the close of business on the
January 1 or July 1 next preceding the interest payment date even if Notes are
cancelled after the record date and on or before the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
SRI will pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts.
However, SRI may pay principal and interest by check payable in such money. It
may mail an interest check to a Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts
trust company (the "TRUSTEE"), will act as Paying Agent and Registrar. SRI may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
SRI or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. INDENTURE
SRI issued the Notes under an Indenture dated as of June 17, 1997
(the "INDENTURE"), between SRI, Stage Stores, Inc. ("Stage") as Guarantor and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa- 77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the
B-3
<PAGE>
Indenture. The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of those terms.
The Notes are unsecured senior obligations of SRI limited to
$200,000,000 aggregate principal amount (subject to Section 2.07 of the
Indenture). The Indenture imposes certain limitations on the incurrence of
additional indebtedness by Stage and certain of its subsidiaries, the payment of
dividends on, and the redemption of, capital stock of Stage and certain of its
Subsidiaries, the making of Investments, restrictions on distributions from
certain Subsidiaries, the use of proceeds from the sale of assets and Subsidiary
stock, transactions with affiliates, liens, sale/leaseback transactions and
certain matters regarding Accounts Receivable Subsidiaries. The Indenture also
restricts the ability of Stage, SRI and certain of the Subsidiaries of Stage to
consolidate or merge with or into, or to transfer all or substantially all its
assets to, another person. All of these limitations, however, are subject to a
number of important qualifications contained in the Indenture.
5. OPTIONAL REDEMPTION
The Notes will be redeemable, at SRI's option, in whole or in part,
at any time and from time to time on or after July 15, 2001, upon not less than
30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address appearing in the Note Register, at the following
redemption prices (expressed in percentages of principal amount at maturity),
plus accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on or after July 15 of the years set forth below:
REDEMPTION
YEAR PRICE
---- -----
2001.............................. 104.250%
2002.............................. 102.125%
2003 and thereafter............... 100.000%
In addition, at any time and from time to time prior to July 15,
2000, SRI may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the net cash proceeds of one or more Public Equity Offerings,
at a redemption price (expressed as a percentage of principal amount) of
108.50%, plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); PROVIDED, HOWEVER,
that at least $130,000,000 aggregate principal amount at maturity of the Notes
must remain outstanding after each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption shall be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Notes to be redeemed
at its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption
B-4
<PAGE>
price of and accrued interest on all Notes (or portions thereof) to be redeemed
on the redemption date is deposited with the Paying Agent on or before the
redemption date and certain other conditions are satisfied, on and after such
date interest ceases to accrue on such Notes (or such portions thereof) called
for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Notes will have the right to
require SRI to repurchase all or any part of the Notes of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Notes to be
repurchased plus accrued and unpaid interest (if any) to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. SENIOR NOTE GUARANTIES
As provided in the Indenture and subject to certain limitations
therein set forth, the obligations of SRI under the Indenture and this Note are
guaranteed on a senior unsecured basis by Stage and may in the future be
guaranteed on a senior unsecured basis by certain Subsidiaries of Stage.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. Holders of Notes may transfer or
exchange Notes in accordance with the Indenture. The Registrar may require a
Holder of a Note, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Note selected for redemption (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed) or any Notes for a period of
15 days before a selection of Notes to be redeemed or 15 days before an interest
payment date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the sole owner
of such Note for all purposes.
11. UNCLAIMED MONEY
Subject to applicable abandoned property law, if money for the
payment of principal or interest remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to SRI at its request. After any such
payment, Holders entitled to the money must look only to SRI and not to the
Trustee or Paying Agent for payment.
B-5
<PAGE>
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, SRI at any time may terminate some or
all of its obligations under the Notes and the Indenture if SRI deposits with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Notes to redemption or maturity, as the case may be.
13. AMENDMENT; WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount outstanding of the Notes; and (ii) any
default or compliance with any provision may be waived with the written consent
of the Holders of a majority in principal amount of the Notes then outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of a Note, SRI, Stage and the Trustee may amend the Indenture or the
Notes to cure any ambiguity, omission, defect or inconsistency, or to comply
with Article VI of the Indenture, or to provide for uncertificated Notes in
addition to or in place of certificated Notes, or to add guarantees with respect
to the Notes or add additional covenants or surrender rights and powers
conferred on Stage, SRI or any Guarantor, or to release a Guaranty, when
permitted by the Indenture, or to secure the Notes, or to make any change that
would not adversely affect the rights of any Holder of a Note or to comply with
requirements of the SEC in connection with the qualification of the Indenture
under the TIA.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest; (ii) default in payment of principal or premium, if
any, on the Notes at maturity, upon redemption, upon declaration, upon required
repurchase or otherwise; (iii) failure by SRI to comply with other covenants in
the Indenture or the Notes, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay at final maturity or
failure to pay within any applicable grace period) of other Debt of Stage or any
of its Subsidiaries if the amount accelerated (or so unpaid) aggregates $15
million or more; (v) certain events of bankruptcy or insolvency with respect to
Stage, SRI or any Significant Subsidiary of Stage; (vi) certain judgments or
decrees for the payment of money in excess of $15 million; and (vii) certain
events with respect to the Guaranties of the Notes by Stage and certain
Subsidiaries of Stage. If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding may declare the principal of and accrued but unpaid
interest on all the Notes to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the Notes
being due and payable immediately upon the occurrence of such Events of Default.
Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders
B-6
<PAGE>
of Notes notice of any continuing Default (except a Default in payment of
principal or interest) if it determines that withholding such notice is in the
interest of the Holders of Notes.
15. TRUSTEE DEALINGS WITH SRI, STAGE AND THEIR AFFILIATE
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by SRI, Stage or their Affiliates and may otherwise deal with SRI, Stage or
their Affiliates with the same rights it would have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of SRI, Stage
or any Guarantor or the Trustee shall not have any liability for any obligations
of SRI, Stage or any Guarantor under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations. By accepting a Note,
each Holder of a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
17. AUTHENTICATION
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the face of this Note.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT
Each Holder of a Note, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
20. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
B-7
<PAGE>
21. CUSIP NUMBERS
Pursuant to the recommendation promulgated by the Committee on
Uniform Security Identification Procedures SRI has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use such CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
--------------------------
SRI will furnish to any Holder of a Note upon written request and
without charge to such Holder of a Note a copy of the Indenture which contains
the text of this Note in larger type. Requests may be made to:
Specialty Retailers, Inc.
c/o Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: James Marcum
B-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, complete the form below:
I or we assign and transfer this Note to:
[PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE]
[INSERT ASSIGNEE'S SOC. SEC. OR TAX I.D. NO. ]
and irremovably appoint ___________________ agent to transfer this Note on
the books of SRI. The agent may substitute another to act for him.
Date: Your Signature:
Sign exactly as your name appears on the face of this Note.
Signature Guarantee:
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan association or
credit union) with membership in an approved signature guarantee
medallion program pursuant to Securities and Exchange Commission
Rule 17Ad- 15.]
B-9
<PAGE>
OPTION OF HOLDER OF NOTE TO ELECT PURCHASE
If you elect t have this Note purchased by SRI pursuant to Article
IV or Section 5.07 of the Indenture, check the box:
[ ]
If you elect to have only part of this Note purchased by SRI
pursuant to Article IV or Section 5.07 of the Indenture, state the amount:
$
Date: Your Signature:
(Sign exactly as your name
appears on the face of the
Note)
Signature Guarantee:
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan association or
credit union) with membership in an approved signature guarantee
medallion program pursuant to Securities and Exchange Commission
Rule 17Ad- 15.]
B-10
EXHIBIT 4.3
================================================================================
SPECIALTY RETAILERS, INC.,
AS ISSUER
STAGE STORES, INC.,
AS GUARANTOR
$100,000,000
9% SENIOR SUBORDINATED NOTES DUE 2007
-----------------
INDENTURE
Dated as of June 17, 1997
-----------------
STATE STREET BANK AND TRUST COMPANY
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
310 (a)(1)...................................................... 8.10
(a)(2)...................................................... 8.10
(a)(3)...................................................... N/A
(a)(4)...................................................... N/A
(a)(5)...................................................... 8.10
(b)......................................................... 8.10
(c)......................................................... N/A
311 (a)......................................................... 8.11
(b)......................................................... 8.11
(c)......................................................... N/A
312 (a)......................................................... 2.05
(b)......................................................... 14.03
(c)......................................................... 14.03
313 (a)......................................................... 11.02
(b)(i)...................................................... 11.02
(b)(2)...................................................... 8.06
(c)......................................................... 8.06; 11.02
(d)......................................................... 8.06
314 (a)......................................................... 8.03; 11.02
(b)......................................................... 11.03
(c)(1)...................................................... 14.04
(c)(2)...................................................... 14.04
(c)(3)...................................................... N/A
(d)......................................................... 11.02;11.03
(e)......................................................... 14.05
(f)......................................................... N/A
315 (a)......................................................... 8.01
(b)......................................................... 8.05; 14.02
(c)......................................................... 8.01
(d)......................................................... 8.01
(e)......................................................... 7.11
316 (a)(1)(A)................................................... 7.05
(a)(1)(B)................................................... 7.04
(a)(2)...................................................... N/A
(b)......................................................... 7.07
317 (a)(1)...................................................... 7.08
(a)(2)...................................................... 7.09
(b)......................................................... 2.04
318 (a)......................................................... 14.01
(b)......................................................... N/A
(c)......................................................... 14.01
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
i
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES...................................................................... 1
RECITALS OF SRI AND STAGE.................................................... 1
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.............................................. 1
Section 1.02. Other Definitions........................................ 16
Section 1.03. Incorporation by Reference of Trust Indenture Act........ 17
Section 1.04. Rules of Construction.................................... 17
ARTICLE II
THE NOTES
Section 2.01. Form and Dating.......................................... 18
Section 2.02. Execution and Authentication............................. 19
Section 2.03. Registrar and Paying Agent............................... 20
Section 2.04. Paying Agent to Hold Money In Trust...................... 20
Section 2.05. Lists of Holders of Notes................................ 20
Section 2.06. Transfer and Exchange.................................... 21
Section 2.07. Replacement Notes........................................ 25
Section 2.08. Outstanding Notes........................................ 25
Section 2.09. Temporary Notes and Certificated Notes................... 25
Section 2.10. Cancellation............................................. 26
Section 2.11. Defaulted Interest....................................... 27
Section 2.12. CUSIP Number............................................. 27
ARTICLE III
REDEMPTION
Section 3.01. Notices to Trustee....................................... 27
Section 3.02. Selection of Notes to be Redeemed........................ 27
Section 3.03. Notice of Redemption..................................... 28
Section 3.04. Effect of Notice of Redemption........................... 28
Section 3.05. Deposit of Redemption Price.............................. 29
Section 3.06. Notes Redeemed in Part................................... 29
ARTICLE IV
- --------
NOTE: This Table of Contents shall not, for any reason, be deemed to be part
of the Indenture.
ii
<PAGE>
PAGE
CHANGE OF CONTROL
ARTICLE V
COVENANTS
Section 5.01. Payment of Principal, Premium and Interest............... 30
Section 5.02. Maintenance of Office or Agency.......................... 31
Section 5.03. SEC Reports.............................................. 31
Section 5.04. Limitation On Debt....................................... 31
Section 5.05. Limitation On Restricted Payments........................ 33
Section 5.06. Limitation On Restrictions On Distributions from
Restricted Subsidiaries.................................. 35
Section 5.07. Limitation On Sales of Assets and Subsidiary Stock....... 36
Section 5.08. Limitation On Transactions with Affiliates............... 39
Section 5.09. Limitation On the Sale or Issuance of Capital Stock of
Restricted Subsidiaries.................................. 39
Section 5.10. Limitation on Liens...................................... 40
Section 5.11. Accounts Receivable Subsidiaries......................... 40
Section 5.12. Future Guarantors........................................ 40
Section 5.13. Compliance Certificates.................................. 40
Section 5.14. Further Instruments and Acts............................. 41
ARTICLE VI
SUCCESSORS
Section 6.01. When Stage and SRI May Merge or Transfer Assets.......... 41
Section 6.02. Successor Company Substituted............................ 41
Section 6.03. When Subsidiary Guarantor May Merge or Transfer Assets... 42
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01. Events of Default........................................ 42
Section 7.02. Acceleration............................................. 43
Section 7.03. Other Remedies........................................... 44
Section 7.04. Waiver of Past Defaults.................................. 44
Section 7.05. Control by Majority...................................... 44
Section 7.06. Limitation On Suits...................................... 45
Section 7.07. Unconditional Right of Holders of Notes to Receive
Payment.................................................. 45
Section 7.08. Collection Suit by Trustee............................... 45
Section 7.09. Trustee May File Proofs of Claim......................... 45
Section 7.10. Priorities............................................... 46
iii
<PAGE>
PAGE
Section 7.11. Undertaking for Costs.................................... 46
Section 7.12. Waiver of Stay, Extension and Usury Laws................. 46
ARTICLE VIII
TRUSTEE
Section 8.01. Duties of Trustee........................................ 47
Section 8.02. Rights of Trustee........................................ 48
Section 8.03. Individual Rights of Trustee............................. 48
Section 8.04. Trustee's Disclaimer..................................... 48
Section 8.05. Notice of Default........................................ 49
Section 8.06. Reports by Trustee to Holders of Notes................... 49
Section 8.07. Compensation and Indemnity............................... 49
Section 8.08. Replacement of Trustee................................... 50
Section 8.09. Successor Trustee by Merger, Etc......................... 51
Section 8.10. Eligibility; Disqualification............................ 51
Section 8.11. Preferential Collection of Claims Against SRI............ 51
ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Liability on Notes; Defeasance.............. 51
Section 9.02. Conditions to Defeasance................................. 52
Section 9.03. Application of Trust Money............................... 53
Section 9.04. Repayment to SRI......................................... 53
Section 9.05. Indemnity for Government Obligations..................... 54
Section 9.06. Reinstatement............................................ 54
ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01.Without Consent of Holders of Notes...................... 54
Section 10.02.With Consent of Holders of Notes......................... 55
Section 10.03.Compliance with Trust Indenture Act...................... 56
Section 10.04.Revocation and Effect of Consents and Waivers............ 56
Section 10.05.Notation On or Exchange of Notes......................... 57
Section 10.06.Trustee to Sign Amendments, Etc.......................... 57
Section 10.07.Payment for Consents..................................... 57
ARTICLE XI
SUBORDINATION OF NOTES
Section 11.01.Notes Subordinate to Senior Debt; Notes PARI PASSU
with Senior Subordinated Debt; Notes Senior to
Subordinated Obligations................................. 57
iv
<PAGE>
PAGE
Section 11.02.Payment Over of Proceeds Upon Dissolution, Etc........... 58
Section 11.03.No Payment When Senior Debt in Default................... 59
Section 11.04.Payment Permitted If No Default.......................... 60
Section 11.05.Subrogation to Rights of Holders of Senior Debt.......... 60
Section 11.06.Provisions Solely to Define Relative Rights.............. 60
Section 11.07.Trustee to Effectuate Subordination...................... 61
Section 11.08.No Waiver of Subordination Provisions.................... 61
Section 11.09.Notice to Trustee........................................ 61
Section 11.10.Reliance on Judicial Order or Certificate of
Liquidating Agent........................................ 62
Section 11.11.Trustee Not Fiduciary for Holders of Senior Debt......... 62
Section 11.12.Rights of Trustee as Holder of Senior Debt; Preservation
of Trustee's Rights...................................... 62
Section 11.13.Article XI Applicable to Paying Agents................... 63
Section 11.14.Trust Moneys Not Subordinated............................ 63
ARTICLE XII
GUARANTIES
Section 12.01.Guaranties............................................... 63
Section 12.02.Limitation on Liability; Contribution.................... 65
Section 12.03.Successors and Assigns................................... 65
Section 12.04.No Waiver................................................ 65
Section 12.05.Modification............................................. 65
Section 12.06.Release of Subsidiary Guarantor.......................... 65
ARTICLE XIII
SUBORDINATION OF GUARANTIES
Section 13.01.Guaranties Subordinate to Senior Debt; Guaranties PARI
PASSU with Senior Subordinated Debt; Guaranties Senior
to Subordinated Obligations.............................. 66
Section 13.02.Payment Over of Proceeds Upon Dissolution, Etc........... 66
Section 13.03.No Payment When Senior Debt in Default................... 67
Section 13.04.Payment Permitted If No Default.......................... 68
Section 13.05.Subrogation to Rights of Holders of Senior Debt.......... 69
Section 13.06.Provisions Solely to Define Relative Rights.............. 69
Section 13.07.Trustee to Effectuate Subordination...................... 69
Section 13.08.No Waiver of Subordination Provisions.................... 70
Section 13.09.Notice to Trustee........................................ 70
Section 13.10.Reliance on Judicial Order or Certificate of
Liquidating Agent........................................ 71
Section 13.11.Trustee Not Fiduciary for Holders of Senior Debt......... 71
Section 13.12.Rights of Trustee as Holder of Senior Debt; Preservation
of Trustee's Rights...................................... 71
Section 13.13.Article XIII Applicable to Paying Agents................. 71
Section 13.14.Trust Moneys Not Subordinated............................ 72
ARTICLE XIV
v
<PAGE>
PAGE
MISCELLANEOUS
Section 14.01.Trust Indenture Act Controls............................. 72
Section 14.02.Notices.................................................. 72
Section 14.03.Communication by Holders of Notes with Other Holders
of Notes................................................. 73
Section 14.04.Certificate and Opinion as to Conditions Precedent....... 73
Section 14.05.Statements Required in Certificate or Opinion............ 74
Section 14.06.Rules by Trustee and Agents.............................. 74
Section 14.07.No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders........................... 74
Section 14.08.Governing Law............................................ 74
Section 14.09.No Adverse Interpretation of Other Agreements............ 74
Section 14.10.Successors............................................... 75
Section 14.11.Severability............................................. 75
Section 14.12.Counterpart Originals.................................... 75
Section 14.13.Table of Contents, Headings, Etc......................... 75
EXHIBIT A--Form of Initial Note
EXHIBIT B--Form of Exchange Note
vi
<PAGE>
INDENTURE, dated as of June 17, 1997, among Specialty Retailers,
Inc. ("SRI"), a corporation duly organized and existing under the laws of the
State of Texas, as Issuer, Stage Stores, Inc. ("STAGE"), a corporation duly
organized and existing under the laws of the State of Delaware, as Guarantor,
and State Street Bank and Trust Company, a trust company duly organized and
existing under the laws of the Commonwealth of Massachusetts, as trustee (the
"TRUSTEE").
RECITALS OF SRI AND STAGE
SRI and Stage have duly authorized the execution and delivery of
this Indenture to provide for the issuance of up to $100,000,000 aggregate
principal amount of SRI's 9% Senior Subordinated Notes Due 2007 issuable as
provided in this Indenture. All things necessary to make this Indenture a valid
agreement of SRI and Stage, in accordance with its terms, have been done, and
SRI and Stage have done all things necessary to make the Notes, when executed by
SRI and Stage and authenticated and delivered by the Trustee hereunder and duly
issued by SRI, the valid obligations of SRI and Stage as hereinafter provided.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. DEFINITIONS.
"ACCOUNTS RECEIVABLE FACILITY" means the program and the
transactions in effect on the Issue Date pursuant to the following principal
documents, each as in effect on the Issue Date, pursuant to which SRI
Receivables Purchase Co., Inc. ("SRPC") has acquired and securitized Receivables
originated by SRI: Receivables Purchase Agreement between SRI and SRPC; Pooling
and Servicing Agreement among SRI, as servicer, SRPC, as transferor, and Bankers
Trust (Delaware), as trustee; Series 1993-1 Supplement, Series 1933-2 Supplement
and Series 1995-1 Supplement, each between SRPC, as transferor, and Bankers
Trust (Delaware), as trustee; each related certificate purchase agreement and
placement agent agreement; Indenture between SRPC, as issuer, and Bankers Trust
(Delaware), as trustee and collateral agent; and Purchase Agreement between BT
Securities Corp., SRPC and SRI, pertaining to 12.5% Trust Certificate-Backed
Notes
"ACCOUNTS RECEIVABLE SUBSIDIARY" means a wholly owned Subsidiary of
Stage or a Subsidiary of such wholly owned Subsidiary, in each case which
engages in no activities other than in connection with the financing of
Receivables, including any Banking Subsidiary, and which is designated by the
Board of Directors as an Accounts Receivable Subsidiary pursuant to
<PAGE>
a board resolution set forth in an Officers' Certificate and delivered to the
Trustees, (a) no portion of the Debt or any other obligations (contingent or
otherwise) of which (i) is Guaranteed by Stage or any other Subsidiary of Stage,
(ii) is recourse to or obligates Stage or any other Subsidiary of Stage in any
way, other than pursuant to Customary Securitization Undertakings or (iii)
subjects any property or asset of Stage or any other Subsidiary of Stage,
directly or indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Customary Securitization Undertakings, (b) with which
none of Stage or any other Subsidiary of Stage has any contract, agreement,
arrangement or understanding other than on terms no less favorable to Stage or
such other Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of Stage, other than sales of Receivables in accordance
with clause (v) of the definition of "Asset Disposition" and fees payable in the
ordinary course of business in connection with servicing Receivables and (c)
with which neither Stage nor any other Subsidiary of Stage or has any obligation
(i) to subscribe for additional shares of Capital Stock therein or (ii) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results.
"ACQUISITION" means the acquisition by Stage of C.R. Anthony Company
pursuant to and in accordance with the terms of the Merger Agreement.
"AFFILIATE" means with respect to any specified Person any other
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of Section 5.07 and Section 5.08 only, the term
"Affiliate" shall also mean any beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) of Capital Stock representing 10% or more of the
total voting power of the Voting Stock (on a fully diluted basis) of Stage or of
rights or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner in accordance with the first sentence of this definition.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"ASSET DISPOSITION" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by Stage or any of its Restricted
Subsidiaries, including, without limitation, any disposition by means of a
merger, consolidation or similar transaction, other than (i) a disposition by a
Restricted Subsidiary to Stage or by Stage or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (ii) a disposition of property or assets (other than
shares of Capital Stock of a Restricted Subsidiary and which do not constitute
all or substantially all of the assets of any division or line of business of
Stage or any Restricted Subsidiary) at fair market value in the ordinary course
of business, (iii) for purposes of Section 5.07 only, a disposition that
constitutes a Restricted Payment or a Permitted Investment permitted pursuant to
Section 5.05, (iv) a transaction or series of related transactions for which
Stage or its Restricted Subsidiaries receive aggregate consideration of less
than $250,000, (v) contributions, dispositions or other transfers of Receivables
to an Accounts Receivable Subsidiary that is wholly owned, directly or
indirectly, by Stage in exchange for Capital Stock or an increase in paid-in
capital in such Accounts Receivable Subsidiary or sales of Receivables to an
Accounts Receivable
2
<PAGE>
Subsidiary for cash and promissory notes, in each case for consideration having
a value at least equal to 95% of the book value thereof as determined in
accordance with GAAP, and (vi) the disposition of all or substantially all of
the assets of Stage permitted under Article VI.
"ATTRIBUTABLE DEBT" means, in respect of a Sale/Leaseback
Transaction, as at the time of determination, the present value (discounted at
the interest rate borne by the Senior Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"AVERAGE LIFE" means, as of the date of determination, with respect
to any Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of
the products of numbers of years from the date of determination to the dates of
each successive scheduled principal payment of such Debt or redemption or
similar payment with respect to such Preferred Stock multiplied by the amount of
such payment, by (ii) the sum of all such payments.
"BANK DEBT" means all obligations pursuant to the New Credit
Agreement including reimbursement obligations in respect of letters of credit
and interest accruing at the contract rate specified therein on or after the
filing of any petition in bankruptcy or for reorganization relating to Stage or
SRI whether or not post-filing interest is an allowed claim in such proceeding.
"BANKING SUBSIDIARY" means a wholly owned Subsidiary of Stage or a
Subsidiary of a wholly owned Subsidiary of Stage, in each case chartered under
the banking laws of the United States or any state thereof, which engages in
activities permitted by applicable banking laws and the primary purpose of which
is to finance the Receivables arising out of sales of goods and services by
Stage and its Subsidiaries.
"BANKRUPTCY LAW" means title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.
"BEALLS HOLDING JUNIOR SUBORDINATED DEBENTURES" means the 7% Junior
Subordinated Debentures Due 2003 of Bealls Holding, Inc.
"BEALLS HOLDING SUBORDINATED NOTES" means the Subordinated Notes Due
2002 of Bealls Holding, Inc.
"BOARD OF DIRECTORS" means the Board of Directors of Stage or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL LEASE OBLIGATIONS" of any Person means any obligation which
is required to be classified and accounted for as a capital lease on the face of
a balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
3
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"CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in such Person (however designated), including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended.
"CONSOLIDATED EBITDA COVERAGE RATIO" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; PROVIDED, HOWEVER, that (1) if Stage or any Restricted
Subsidiary has Incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated EBITDA Coverage Ratio is an Incurrence of Debt, or both, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been Incurred on
the first day of such period and the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
as if such discharge had occurred on the first day of such period, (2) if since
the beginning of such period Stage or any Restricted Subsidiary shall have made
any Asset Disposition, the EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or increased by an amount
equal to the EBITDA (if negative), directly attributable thereto for such
period, and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Debt of Stage or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to Stage and its continuing Restricted
Subsidiaries in connection with such Asset Dispositions for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Debt of such
Restricted Subsidiary to the extent Stage and its continuing Restricted
Subsidiaries are no longer liable for such Debt after such sale), (3) if since
the beginning of such period Stage or any Restricted Subsidiary (by merger or
otherwise) shall have made an Investment in any Restricted Subsidiary (or any
Person which becomes a Restricted Subsidiary) or an acquisition of assets,
including any acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Debt) as if such Investment or
acquisition occurred on the first day of such period, and (4) if since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into Stage or any Restricted Subsidiary since
the beginning of such period) shall have made any Asset Disposition or any
Investment that would have required an adjustment pursuant to clause (2) or (3)
above if made by Stage or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition or Investment occurred on
the first day of such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto, and the amount of Consolidated Interest Expense
associated with any Debt Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of Stage. If any Debt bears a floating rate of interest and
is being given pro forma effect, the interest of such Debt shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the
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entire period (taking into account any Interest Rate Agreement applicable to
such Debt if such Interest Rate Agreement has a remaining term in excess of 12
months).
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the total
interest expense of Stage and its consolidated Restricted Subsidiaries
(excluding amortization of deferred financing costs), plus, to the extent not
included in such interest expense, (i) interest expense attributable to Capital
Lease Obligations, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs under Hedging Obligations (including amortization of
fees), (vii) Preferred Stock dividends in respect of all Redeemable Stock of
Stage and Preferred Stock dividends payable in cash in respect of all Preferred
Stock held by Persons other than Stage or a Wholly Owned Subsidiary, (viii)
interest incurred in connection with Investments in discontinued operations;
(ix) interest accruing on any Debt of any other Person to the extent such Debt
is Guaranteed by Stage or any of its Restricted Subsidiaries and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than Stage) in connection with Debt Incurred by such plan
or trust.
"CONSOLIDATED NET INCOME" means, for any period, the net income of
Stage and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall not
be included in such Consolidated Net Income (i) any net income of any Person if
such Person is not a Restricted Subsidiary, except that subject to the exclusion
contained in clause (iv) below, Stage's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person during such
period to Stage or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (iii) below); (ii) any net
income of any Person acquired by Stage or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any net
income of any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to
Stage, except that (A) subject to the exclusion contained in clause (iv) below,
Stage's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Restricted Subsidiary during such
period to Stage or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to
another Restricted Subsidiary, to the limitation contained in this clause), and
(B) Stage's equity in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income; (iv) any
gain or loss realized upon the sale or other disposition of any property, plant
or equipment of Stage or its consolidated Subsidiaries (including pursuant to
any sale-and-leaseback arrangement) which is not sold or otherwise disposed of
in the ordinary course of business and any gain or loss realized upon the sale
or other disposition of any Capital Stock of any Person; (v) extraordinary gains
or losses; and (vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 5.05 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
Stage or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted pursuant to
Section 5.05(a)(3)(D).
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"CONSOLIDATED NET WORTH" of any Person means the total of the
amounts shown on the balance sheet of such Person and its consolidated
subsidiaries, determined on a consolidated basis in accordance with GAAP, as of
the end of the most recent fiscal quarter of such Person ending at least 45 days
prior to the taking of any action for the purpose of which the determination is
being made, as (i) the par or stated value of all outstanding Capital Stock of
such Person, plus (ii) paid-in capital or capital surplus relating to such
Capital Stock, plus (iii) any retained earnings or earned surplus, less (A) any
accumulated deficit, (B) any amounts attributable to Redeemable Stock, and (C)
any amounts attributable to Exchangeable Stock.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of
the Trustee specified in Section 14.02 or such other address as to which the
Trustee may give notice to Stage.
"CURRENCY AGREEMENT" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement to which
such Person is a party or a beneficiary.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"CUSTOMARY SECURITIZATION UNDERTAKINGS" means representations,
warranties, covenants and indemnities entered into by Stage or any of its
Restricted Subsidiaries in connection with a Receivables transaction with an
Accounts Receivable Subsidiary and which are reasonably customary in asset
securitization transactions involving accounts, general intangibles or other
rights to payment. All terms and provisions of the Accounts Receivable Facility
shall constitute Customary Securitization Undertakings.
"DEBT" of any Person means, without duplication, (i) the principal
of and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations of such Person and all
obligations of such Person under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business); (iv) all
obligations of such Person for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) all Redeemable
Stock of such Person and, with respect to any Subsidiary of such Person, all
Preferred Stock (the amount of Debt represented thereby shall equal the greater
of its liquidation preference and the redemption, repayment or other repurchase
obligations with respect thereto, but excluding any accrued dividends); (vi) all
Hedging Obligations of such Person; (vii) all obligations of the type referred
to in clauses (i) through (v) of other Persons and all dividends of other
Persons for the payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including by
means of any Guarantee; and (viii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such
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obligation being deemed to be the lesser of the value of such property or assets
or the amount of the obligation so secured. The amount of Debt of any Person at
any date shall be the outstanding balance of such date of all unconditional
obligations as described above and the maximum liability upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date; PROVIDED, HOWEVER, that the amount outstanding at any time of any
Debt Incurred with original issue discount is the face amount of such Debt less
the remaining unamortized portion of the original issue discount of such Debt at
such time as determined in conformity with GAAP.
"DEEMED ASSET VALUE" means 75% of the fair market value, as
determined in good faith by the Board of Directors of Stage, of assets (other
than cash) received by Stage from the issuance or sale of its Capital Stock.
"DEFAULT" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"DESIGNATED SENIOR DEBT" of any Person means (i) the Bank Debt and
(ii) any other Senior Debt of such Person which, at the date of determination,
has an aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $20
million and is specifically designated by such Person in the instrument
evidencing or governing such Senior Debt as "Designated Senior Debt" for
purposes of this Indenture.
"EBITDA" for any period means the sum of Consolidated Net Income
plus Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of Stage,
(b) depreciation expense, (c) amortization expense and (d) all other non-cash
items reducing such Consolidated Net Income (excluding any non-cash items to the
extent it represents an accrual of, or reserve for, cash disbursements for any
subsequent period) less all non-cash items increasing such Consolidated Net
Income, in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of Stage shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same proportion) that the net
income of such Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be divided to Stage by such Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Subsidiary or its stockholders.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE NOTES" means the 9% Senior Subordinated Notes Due 2007 to
be issued pursuant to this Indenture in connection with a Registered Exchange
Offer pursuant to the Registration Rights Agreement.
"EXCHANGEABLE STOCK" means any Capital Stock which is exchangeable
or convertible into another security (other than Capital Stock of Stage which is
neither Exchangeable Stock nor Redeemable Stock).
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"EXPANSION REVOLVING CREDIT FACILITY PROVISIONS" means the
provisions of the New Credit Agreement pursuant to which lenders thereunder have
committed to make available to SRI a reducing revolving credit facility.
"FB HOLDINGS SUBORDINATED NOTES" means the 7% Subordinated Notes Due
2000 of FB Holdings, Inc.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants; (ii) statements and
pronouncements of the Financial Accounting Standards Board; (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession; and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GUARANTEE" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise); or (ii) entered into for purposes of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business or guarantees of obligations of a Subsidiary in the ordinary course of
business if such obligations do not constitute Debt of such Subsidiary or
Customary Securitization Undertakings. The term "Guarantee" used as a verb shall
have a corresponding meaning.
"GUARANTOR" means Stage and each other Person that, pursuant to the
terms of this Indenture, Guarantees the Indenture Obligations.
"GUARANTY" means the guarantee by Stage or a Subsidiary Guarantor of
the Indenture Obligations pursuant to the terms of this Indenture.
"GUARANTY AGREEMENT" means a supplemental indenture, in form
satisfactory to the Trustee, pursuant to which a Guarantor becomes subject to
the applicable terms and conditions of this Indenture.
"HEDGING OBLIGATIONS" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"HOLDER" means the Person in whose name a Note is registered on the
Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be
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deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary.
The term "Incurrence" when used as a noun shall have a correlative meaning.
"INDENTURE" means this Indenture, as amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
"INITIAL NOTES" means the 9% Senior Subordinated Notes Due 2007
issued under this Indenture on or about the date hereof.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect Stage or any Restricted Subsidiary against fluctuations in interest
rates.
"INVESTMENT" in any Person means any loan or advance to, any
acquisition of Capital Stock, equity interest, obligation or other security of,
or capital contribution or other investment in, or any other credit extension to
(including by way of Guarantee of any Debt of), such Person. For purposes of the
definition of "Unrestricted Subsidiary", the definition of "Restricted Payment"
and Section 5.05 of this Indenture, (i) "Investment" shall include the portion
(proportionate to Stage's equity interest in such Subsidiary) of the fair market
value of the net assets of any Subsidiary of Stage at the time that such
Subsidiary is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that if
such designation is made in connection with the acquisition of such Subsidiary
or the assets owned by such Subsidiary, the "Investment" in such Subsidiary
shall be deemed to be the consideration paid in connection with such
acquisition; PROVIDED, FURTHER, HOWEVER, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, Stage shall be deemed to continue to have
a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if
positive) equal to (x) Stage's "Investment" in such Subsidiary at the time of
such redesignation less (y) the portion (proportionate to Stage's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"ISSUE DATE" means the date on which the Notes are originally
issued.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday, payment may be made at that place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period.
"LIEN" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"MASTER TRUST" means a trust organized for the purpose securitizing
Receivables held by an Accounts Receivable Subsidiary that does not engage in
any business other than (a) the purchase of Receivables or participation
interests therein, (b) the issuance and distribution of indebtedness and other
interests in such trust to (i) the Accounts Receivable Subsidiary or (ii) to
other parties for cash or cash equivalents on an arms-length basis, (c) the
servicing of Receivables
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and any indebtedness or interests in such trust and (d) activities ancillary to
the actions described in clauses (a), (b) and (c).
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as
of March 5, 1997, by and between Stage and C.R. Anthony Company.
"NET AVAILABLE CASH" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
properties or assets that are the subject of such Asset Disposition or received
in any other noncash form) therefrom, in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes required to be
accrued as a liability under GAAP, as a consequence of such Asset Disposition;
(ii) all payments made on any Debt which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition;
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition; and (iv) the deduction of appropriate amounts provided by the
sellers as a reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such Asset Disposition
and retained by Stage or any Restricted Subsidiary after such Asset Disposition.
"NET CASH PROCEEDS" means with respect to any issuance or sale of
Capital Stock, the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NEW CREDIT AGREEMENT" means the agreement to be dated June 17, 1997
among SRI, Credit Suisse First Boston, as administrative agent, and the other
lenders party thereto, and their respective successors and assigns, together
with all other instruments, documents and agreements related thereto, as the
same may be amended, supplemented, waived and otherwise modified from time to
time in accordance with the terms thereof, and any agreement (and all other
related instruments, documents and agreements) governing Debt Incurred to
refund, replace or refinance, in whole or in part, the borrowings and
commitments then outstanding or permitted to be outstanding under such New
Credit Agreement or a successor New Credit Agreement, whether by the same or any
other lender or group of lenders.
"NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible common
stock of such corporation; PROVIDED, HOWEVER, that Non-Convertible Capital Stock
shall not include any Redeemable Stock or Exchangeable Stock.
"NOTES" means the Initial Notes, the Exchange Notes and the Private
Exchange Notes, treated as a single class.
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"OFFICER" means with respect to any Person the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, Controller, Secretary or any
Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of a
Person by two Officers of such Person, one of whom must be the principal
executive officer, principal financial officer, treasurer or principal
accounting officer of such Person.
"OPINION OF COUNSEL" means a written opinion from legal counsel, who
may be an employee of or counsel to Stage or the Trustee.
"PERMITTED INVESTMENT" means an Investment by Stage or any
Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is reasonably
related to the business of Stage; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, Stage or a
Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's primary business is
reasonably related to the business of Stage; (iii) Temporary Cash Investments;
(iv) receivables owing to Stage or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; PROVIDED, HOWEVER, that such trade terms
may include such concessionary trade terms as Stage or any such Restricted
Subsidiary deems reasonable under the circumstances; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business consistent with past practices of Stage or such
Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to
Stage or any Restricted Subsidiary or in satisfaction of judgments; (viii) other
Investments in an aggregate amount not to exceed $5 million; (ix) Investments in
an Accounts Receivable Subsidiary received in consideration of contributions or
sales of Receivables permitted pursuant to clause (v) of the definition of
"Asset Disposition;" (x) Investments in a Banking Subsidiary in an aggregate
amount not to exceed $10 million; (xi) Investments in an Accounts Receivable
Subsidiary in an aggregate amount not to exceed the amount of dividends and
other distributions made to Stage or any of its Restricted Subsidiaries from
such Accounts Receivable Subsidiary; PROVIDED, HOWEVER, that the amount of such
Investments actually made shall reduce the amount included in the calculation
made pursuant to Section 5.05(a)(3)(D) to the extent that the amount of
dividends and other distributions by the Accounts Receivable Subsidiary to which
such Investments relate shall have otherwise increased the amount included in
the calculation made pursuant to Section 5.05(a)(3)(D); and (xii) any Person to
the extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to the covenant
described under Section 5.07.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or
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dissolution of such corporation, over shares of Capital Stock of any other class
of such corporation.
"PRIVATE EXCHANGE" means the offer by SRI, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
the Initial Purchasers, in exchange for the Initial Notes held by the Initial
Purchasers as part of their initial distribution, a like aggregate principal
amount of Private Exchange Notes.
"PRIVATE EXCHANGE NOTES" means the 9% Senior Subordinated Notes Due
2007 to be issued pursuant to this Indenture in connection with a Private
Exchange effected pursuant to the Registration Rights Agreement.
"PUBLIC EQUITY OFFERING" means an underwritten primary public
offering of common stock of Stage pursuant to an effective registration
statement under the Securities Act.
"RECEIVABLES" means accounts, general intangibles or other rights to
payment from obligors arising from extension of credit to obligors, together
with any financing charges or other fees or charges related thereto, and any
related assets which are transferred under the Accounts Receivable Facility or
which are customarily transferred in connection with asset securitization
transactions involving accounts, general intangibles or other rights to payment.
"REDEEMABLE STOCK" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated Maturity
of the Notes.
"REFINANCE" means, in respect of any Debt, to refinance, extend,
renew, refund, repay, prepay, redeem, defease, exchange or retire, or to issue
other Debt in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"REFINANCING DEBT" means Debt that Refinances any Debt of Stage or
any Restricted Subsidiary existing on the Issue Date or Incurred in compliance
with the Indentures including Debt that Refinances Refinancing Debt; PROVIDED,
HOWEVER, that (i) such Refinancing Debt has a Stated Maturity no earlier than
the Stated Maturity of the Debt being Refinanced; (ii) such Refinancing Debt has
an Average Life at the time such Refinancing Debt is Incurred that is equal to
or greater than the Average Life of the Debt being Refinanced; (iii) such
Refinancing Debt has an aggregate principal amount (or if Incurred with original
issue discount, an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue discount, the
aggregate accredited value) then outstanding or committed (plus fees and
expenses, including any premium and defeasance costs) under the Debt being
Refinanced; and (iv) with respect to any Refinancing Debt of Debt other than
Senior Debt, such Refinancing Debt shall rank no more senior, and shall be at
least as subordinated, in right of payment to the Notes as the Debt being so
extended, renewed, refunded or refinanced; PROVIDED, FURTHER, HOWEVER, that
Refinancing Debt shall not include (x) Debt of a Subsidiary that Refinances Debt
of Stage, or (y) Debt of Stage or a Restricted Subsidiary that Refinances Debt
of an Unrestricted Subsidiary.
"REGISTERED EXCHANGE OFFER" means an offer by SRI, pursuant to the
Registration Rights Agreement, to certain Holders of Initial Notes, to issue and
deliver to such Holders, in
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exchange for the Initial Notes, a like aggregate principal amount of Exchange
Notes registered under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated June 11, 1997 among SRI, Stage and the Initial Purchasers.
"REPRESENTATIVE" means any trustee, agent or representative (if any)
for an issue of Senior Debt.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee,
any officer within the Corporate Trust Department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers.
"RESTRICTED SUBSIDIARY" means any Subsidiary of Stage that is not an
Unrestricted Subsidiary, and in all cases shall include SRI.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to
property now owned or hereafter acquired whereby Stage or a Restricted
Subsidiary transfers such property to a Person and Stage or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"SECURED DEBT" means any Debt of Stage or any Guarantor secured by a
Lien.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" of any Person means (I) (i) Debt of such Person,
whether outstanding on the Issue Date or thereafter Incurred and (ii) accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to such Person to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the applicable
Notes; PROVIDED, HOWEVER, that Senior Debt shall not include (1) any obligation
of such Person to any subsidiary of such Person, (2) any liability for Federal,
state, local or other taxes owed or owing by such Person, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Debt of such Person (and any accrued and unpaid interest
in respect thereof) which is subordinate or junior in any respect to any other
Debt or other obligation of such Person, (5) that portion of any Debt which at
the time of Incurrence is Incurred in violation of an Indenture, (6) Debt owed
to, due, or guaranteed on behalf of, any director, officer or employee of such
Person or any subsidiary of such Person (including, without limitation, amounts
owed for compensation), and (7) Debt which when Incurred and without respect to
any election under Section 1111(b) of Title 11 United States Code, is without
recourse to such Person and (II) the Bank Debt.
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"SENIOR NOTES" means the $200 million aggregate principal amount of
8 1/2% Senior Notes Due 2005 of SRI issued pursuant to the Indenture, dated as
of the date hereof, among SRI, Stage and State Street Bank and Trust Company as
trustee.
"SENIOR SUBORDINATED DEBT" means (i) with respect to SRI, any Debt
of SRI that specifically provides that such Debt is to rank PARI PASSU with the
Notes in right of payment and is not subordinated by its terms in right of
payment to any Debt or other obligation of SRI which is not Senior Debt of SRI
and (ii) with respect to any Guarantor, any Debt of such Person that
specifically provides that such Debt ranks PARI PASSU with the Guaranty of such
Person in right of payment and is not subordinated by its terms in right of
payment to any Debt or other obligation of such Person which is not Senior Debt
of such Person.
"SHELF REGISTRATION STATEMENT" means the registration statement
issued by SRI in connection with the offer and sale of Initial Notes or Private
Exchange Notes, pursuant to the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" of any Person means any Restricted
Subsidiary that would be a "significant subsidiary" of such Person as defined in
Rule 1-02 of Regulation S-X, promulgated by the SEC.
"STATED MATURITY" means with respect to any security the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"SUBORDINATED OBLIGATION" of any Person means any Debt of such
Person (whether outstanding on Issue Date or hereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement, including, without limitation, the Bealls Holding Subordinated Notes,
the FB Holdings Subordinated Notes and the Bealls Holding Junior Subordinated
Debentures.
"SUBSIDIARY" means any corporation, association, partnership or
other business entity of which more than 50% of the total voting power of shares
of Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) Stage; (ii) Stage and one or more Subsidiaries;
or (iii) one or more Subsidiaries.
"SUBSIDIARY GUARANTOR" means each Subsidiary that becomes a
Guarantor pursuant to the terms of this Indenture.
"TANGIBLE PROPERTY" means all land, buildings, machinery and
equipment and leasehold interests and improvements which would be reflected on a
balance sheet of Stage prepared in accordance with generally accepted accounting
principles, excluding (i) all rights, contracts and other intangible assets of
any nature whatsoever; and (ii) all inventories and other current assets.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed
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by the United States of America or any agency thereof or in a money market
mutual fund registered under the Investment Company Act of 1940, the principal
of which is invested solely in such direct or guaranteed obligations, (ii)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States, and which bank or trust company has capital, surplus and undivided
profits aggregating in excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above and
(iv) investments in commercial paper, maturing not more than 90 days after the
date of acquisition, issued by a corporation (other than an Affiliate of Stage)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investor Service, Inc. or "A-1" (or higher) according to Standard &
Poor's Ratings Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TOTAL ASSETS" means the total consolidated assets of Stage and its
Subsidiaries, as shown on the most recent balance sheet of Stage.
"TRANSFER RESTRICTED NOTES" means Notes that bear or are required to
bear the legend set forth in Section 2.06(d).
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture, and
thereafter such term shall mean such successor serving hereunder.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of Stage that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; (ii) any Subsidiary of an
Unrestricted Subsidiary and (iii) any Accounts Receivable Subsidiary. The Board
of Directors may designate any Subsidiary of Stage (including any newly acquired
or newly formed Subsidiary), to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries own any Capital Stock or Debt of, or holds
any Lien on any property of, Stage or any other Subsidiary of Stage that is not
a Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets of greater than $1,000, such designation
would be permitted pursuant to Section 5.05; and PROVIDED, FURTHER, HOWEVER,
that (1) no Subsidiary of Stage that is a Restricted Subsidiary on the Issue
Date may be designated an Unrestricted Subsidiary and (2) no Subsidiary holding,
directly or indirectly, any assets held by
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Stage or a Restricted Subsidiary on the Issue Date may be designated an
Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (x) Stage could Incur $1.00 of
additional Debt pursuant to Section 5.04(a) and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be by Stage to the Trustee by promptly filing with the Trustee a copy of the
board resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing provisions.
"VOTING STOCK" of a corporation means all classes of Capital Stock
of such corporation then outstanding and normally entitled (without regard to
any contingency) to vote in the election of directors.
"WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares) is owned by
Stage or another Wholly Owned Subsidiary.
"WORKING CAPITAL FACILITY PROVISIONS" means the provisions of the
New Credit Agreement pursuant to which lenders thereunder have committed to make
available to SRI and certain other Subsidiaries a revolving credit and letter of
credit facility.
Section 1.02. OTHER DEFINITIONS.
DEFINED IN
TERM ARTICLE/SECTION
"AFFILIATE TRANSACTION".................... Section 5.08
"AGENT MEMBER"............................. Section 2.01
"BLOCKAGE NOTICE".......................... Section 11.03
"CHANGE OF CONTROL"........................ Article IV
"COVENANT DEFEASANCE"...................... Section 9.01
"DEFAULT AMOUNT"........................... Section 7.02
"EVENT OF DEFAULT"......................... Section 7.01
"GLOBAL NOTE".............................. Section 2.01
"GUARANTOR BLOCKAGE NOTICE"................ Section 13.03
"GUARANTOR OBLIGATIONS".................... Section 13.01
"GUARANTOR PAYMENT BLOCKAGE PERIOD"........ Section 13.03
"GUARANTOR PROCEEDING"..................... Section 13.02
"GUARANTOR SENIOR PAYMENT DEFAULT"......... Section 13.03
"GUARANTOR SENIOR NONMONETARY DEFAULT"..... Section 13.03
"GUARANTY PAYMENT"......................... Section 13.02
"INDENTURE OBLIGATIONS".................... Section 12.01
"INITIAL PURCHASERS"....................... Section 2.01
"LEGAL DEFEASANCE"......................... Section 9.01
"NOTE REGISTER"............................ Section 2.03
"NOTES PAYMENT"............................ Section 11.02
"OFFER".................................... Section 5.07
"OFFER AMOUNT"............................. Section 5.07
"OFFER PERIOD"............................. Section 5.07
"PAYING AGENT"............................. Section 2.03
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"PARENT CORPORATION"....................... Article IV
"PAYMENT BLOCKAGE"......................... Section 11.03
"PAYMENT DEFAULT".......................... Section 7.01
"PROCEEDING"............................... Section 11.02
"PURCHASE AGREEMENT"....................... Section 2.01
"PURCHASE DATE"............................ Section 5.07
"QIB"...................................... Section 2.01
"REGISTRAR"................................ Section 2.03
"REGULATION S"............................. Section 2.01
"RESTRICTED PAYMENT"....................... Section 5.05
"RULE 144A"................................ Section 2.01
"SENIOR NONMONETARY DEFAULT"............... Section 11.03
"SENIOR PAYMENT DEFAULT"................... Section 11.03
"SPECIFIED CORPORATION".................... Article IV
"SUCCESSOR COMPANY"........................ Section 6.01
Section 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
(i) "INDENTURE SECURITIES" means the Notes;
(ii) "INDENTURE SECURITY HOLDER" means a Noteholder;
(iii) "INDENTURE TO BE QUALIFIED" means this Indenture;
(iv) "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee;
(v) "OBLIGOR" upon the Notes means SRI and any successor obligor
upon the Notes.
All other terms used in this Indenture that are (i) defined by the
TIA; (ii) defined by TIA reference to another statute; or (iii) defined by SEC
rule under the TIA have the meanings so assigned to them.
Section 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) the word "or" shall not be deemed to be exclusive;
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(iv) words in the singular include the plural, and words in the
plural include the singular; and
(v) provisions apply to successive events and transactions.
ARTICLE II
THE NOTES
Section 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Exchange Notes, the
Private Exchange Notes and the Trustee's certificate of authentication shall be
substantially in the form of EXHIBIT B, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Notes may have such
notations, legends or endorsements approved as to form by SRI and required, as
applicable, by law, stock exchange rule, agreements to which SRI is subject
and/or usage. Each Note shall be dated the date of its authentication. The Notes
shall be issuable only in denominations of $1,000 and integral multiples
thereof. The terms of the Notes set forth in EXHIBIT A and EXHIBIT B are part of
the terms of this Indenture.
The Notes are being offered and sold by SRI pursuant to a Purchase
Agreement (the "PURCHASE AGREEMENT"), dated June 11, 1997, among SRI, Stage and
Credit Suisse First Boston Corporation, Bear, Stearns & Co. Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation as Initial Purchasers (the "INITIAL
PURCHASERS").
(a) GLOBAL NOTES. The Notes offered and sold to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) (a
"QIB") in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, shall be issued initially in the form of
one permanent global Note in definitive, fully registered form without interest
coupons with the global Note legend and restricted Note legend set forth in
Exhibit A hereto (the "Global Note"), which shall be deposited on behalf of the
purchasers of the Notes represented thereby with the Trustee, as custodian for
the Depository (or with such other custodian as the Depository may direct), and
registered in the name of the Depository or a nominee of the Depository, duly
executed by SRI and Stage and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Note may from time to
time be increased or decreased by adjustments made on the records of the Trustee
and the Depository or its nominee as hereinafter provided.
(b) BOOK-ENTRY PROVISIONS. This Section 2.01(b) shall apply only to
the Global Note deposited with or on behalf of the Depository.
SRI and Stage shall execute and the Trustee shall, in accordance
with this Section 2.01(b), authenticate and deliver initially one Global Note
that (a) shall be registered in the name of the Depository or the nominee of the
Depository and (b) shall be delivered by the Trustee to the Depository or
pursuant to the Depository's instructions or held by the Trustee as custodian
for the Depository.
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Members of, or participants in, the Depository ("AGENT MEMBERS")
shall have no rights under this Indenture with respect to the Global Note held
on their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Note, and the Depository may be treated by
Stage, the Trustee and any agent of SRI or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent SRI, the Trustee or any agent of SRI or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices of such Depository governing the
exercise of the rights of a holder of a beneficial interest in the Global Note.
(c) CERTIFICATED NOTES. Except as provided in Section 2.06 or 2.09,
owners of beneficial interests in the Global Note will not be entitled to
receive physical delivery of certificated Notes. Certificated Notes will bear
the restricted securities legend set forth on EXHIBIT A unless removed in
accordance with Section 2.06(d).
Section 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of SRI shall sign the Notes for SRI by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time such Note is authenticated such Note shall be valid
nevertheless.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that a Note has been authenticated in accordance with the terms of this
Indenture.
The Trustee, upon a written order of SRI set forth in an Officers'
Certificate, shall authenticate and deliver (1) Notes for original issue in an
aggregate principal amount of $100,000,000, and (2) Exchange Notes or Private
Exchange Notes for issue only in a Registered Exchange Offer or a Private
Exchange, respectively, pursuant to the Registration Rights Agreement, for a
like principal amount of Notes. Such order shall specify the amount of the Notes
to be authenticated, the date on which the original issue of Notes is to be
authenticated and whether the Notes are to be Initial Notes, Exchange Notes or
Private Exchange Notes. The aggregate principal amount of Notes outstanding at
any time may not exceed $100,000,000 except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to SRI to
authenticate the Notes. Unless limited by the terms of such appointment, any
such authenticating agent may authenticate the Notes whenever the Trustee may do
so. Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent of the Trustee. An authenticating
agent has the same rights as an Agent to deal with SRI or an Affiliate of SRI.
Section 2.03. REGISTRAR AND PAYING AGENT.
SRI shall maintain (i) an office or agency where the Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "REGISTRAR"); and (ii) an office or agency where the Notes may
be presented for payment ("PAYING AGENT"). The Registrar shall keep a register
of the Holders of Notes and of the transfer and exchange of such Notes (the
"NOTE REGISTER"). SRI may appoint one or more co-registrars and one or more
additional paying
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agents. The term "Paying Agent" shall include any such additional paying agent.
SRI may change any Paying Agent, Registrar or co-registrar without prior notice
to any Holder of a Note. SRI shall notify the Trustee and the Trustee shall
notify the Holders of the Notes of the name and address of any Agent not a party
to this Indenture. SRI or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar. SRI shall enter
into an appropriate agency agreement with any Agent not a party to this
Indenture, which shall incorporate the provisions of the TIA. Any such agency
agreement shall implement the provisions of this Indenture that relate to such
Agent. If SRI fails to maintain a Registrar or Paying Agent, or fails to give
the foregoing notice, the Trustee shall act as such, as appropriate, and shall
be entitled to appropriate compensation in accordance with Section 8.07.
SRI initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes in
accordance with Section 5.02.
Section 2.04PAYING AGENT TO HOLD MONEY IN TRUST.
On or prior to each due date of the principal of, premium, if any,
and interest on any Note, SRI shall deposit with the Paying Agent a sum
sufficient to pay such principal, premium, if any, and interest when so becoming
due. SRI shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of the Holders
of the Notes or the Trustee all money held by the Paying Agent for the payment
of principal of, premium, if any, and interest on the Notes, and shall notify
the Trustee of any Default by SRI in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. SRI at any time may require a Paying Agent to pay all
money held by it to the Trustee. Upon payment over to the Trustee, the Paying
Agent (if other than SRI) shall have no further liability for the money
delivered to the Trustee. If SRI acts as Paying Agent, it shall segregate and
hold in a separate trust fund for the benefit of the Holders of the Notes all
money held by it as Paying Agent.
Section 2.05. LISTS OF HOLDERS OF NOTES.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders of Notes. If the Trustee is not the Registrar, SRI shall furnish to
the Trustee at least three Business Days before each interest payment date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Notes, including the aggregate principal amount of
Notes held by each such Holder of Notes.
Section 2.06. TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF CERTIFICATED NOTES. Certificated Notes
shall be issued in registered form and shall be transferable only upon the
surrender of certificated Notes for registration of transfer. When certificated
Notes are presented to the Registrar with a request to register the transfer or
to exchange them for an equal principal amount of certificated Notes of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; PROVIDED, HOWEVER, that any
certificated Notes presented or surrendered for registration of transfer or
exchange:
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(i) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar and the Trustee duly
executed by the Holder thereof or by his attorney duly authorized in
writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.06(b) or pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:
(A) if such certificated Notes are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect
(in the form set forth on the reverse of the Note); or
(B) if such certificated Notes are being transferred to SRI a
certification to that effect (in the form set forth on the reverse
of the Note); or
(C) if such certificated Notes are being transferred pursuant
to an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act: (i) a certificate to that
effect (in the form set forth on the reverse of the Note), and (ii)
if SRI or Registrar so requests, evidence reasonably satisfactory to
them as to the compliance with the restrictions set forth in the
legend set forth in Section 2.06(d)(i).
(b) RESTRICTIONS ON TRANSFER OF A CERTIFICATED NOTE FOR A BENEFICIAL
INTEREST IN THE GLOBAL NOTE. A certificated Note may not be exchanged for a
beneficial interest in the Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a certificated
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the Note,
that such certificated Note is being transferred to a QIB in accordance
with Rule 144A under the Securities Act or to a non-U.S. person in
accordance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to
direct the Notes Custodian to make, an adjustment on its books and records
with respect to such Global Note to reflect an increase in the aggregate
principal amount of the Notes represented by the Global Note,
then the Trustee shall cancel such certificated Note and cause, or direct the
Notes Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Notes Custodian, the
aggregate principal amount of Notes represented by the Global Note to be
increased accordingly. If no Global Note is then outstanding, SRI shall issue
and the Trustee shall authenticate, upon written order of SRI in the form of an
Officers' Certificate, a new Global Note in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES.
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(i) The transfer and exchange of the Global Note or beneficial
interests therein shall be effected through the Depository, in accordance
with this Indenture (including applicable restrictions on transfer set
forth herein, if any) and the procedures of the Depository therefor, if
applicable.
(ii) Notwithstanding any other provisions of this Indenture (other
than the provisions set forth in Section 2.09), the Global Note may not be
transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(iii) In the event that the Global Note is exchanged for Notes in
definitive form pursuant to Section 2.09, prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Notes, such Notes may be exchanged only in
accordance with such procedures as are substantially consistent with the
provisions of this Section 2.06 (including the certification requirements
set forth on the reverse of the Notes intended to ensure that such
transfers comply with Rule 144A or Regulation S, as the case may be) and
such other procedures as may from time to time be adopted by SRI.
(d) LEGEND.
(i) Except as permitted by the following paragraphs (ii) and (iii)
each Note certificate evidencing the Global Note and any certificated
Notes (and all Notes issued in exchange therefor or substitution thereof)
shall bear a legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND UNDER APPLICABLE STATE
SECURITIES LAWS, AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF SRI THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (i) THROUGH (iv) IN ACCORDANCE
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WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO
IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by the Global Note)
pursuant to Rule 144 under the Securities Act in the case of any Transfer
Restricted Note that is represented by the Global Note, the Registrar
shall permit the Holder thereof to request the issuance of a certificated
Note that does not bear the legend set forth above and rescind any
restrictions on the transfer of such Transfer Restricted Note, if the sale
or exchange was made in reliance on Rule 144 and the Holder certifies to
that effect in writing to the Registrar (such certification to be in the
form set forth on the reverse of the Note).
(iii) After a transfer of any Notes or Private Exchange Notes during
the period of the effectiveness of a Shelf Registration Statement with
respect to such Notes or Private Exchange Notes, as the case may be, all
requirements pertaining to legends on such Note or such Private Exchange
Note will cease to apply, the requirements requiring any such Note or such
Private Exchange Note issued to certain Holders be issued in global form
will cease to apply, and a certificated Note or Private Exchange Note
without legends will be available to the transferee of the Holder of such
Notes or Private Exchange Notes or upon receipt of directions to transfer
such Holder's interest in the Global Note, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Notes pursuant to which Holders of such Notes are offered
Exchange Notes in exchange for their Notes, all requirements pertaining to
such Notes that Notes issued to certain Holders be issued in global form
will cease to apply and certificated Notes with the restricted securities
legend set forth in Exhibit A hereto will be available to Holders of such
Notes that do not exchange their Notes and Exchange Notes in certificated
form will be available to Holders that exchange such Notes in such
Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to
the Notes pursuant to which Holders of such Notes are offered Private
Exchange Notes in exchange for their Notes, all requirements pertaining to
such Notes that Notes issued to certain holders be issued in global form
will still apply, and Private Exchange Notes in global form with the
restricted securities legend set forth in Exhibit A hereto will be
available to Holders that exchange such Notes in such Private Exchange.
(e) CANCELLATION OR ADJUSTMENT OF GLOBAL NOTE. At such time as all
beneficial interests in the Global Note have either been exchanged for
certificated Notes, redeemed, repurchased or cancelled, such Global Note shall
be returned to the Depository for cancellation or retained and cancelled by the
Trustee. At any time prior to such cancellation, if any beneficial interest in
the Global Note is exchanged for certificated Notes, redeemed, repurchased or
cancelled, the principal amount of Notes represented by such Global Note shall
be reduced and an adjustment shall be made by the Trustee or the Notes Custodian
to reflect such reduction on the books and records of the Notes Custodian for
such Global Note with respect to such Global Note.
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(f) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF NOTES.
(i) To permit registration of transfers and exchanges, SRI and
Stage shall execute and the Trustee shall authenticate certificated
Notes and the Global Note at the Registrar's or co-registrar's
request.
(ii) SRI may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with
any transfer or exchange pursuant to this Section 2.06.
(iii) SRI shall not be required to make and the Registrar or
co-registrar need not register transfers or exchanges of
certificated Notes selected for redemption (except, in the case of
any certificated Note to be redeemed in part, the portion thereof
not to be redeemed), or any Notes for a period of 15 days before a
selection of Notes to be redeemed or 15 days before an interest
payment date.
(iv) Prior to the due presentation for registration of
transfer of any Note, SRI, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose
name a Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such
Note and for all other purposes whatsoever, whether or not such Note
is overdue, and none of SRI, the Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the
contrary.
(v) All Notes issued upon any transfer or exchange pursuant to
the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Notes
surrendered upon such transfer or exchange.
(g) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of the Global Note, a member of, or a
participant in the Depository or other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member thereof, with respect to any ownership
interest in the Notes or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than
the Depository) of any notice (including any notice of redemption)
or the payment of any amount, under or with respect to such Notes.
All notices and communications to be given to the Holders and all
payments to be made to Holders under the Notes shall be given or
made only to or upon the order of the registered Holders (which
shall be the Depository or its nominee in the case of the Global
Note). The rights of beneficial owners in the Global Note shall be
exercised only through the Depository subject to the applicable
rules and procedures of the Depository. The Trustee may rely and
shall be fully protected in relying upon information furnished by
the Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with
respect to any transfer of any interest in
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any Note (including any transfers between or among Depository
participants, members or beneficial owners in the Global Note) other
than to make any required delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and
to examine the same to determine substantial compliance as to form
with the express requirements hereof.
Section 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or SRI and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Note, SRI shall issue, Stage shall execute and the Trustee shall
authenticate a replacement Note if SRI's and the Trustee's reasonable
requirements for the replacements of Notes are met. If required by the Trustee
or SRI, an indemnity bond shall be supplied by the Holder that is sufficient in
the judgment of the Trustee, SRI and Stage to protect SRI, Stage, the Trustee,
any Agent or any authenticating agent from any loss which any of them may suffer
if a Note is replaced.
Every replacement Note shall be an obligation of SRI.
Section 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee, except for those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding. A Note
does not cease to be outstanding because Stage, a Subsidiary of Stage or an
Affiliate of Stage holds such Note.
If a Note is replaced pursuant to Section 2.07, it shall cease to be
outstanding unless the Trustee receives proof satisfactory to it that such
replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be
outstanding upon surrender of such Note and replacement thereof pursuant to
Section 2.07.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the Notes
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Holders of Notes on
that date pursuant to the terms of this Indenture, then on and after that date
such Notes (or portions thereof) shall cease to be outstanding and interest
thereon shall cease to accrue.
Section 2.09. TEMPORARY NOTES AND CERTIFICATED NOTES.
(a) Until definitive Notes are ready for delivery, SRI may prepare,
SRI shall execute and the Trustee shall authenticate temporary Notes. Temporary
Notes shall be substantially in the form of definitive Notes but may have such
variations as SRI and the Trustee consider appropriate for temporary Notes.
Without unreasonable delay, SRI shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes. Until such exchange, temporary
Notes shall be entitled to the same rights, benefits and privileges as
definitive Notes.
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(b) The Global Note deposited with the Depository or with the
Trustee as custodian for the Depository pursuant to Section 2.01 shall be
transferred to the beneficial owners thereof in the form of certificated Notes
in an aggregate principal amount equal to the principal amount of such Global
Note, in exchange for such Global Note, only if such transfer complies with
Section 2.06 and (i) the Depository notifies SRI that it is unwilling or unable
to continue as Depository for such Global Note or if at any time such Depository
ceases to be a "clearing agency" registered under the Exchange Act and a
successor depository is not appointed by SRI within 90 days of such notice, (ii)
an Event of Default has occurred and is continuing or (iii) SRI, in its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of certificated Notes under this Indenture.
(c) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to State
Street Bank and Trust Company, N.A., an Affiliate of the Trustee located in the
Borough of Manhattan, The City of New York, to be so transferred, in whole or
from time to time in part, without charge, and the Trustee shall authenticate
and deliver, upon such transfer of each portion of such Global Note, an equal
aggregate principal amount of Notes of authorized denominations. Any portion of
the Global Note transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depository shall direct.
Any Note delivered in exchange for an interest in the Global Note shall, except
as otherwise provided by Section 2.06(d), bear the restricted securities legend
set forth in Exhibit A hereto.
(d) Subject to the provisions of Section 2.09(c), the registered
Holder of the Global Note may grant proxies and otherwise authorize any person,
including agent members, participants and persons that may hold interests
through agent members, to take any action which a Holder is entitled to take
under this Indenture or the Notes.
(e) In the event of the occurrence of any of the events specified in
Section 2.09(b), SRI will promptly make available to the Trustee a reasonable
supply of certificated Notes in definitive, fully registered form without
interest coupons.
Section 2.10. CANCELLATION.
SRI at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation, and shall destroy such
cancelled Notes (subject to the record retention requirement of the Exchange
Act), and, upon the request of SRI, deliver a certificate of such destruction to
SRI, unless SRI directs cancelled Notes to be returned to them. SRI may not
issue new Notes to replace Notes it has redeemed paid or delivered to the
Trustee for cancellation.
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Section 2.11. DEFAULTED INTEREST.
If SRI defaults in a payment of interest on the Notes, SRI shall pay
such defaulted interest in any lawful manner. SRI may pay such defaulted
interest to the Persons who are Holders of the Notes on a subsequent special
record date, which date shall be at the earliest practicable date but in all
events at least five Business Days prior to the payment date, in each case at
the rate provided in the Notes. SRI shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days prior to the special
record date, SRI shall mail or cause to be mailed to each Holder of a Note a
notice that states such special record date, such related payment date and the
amount of any such defaulted interest to be paid to Holders of the Notes.
Section 2.12. CUSIP NUMBER.
SRI in issuing the Notes may use a "CUSIP" number, and, if SRI shall
do so, the Trustee shall use such CUSIP number in notices of redemption or
exchange as a convenience to Holders; PROVIDED, HOWEVER, that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in such notice or on the Notes and that reliance may be
placed only on the other identification numbers printed on the Notes. SRI will
notify the Trustee of any change in a CUSIP number.
ARTICLE III
REDEMPTION
Section 3.01. NOTICES TO TRUSTEE.
If SRI elects to redeem Notes pursuant to paragraph 5 of the Notes,
SRI shall notify the Trustee in writing of the redemption date, the principal
amount of Notes to be redeemed and the paragraph of the Notes pursuant to which
the redemption will occur.
SRI shall give each notice to the Trustee provided for in this
Section 3.01 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from SRI to the effect that such
redemption will comply with the conditions herein. If fewer than all of the
Notes are to be redeemed, the record date relating to such redemption shall be
selected by SRI and given to the Trustee, which record date shall not be less
than 15 days after the date of notice to the Trustee, unless the Trustee
consents to a shorter period.
Section 3.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed pro rata or by lot or by a method that complies
with applicable legal, securities exchange and Depository Trust Company
requirements, if any, and that the Trustee in its sole discretion considers to
be fair and appropriate. The Trustee shall make the selection from outstanding
Notes not previously called for redemption. The Trustee may select for
redemption portions of the principal of Notes that have denominations larger
than $1,000. Notes and portions of Notes the Trustee selects shall be in amounts
of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply
to Notes called for redemption also apply to portions of
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Notes called for redemption. The Trustee shall notify SRI promptly of the Notes
or portions of Notes to be redeemed.
Section 3.03. NOTICE OF REDEMPTION.
SRI shall at least 30 days but not more than 60 days before a
redemption date mail or cause to be mailed, by first class-mail, a notice of
redemption to each Holder of Notes which are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price,
(iii) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed, and that after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued;
(iv) the name and address of the Paying Agent;
(v) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(vi) that, unless SRI defaults in making such redemption payment or
the Paying Agent is prohibited from making such payment pursuant to the terms of
this Indenture, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(vii) the paragraph of the Notes and/or the Section of this
Indenture pursuant to which the Notes called for redemption are being redeemed;
and
(viii)that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At SRI's request, at least five Business Days prior to the date upon
which such notice is to be mailed unless the Trustee consents to a shorter
period, the Trustee shall give the notice of redemption in SRI's name and at
SRI's expense. In such event, SRI shall provide the Trustee with the information
required by this Section 3.03.
Section 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption shall become due and payable on the redemption date
and at the redemption price stated in such notice of redemption. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
such notice of redemption, plus accrued interest to the redemption date. Failure
to give notice to a Holder of a Note or any defect in any notice shall not
affect the validity of any notice to any other Holder of a Note.
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Section 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to any redemption date, SRI shall deposit with the
Paying Agent (or, if SRI or a Subsidiary is the Paying Agent, shall segregate
and hold in trust) money sufficient to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date. The Trustee or the Paying
Agent shall promptly return to SRI any money deposited with the Trustee or the
Paying Agent by SRI in excess of the amounts necessary to pay the redemption
price of, and accrued interest on, all Notes to be redeemed on that date other
than Notes or portions of Notes called for redemption which have been delivered
by SRI to the Trustee for cancellation.
Section 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, SRI shall issue
and the Trustee shall authenticate for the Holder of the Notes (at the expense
of SRI) a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
ARTICLE IV
CHANGE OF CONTROL
(a) Upon the occurrence of a Change of Control (as defined below),
each Holder of a Note shall have the right to require SRI to repurchase such
Holder's Notes at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest (if any) to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
(b) The occurrence of any of the following events shall constitute a
"CHANGE OF CONTROL" under this Indenture:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall
be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
more than 35% of the total voting power of the Voting Stock of Stage;
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of Stage
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of Stage was approved
by a majority of the directors of Stage 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 the Board of Directors of Stage then in
office;
(iii) the merger or consolidation of Stage or SRI with or into
another Person or the merger of another Person with or into Stage or SRI,
as the case may be, or the sale or transfer in one or a series of
transactions of all or substantially all the assets of Stage
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or SRI, as the case may be, to another Person, and, in the case only of
any such merger or consolidation, the securities of Stage or SRI, as the
case may be, that are outstanding immediately prior to such transaction
and which represent 100% of the aggregate voting power of the Voting Stock
of Stage or SRI, as the case may be, are changed into or exchanged for
cash, securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving corporation that represent
immediately after such transaction, at least a majority of the aggregate
voting power of the Voting Stock of the surviving corporation; PROVIDED,
HOWEVER, that the merger or consolidation of Stage with or into SRI or the
merger or consolidation of SRI with or into Stage shall not be deemed a
Change of Control; or
(iv) Stage shall hold, directly or indirectly, less than 100% of the
Capital Stock of SRI or less than 100% of the Voting Stock of SRI; and
PROVIDED, FURTHER, that a Change of Control shall occur if at any time
that Stage does not directly hold such Capital Stock or Voting Stock of
SRI, the entity holding such Capital Stock or Voting Stock of SRI shall
not be a Restricted Subsidiary and a Subsidiary Guarantor.
(c) Within 30 days following any Change of Control, SRI shall mail a
notice to each Holder with a copy to the Trustee stating: (i) that a Change of
Control has occurred and that such Holder has the right to require SRI to
purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest on the relevant interest payment date); (ii) the
material circumstances and facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization, each after giving effect to such Change of Control); (iii) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed in the event of a Change of Control); and
(iv) the instructions determined by SRI, consistent with the covenant described
hereunder, that a Holder must follow in order to have its Notes purchased.
(d) SRI shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Article IV. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Article IV, SRI shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Article IV by virtue thereof.
ARTICLE V
COVENANTS
Section 5.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
SRI shall duly and punctually pay the principal of (and premium, if
any) and interest on the Notes in accordance with the terms of this Indenture
and the Notes.
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Section 5.02. MAINTENANCE OF OFFICE OR AGENCY.
SRI shall maintain an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
notices and demands to or upon SRI or any Guarantor in respect of the Notes and
this Indenture may be served. SRI shall give prompt written notice to the
Trustee of the location, and any change in such location, of such office or
agency. If at any time SRI shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
SRI also from time to time may designate one or more additional
offices or agencies for any or all such purposes and from time to time may
rescind any such designation; PROVIDED, HOWEVER, that no such designation or
rescission shall in any manner relieve SRI of its obligation to maintain an
office or agency pursuant to Section 2.03 or this Section 5.02. SRI shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
Section 5.03. SEC REPORTS.
So long as any of the Notes remain outstanding, Stage shall cause
copies of all quarterly and annual financial reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which Stage is required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, including
without limitation, Forms 8-K, 10-Q and 10-K, to be so filed with the SEC and to
be filed with the Trustee and mailed to the Holders at their addresses appearing
in the Note Register maintained by the Registrar, in each case, at the times
specified for such filing with the SEC. If Stage is not subject to the
requirements of such Section 13 or 15(d) of the Exchange Act, Stage shall
nevertheless continue to file with the SEC, in conformity with Section 13 or
Section 15(d) of the Exchange Act, and provide the Trustee and Holders of Notes
with such annual and quarterly reports (without exhibits in the case of
documents provided to the Trustee and Holders of Notes) and such information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which are specified in
Section 13 or Section 15(d) of the Exchange Act, including without limitation,
Forms 8-K, 10-Q and 10-K. SRI and Stage shall also comply with the provisions of
TIA ss. 314(a).
Section 5.04. LIMITATION ON DEBT.
(a) Stage shall not Incur, and shall not permit any Restricted
Subsidiary to Incur, directly or indirectly, any Debt unless the Consolidated
EBITDA Coverage Ratio at the date of such Incurrence exceeds 2.25 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), Stage and its
Restricted Subsidiaries may Incur the following Debt: (1) the Senior Notes and
the Notes; (2) Debt Incurred by Stage and its Restricted Subsidiaries pursuant
to the Working Capital Facility Provisions of the New Credit Agreement or any
other working capital facility which, when taken together with the outstanding
principal amount of all unreimbursed letters of credit and the outstanding
principal amount of all other Debt Incurred pursuant to this clause (2), does
not exceed at any time in an aggregate principal amount the greater of (A) $125
million and (B) the sum of (i) 50% of the book value of the inventory of Stage
and its Restricted Subsidiaries and (ii) 85% of the book value of Receivables
(or interests in a Master Trust comprised of
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Receivables including, without limitation, "Transferor Certificates" under the
Accounts Receivable Facility) of Stage, its Restricted Subsidiaries and any
Accounts Receivable Subsidiary, but only to the extent that such Receivables (or
Master Trust interests) are owned by Stage, any of its Restricted Subsidiaries
or any Accounts Receivable Subsidiary and may be transferred by Stage, any
Restricted Subsidiary or any Accounts Receivable Subsidiary to a third party for
fair value without the consent of existing investors in such Receivables or
Master Trust; (3) Debt Incurred by Stage and its Restricted Subsidiaries
pursuant to the Expansion Revolving Credit Facility Provisions of the New Credit
Agreement or Debt Incurred under any other credit or loan agreement or any
indenture in each case which Refinances Debt Incurred under such Expansion
Revolving Credit Facility provisions or any Debt that previously Refinanced such
Debt in accordance with this clause (3) during the term thereof or concurrent
with the termination thereof, which, when taken together with the principal
amount of all other Debt Incurred pursuant to this clause (3), does not exceed
$100 million outstanding at any one time; (4) Debt of Stage owed to and held by
a Wholly Owned Subsidiary and Debt of a Wholly Owned Subsidiary owed to and held
by Stage or another Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any
subsequent issuance or transfer of any Capital Stock which results in such
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any transfer
of such Debt (other than to a Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Debt by the issuer thereof; (5) Debt
of a Restricted Subsidiary Incurred and outstanding on or prior to the date on
which such Restricted Subsidiary became a Restricted Subsidiary or was acquired
by Stage (other than Debt Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by Stage); (6) Debt of Stage and
its Restricted Subsidiaries outstanding on the Issue Date (other than Debt
described in clause (1), (2), (3), (4) or (5)); (7) Refinancing Debt in respect
of Debt Incurred pursuant to paragraph (a) or pursuant to clause (1) or (6) or
this clause (7); (8) Hedging Obligations to the extent directly related to Debt
permitted to be Incurred by Stage pursuant to the Indentures; and (9) Debt in an
aggregate principal amount which, together with all other Debt of Stage and its
Restricted Subsidiaries then outstanding (other than Debt permitted by clauses
(1) through (8) of this paragraph (b) or paragraph (a) above) does not exceed
$25 million.
(c) Notwithstanding the foregoing paragraphs (a) and (b) above,
Stage shall not, and shall not permit any Restricted Subsidiary to, Incur any
Debt if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Debt shall be subordinated to the
applicable Notes at least to the same extent as the Subordinated Obligations.
(d) Notwithstanding paragraphs (a) and (b) above, Stage shall not,
and shall not permit SRI or any Guarantor to, Incur any Debt if such Debt is
subordinated or junior in ranking to any Senior Debt, unless such Debt is Senior
Subordinated Debt or is expressly subordinated in right of payment to Senior
Subordinated Debt.
(e) For purposes of determining compliance with the foregoing
covenant, (i) in the event that an item of Debt meets the criteria of more than
one of the types of Debt described in paragraph (b), Stage, in its sole
discretion, will classify such item of Debt and only be required to include the
amount and type of such Debt in one of the clauses of paragraph (b), (ii) an
item of Debt may be divided and classified in more than one of the types of debt
in paragraph (b) and (iii) Guarantees of Debt otherwise included in the
determination of particular amounts of Debt of Stage or any Restricted
Subsidiary shall not also be included.
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Section 5.05. LIMITATION ON RESTRICTED PAYMENTS.
(a) Stage shall not, and shall not permit any Restricted Subsidiary,
directly or indirectly, to:
(i) declare or pay any dividend (either in cash or property) or make
any distribution on or in respect of, or redeem, repurchase, retire or
otherwise acquire, its Capital Stock or the Capital Stock of any
Restricted Subsidiary (including any payment in connection with any merger
or consolidation involving Stage) or similar payment to the direct or
indirect holders of its Capital Stock (except dividends or distributions
payable solely in its Non-Convertible Capital Stock or in options,
warrants or other rights to purchase its Non-Convertible Capital Stock and
except dividends or distributions payable to Stage or a Restricted
Subsidiary), and other than pro rata dividends or other distributions made
by a Restricted Subsidiary of Stage that is not a Wholly Owned Subsidiary
to minority shareholders (or owners of an equivalent interest in the case
of a Restricted Subsidiary that is an entity other than a corporation),
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of Stage or a Restricted Subsidiary (other than such Capital
Stock owned by Stage or any Wholly Owned Subsidiary),
(iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations (other than
the purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition);
(iv) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance or other acquisition, retirement or Investment being herein
referred to as a "Restricted Payment"),
if at the time Stage or such Restricted Subsidiary makes such Restricted Payment
or after giving effect thereto: (1) a Default shall have occurred and be
continuing (or would result therefrom); (2) Stage, after giving pro forma effect
to such Restricted Payment, would not be permitted to Incur at least an
additional $1.00 of Debt pursuant to Section 5.04(a); or (3) the aggregate
amount of such Restricted Payment and all other Restricted Payments since the
Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income
(excluding any extraordinary or nonrecurring charges in connection with the
Refinancing and the Acquisition) accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter during which the
Notes were originally issued to the end of the most recent fiscal quarter ending
at least 45 days (or, if less, the number of days after the end of such fiscal
quarter as the consolidated financial statements of Stage shall be provided to
Holders pursuant to the Indentures) prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income shall be a deficit, minus 100% of such
deficit); (B) the aggregate Net Cash Proceeds and aggregate Deemed Asset Value
received by Stage from the issue or sale of its Capital Stock (other than
Redeemable Stock or Exchangeable Stock) subsequent to the Issue Date (other than
an issuance or sale to a Subsidiary or an employee stock ownership plan or
similar trust); (C) the amount by which Debt of Stage is reduced on Stage's
balance sheet upon the conversion or exchange (other than by a Subsidiary)
subsequent to the Issue Date, of any Debt of Stage convertible or exchangeable
for
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Capital Stock (other than Redeemable Stock or Exchangeable Stock) of Stage (less
the amount of any cash, or the fair value of any other property, distributed by
Stage upon such conversion or exchange); (D) an amount equal to the sum of (i)
the net reduction in Investments in Unrestricted Subsidiaries resulting from
dividends, repayments of loans or advances or other transfers of assets, in each
case to Stage or any Restricted Subsidiary from Unrestricted Subsidiaries
(except as provided in clause (xi) of the definition of "Permitted Investment"),
and (ii) the portion (proportionate to the equity interest of Stage in such
Subsidiary) of the fair market value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; PROVIDED, HOWEVER, that the foregoing sum shall not exceed, in the
case of an Unrestricted Subsidiary, the amount of Investments previously made
(and treated as a Restricted Payment) by Stage or any Restricted Subsidiary in
such Unrestricted Subsidiary; and (E) $5 million.
(b) The provisions of the foregoing paragraph (a) shall not
prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of Stage made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of Stage (other than
Redeemable Stock or Exchangeable Stock of Stage and other than Capital
Stock issued or sold to a Subsidiary or an employee stock ownership plan);
PROVIDED, HOWEVER, that (A) such purchase or redemption shall be excluded
in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from clause (3)(B) of
paragraph (a) above;
(ii) any purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Obligations of Stage made by exchange
for, or out of the proceeds of the substantially concurrent sale of, Debt
of Stage which is permitted to be Incurred pursuant to Section 5.04;
PROVIDED, HOWEVER, that such purchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation
of the amount of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations of
Stage from Net Available Cash to the extent permitted under Section 5.07;
PROVIDED, HOWEVER, that such purchase or redemption shall be excluded in
the calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this provision; PROVIDED, HOWEVER, that at the time of declaration of
such dividend, no other Default shall have occurred and be continuing (or
would result therefrom); and PROVIDED, FURTHER, HOWEVER, that such
dividend shall be included in the calculation of the amount of Restricted
Payments;
(v) the repurchase of shares of, or options to purchase shares of,
common stock of Stage or any of its Subsidiaries from employees, former
employees, directors or former directors of Stage or any of its
Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors under which such individuals
purchase or sell or are granted the option to purchase or sell, shares of
such common stock; PROVIDED, HOWEVER, that the aggregate amount of such
repurchases shall not exceed $5 million in any calendar year; and
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PROVIDED, FURTHER, HOWEVER, that such repurchases shall be excluded in the
calculation of the amount of Restricted Payments;
(vi) the issuance of securities or payment of cash to consummate the
Acquisition in accordance with the terms of the Merger Agreement;
PROVIDED, HOWEVER, that such issuance or payment shall be excluded in the
calculation of the amount of Restricted Payments; and
(vii) Restricted Payments, in addition to those otherwise permitted
pursuant to this covenant, in an aggregate amount not to exceed $15
million; PROVIDED, HOWEVER, that such payments shall be excluded in the
calculation of the amount of Restricted Payments.
Section 5.06. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES.
Stage shall not, and shall not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock or pay any Debt or other obligation owed to Stage or any Restricted
Subsidiary,
(ii) make any loans or advances to Stage or any Restricted
Subsidiary or
(iii) transfer any of its property or assets to Stage or any
Restricted Subsidiary, except:
(a) any encumbrance or restriction pursuant to the New Credit Agreement or any
agreement in effect on the Issue Date or pursuant to the issuance of the Notes;
(b) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement relating to any Debt Incurred by such Restricted
Subsidiary on or prior to the date on which such Restricted Subsidiary was
acquired by Stage (other than Debt Incurred as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by Stage), and
outstanding on such date; (c) any encumbrance or restriction pursuant to an
agreement effecting a Refinancing of Debt Incurred pursuant to an agreement
referred to in clause (a) or (b) or contained in any amendment to an agreement
referred to in clause (a) or (b); PROVIDED, HOWEVER, that the encumbrances and
restrictions contained in any such refinancing agreement or amendment are no
less favorable to the Holders than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such agreements; (d) any such
encumbrance or restriction consisting of customary nonassignment provisions in
leases governing leasehold interests to the extent such provisions restrict the
transfer of the lease or other customary non-assignment provisions in contracts
(other than contracts that constitute Debt) entered into in the ordinary course
of business to the extent such provisions restrict the transfer of the assets
subject to such contracts; (e) in the case of clause (iii) above, restrictions
contained in security agreements or mortgages securing Debt of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements or mortgages; (f) encumbrances or
restrictions imposed by operation of applicable law; (g) any restriction with
respect to a Restricted Subsidiary imposed pursuant to an agreement entered into
for the sale or disposition of all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition; and (h)
any encumbrance or restriction on the sale of Receivables
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arising under agreements in connection with such sales between Stage or a
Restricted Subsidiary and an Accounts Receivable Subsidiary.
Section 5.07. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(a) Stage shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, consummate any Asset Disposition unless:
(i) Stage or such Restricted Subsidiary receives consideration at
the time of such Asset Disposition at least equal to the fair market
value, as determined in good faith by the Board of Directors (including as
to the value of all non-cash consideration), of the shares and assets
subject to such Asset Disposition and at least 75% of the consideration
thereof received by Stage or such Restricted Subsidiary is in the form of
cash or cash equivalents, and
(ii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by Stage or SRI (or such Restricted
Subsidiary, as the case may be):
(A) FIRST, to the extent Stage or SRI elects (or is required
by the terms of any Senior Debt), to prepay, repay or purchase
Senior Debt (other than Debt owed to Stage or SRI or an Affiliate of
Stage or SRI) within one year from the later of the date of such
Asset Disposition or the receipt of such Net Available Cash;
(B) SECOND, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), at the
election of Stage to the investment by Stage or any Wholly Owned
Subsidiary in assets to replace the assets that were the subject of
such Asset Disposition or an asset or assets that (as determined by
the Board of Directors) will be used in the business of Stage and
the Wholly Owned Subsidiaries existing on the Issue Date or in
businesses reasonably related thereto, in each case within the later
of one year from the date of such Asset Disposition or the receipt
of such Net Available Cash;
(C) THIRD, to the extent of the balance of such Net Available
Cash after application and in accordance with clauses (A) and (B),
to make an offer to purchase the Notes (and any other Senior
Subordinated Debt of SRI designated by SRI) pursuant to and subject
to the conditions contained in the applicable Indenture (it being
understood that, in all cases, SRI shall be required to make an
offer to purchase the Senior Notes prior to making any offer to
purchase the Notes); and
(D) FOURTH, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A), (B) and (C),
to (x) the acquisition by Stage or any Wholly Owned Subsidiary of
Tangible Property or (y) the prepayment, repayment or purchase of
Debt (other than any Redeemable Stock) of Stage or SRI (other than
Debt owed to an Affiliate of Stage or SRI) or Debt of any Restricted
Subsidiary (other than Debt owed to Stage or SRI or an Affiliate of
Stage or SRI), in each case within one year from the later of the
receipt of such Net Available Cash and the date the offer described
in paragraph (b) below is
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consummated; PROVIDED, HOWEVER, that in connection with any
prepayment, repayment or purchase of Debt pursuant to clause (A),
(C) or (D) above, Stage, SRI or such Restricted Subsidiary shall
retire such Debt and shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal
amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this paragraph, Stage and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash
in accordance with this paragraph except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are
not applied in accordance with this paragraph exceeds $10 million.
Pending application of Net Available Cash pursuant to this
paragraph, such Net Available Cash shall be invested in Permitted
Investments or to reduce loans outstanding under any working capital
facility.
For the purposes of this Section 5.07, the following are deemed to
be cash or cash equivalents: (x) the express assumption of Debt of Stage or any
Restricted Subsidiary and the release of Stage or such Restricted Subsidiary
from all liability on such Debt in connection with such Asset Disposition and
(y) securities received by Stage or any Restricted Subsidiary from the
transferee that are converted by Stage or such Restricted Subsidiary into cash
within 90 days of the receipt of such securities.
(b) In the event of an Asset Disposition that requires the purchase
of the Notes (and other Senior Subordinated Debt) pursuant to clause (a)(ii)(C)
above, SRI will be required to purchase Notes tendered pursuant to an offer by
SRI for the Notes (and such other Debt) (the "OFFER") at a purchase price of
100% of the principal amount the Notes on the date of such offer (without
premium) plus accrued but unpaid interest (or, in respect of such other Debt,
such lesser price, if any, as may be provided for by the terms of such Debt) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in Section 5.07(c). If the aggregate purchase price
of Notes (and any such other Debt) tendered pursuant to any such offer is less
than the Net Available Cash allotted to the purchase thereof, SRI will be
required to apply the remaining Net Available Cash in accordance with clause
(a)(ii)(D) above. SRI shall not be required to make any such offers to purchase
Notes (and other Senior Subordinated Debt) pursuant to this covenant if the Net
Available Cash available therefor is less than $10 million (which lesser amount
shall be carried forward for purposes of determining whether any such offer is
required with respect to any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after SRI becomes
obligated to make an Offer, SRI shall be obligated to deliver to the Trustee and
send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Notes purchased by SRI either in whole or in part
(subject to prorating as hereinafter described in the event the Offer is
oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "PURCHASE
DATE") and shall contain such information concerning the business of Stage and
its Subsidiaries which Stage in good faith believes will enable such Holders to
make an informed decision (which at a minimum will include (i) the most recently
filed Annual Report on Form 10-K (including audited consolidated financial
statements) of Stage, the most recent subsequently filed Quarterly Report on
Form 10-Q and any Current Report on Form 8-K of Stage filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Dispositions
otherwise described in the offering materials (or corresponding successor
reports or, if Stage shall not at such time be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, a corresponding report
prepared pursuant to Section 5.03), (ii) a
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description of material developments in the business of Stage and its
Subsidiaries subsequent to the date of the latest of such Reports, and (iii) if
material, appropriate pro forma financial information) and all instructions and
materials necessary to tender Notes pursuant to the Offer, together with the
information contained in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, SRI shall deliver to the Trustee an
Officers' Certificate as to (i) the amount of the Offer (the "OFFER AMOUNT"),
(ii) the allocation of the Net Available Cash from the Asset Dispositions
pursuant to which such Offer is being made and (iii) the compliance of such
allocation with the provisions of Section 5.07(a). On such date, SRI shall also
irrevocably deposit with the Trustee or with a paying agent other than SRI in
Temporary Cash Investments, maturing on the last day prior to the Purchase Date
or on the Purchase Date if funds are immediately available by open of business,
an amount equal to the Offer Amount to be held for payment in accordance with
the provisions of this Section. Upon the expiration of the period for which the
Offer remains open (the "OFFER PERIOD"), SRI shall deliver to the Trustee for
cancellation the Notes or portions thereof which have been properly tendered to
and are to be accepted by SRI. The Trustee shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price. In
the event that the aggregate purchase price of the Notes delivered by SRI to the
Trustee is less than the Offer Amount, the Trustee shall deliver the excess to
SRI immediately after the expiration of the Offer Period for application in
accordance with this Section.
(3) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to SRI at the
address specified in the notice at least three Business Days prior to the
Purchase Date. Holders shall be entitled to withdraw their election if the
Trustee or SRI receives, not later than one Business Day prior to the Purchase
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note which was delivered for purchase
by the Holder and a statement that such Holder is withdrawing his election to
have such Note purchased. If at the expiration of the Offer Period the aggregate
principal amount of Notes (and any other Senior Subordinated Debt included in
the Offer) surrendered pursuant to the Offer exceeds the Offer Amount, SRI shall
select the Notes and other Senior Subordinated Debt to be purchased on a pro
rata basis (with such adjustments as may be deemed appropriate by SRI so that
only Notes and other Senior Subordinated Debt in denominations of $1,000, or
integral multiples thereof, shall be purchased). Holders whose Notes are
purchased only in part shall be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered.
(4) At the time SRI delivers Notes to the Trustee which are to be
accepted for purchase, SRI shall also deliver an Officers' Certificate stating
that such Notes are to be accepted by SRI pursuant to and in accordance with the
terms of this Section 5.07. A Note shall be deemed to have been accepted for
purchase at the time the Trustee, directly or through an agent, mails or
delivers payment therefor to the surrendering Holder.
(d) SRI shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 5.07. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 5.07, SRI shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this clause by virtue thereof.
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Section 5.08. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Stage shall not, and shall not permit any Restricted Subsidiary
to, enter into any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with any Affiliate (including any
Accounts Receivable Subsidiary) of Stage (an "Affiliate Transaction") unless (i)
the terms of such Affiliate Transaction are (A) set forth in writing and (B) as
favorable to Stage or such Restricted Subsidiary as terms that would be
obtainable at the time for a comparable transaction or series of related
transactions in arm's-length dealings with an unrelated third Person, (ii) if
such Affiliate Transaction involves an amount in excess of $3 million, a
majority of the disinterested members of the Board of Directors of Stage have
approved, by resolution, and determined in good faith that such Affiliate
Transaction meets the criteria set forth in (i)(B) above and (iii) if such
Affiliate Transaction involves an amount in excess of $7.5 million (other than a
contribution, disposition or other transfer of Receivables to an Accounts
Receivable Subsidiary as permitted under the Indentures and the related
customary contractual arrangements and Customary Securitization Undertakings),
such Affiliate Transaction is determined by a nationally recognized investment
banking firm to be fair from a financial standpoint to Stage or such Restricted
Subsidiary, as the case may be.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to the covenant
described in Section 5.05, (ii) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Board of Directors of Stage, (iii) loans or advances to employees in the
ordinary course of business, but in any event not to exceed $5 million in the
aggregate outstanding at any one time, (iv) the payment of reasonable and
customary fees to directors of Stage and its Restricted Subsidiaries, (v) any
transaction between Stage and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries, (vi) any written agreement as in effect on the Issue Date and as
amended from time to time, PROVIDED that any such amendment is not less
favorable in any material respect to Stage and its Subsidiaries than the terms
in effect on the Issue Date, and (vii) indemnification payments to directors and
officers of Stage in accordance with applicable state laws.
Section 5.09. LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES.
Stage shall not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except:
(i) to Stage or a Wholly Owned Subsidiary;
(ii) if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary remains a Restricted
Subsidiary; or
(iii) if, immediately after giving effect to such issuance, sale or
other disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after
giving effect thereto would have been permitted to be made under Section
5.05 if made on the date of such issuance, sale or other disposition. In
connection with any such sale or disposition of Capital Stock, Stage
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or any such Restricted Subsidiary shall comply with Section 5.07. Nothing
herein shall limit or modify SRI's obligations under Article IV above.
Section 5.10. LIMITATION ON LIENS.
Notwithstanding paragraphs (a) and (b) of Section 5.04, Stage shall
not, and shall not permit SRI or any Guarantor to, Incur any Secured Debt which
is not Senior Debt unless contemporaneously therewith effective provision is
made to secure the Notes or the Guaranties equally and ratably with such Secured
Debt for so long as such Secured Debt is secured by a Lien.
Section 5.11. ACCOUNTS RECEIVABLE SUBSIDIARIES.
Stage (a) shall not permit any Accounts Receivable Subsidiary to
sell any Receivables purchased from Stage or any of its Subsidiaries or
participation interests therein to any other Person except on an arms-length
basis and solely for consideration in the form of cash, cash equivalents,
promissory notes of such Person or Debt of or other interests in a Master Trust;
PROVIDED, HOWEVER, that such Accounts Receivable Subsidiary may not sell such
Debt or other interests to any other Person except on an arms-length basis and
solely for consideration in the form of cash or cash equivalents; (b) shall not
permit any Accounts Receivable Subsidiary to incur Debt in an amount in excess
of the book value of such Accounts Receivable Subsidiary's total assets, as
determined in accordance with GAAP; and (c) shall not, and shall not permit any
of its Subsidiaries to, sell Receivables to an Accounts Receivable Subsidiary if
(i) such Accounts Receivable Subsidiary, pursuant to or within the meaning of
Bankruptcy Law, (A) commences a voluntary case, (B) consents to the entry of an
order for relief against it in an involuntary case, (C) consents to the
appointment of a Custodian of it or for all or substantially all of its property
or (D) makes a general assignment for the benefit of its creditors or (ii) a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against such Accounts Receivable Subsidiary, (B)
appoints a Custodian of such Accounts Receivable Subsidiary or for all or
substantially all of the property of such Accounts Receivable Subsidiary or (C)
orders the liquidation of such Accounts Receivable Subsidiary.
Section 5.12. FUTURE GUARANTORS.
Stage and SRI shall cause each Restricted Subsidiary (other than
SRI) to promptly execute and deliver to the Trustee a Guaranty Agreement
pursuant to which such Restricted Subsidiary will Guarantee the Indenture
Obligations on the terms and conditions set forth in this Indenture including,
without limitation, pursuant to Articles XII and XIII hereof.
Section 5.13. COMPLIANCE CERTIFICATES.
Each of SRI and Stage shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of SRI or Stage, as applicable, and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether SRI or Stage, as applicable,
has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such Officers'
Certificate, that to the best of his or her knowledge SRI or Stage, as
applicable, has kept, observed, performed and fulfilled each covenant contained
in this Indenture and is not in default in the performance or observance of any
of the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default
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shall have occurred, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action each is taking or proposes to take
with respect thereto). Each of SRI and Stage shall also comply with TIA ss.
314(a)(4).
Section 5.14. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee, SRI, Stage and any other Guarantors
will execute and deliver such further instruments and do such further acts as
may be reasonably necessary or proper to carry out more effectively the purpose
of this Indenture.
ARTICLE VI
SUCCESSORS
Section 6.01. WHEN STAGE AND SRI MAY MERGE OR TRANSFER ASSETS.
Neither Stage nor SRI shall consolidate with or merge with or into,
or convey, transfer or lease, in one transaction or a series of transactions,
all or substantially all its properties and assets to any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company"), if
other than Stage or SRI, as the case may be, shall be a Person organized and
existing under the laws of the United States of America, any State thereof or
the District of Columbia and the Successor Company expressly assumes, by an
indenture supplemental thereto, executed and delivered to the Trustee, in form
acceptable to the Trustees, all the obligations of Stage or SRI, as the case may
be, under the Notes and this Indenture; (ii) immediately after giving effect to
such transaction, on a pro forma basis (and treating any Debt which becomes an
obligation of the Successor Company or any Subsidiary as a result of such
transaction as having been Incurred by such Successor Company or such Subsidiary
at the time of such transaction), no Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction, on a pro
forma basis, the Successor Company would be able to Incur at least a $1.00 of
additional Debt pursuant to Section 5.04(a); (iv) immediately after giving
effect to such transaction, on a pro forma basis, the Successor Company shall
have Consolidated Net Worth in an amount at least equal to the Consolidated Net
Worth of Stage or SRI, as the case may be, prior to such transaction minus any
costs incurred in connection with such transaction; and (v) Stage or SRI, as the
case may be, shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture. The foregoing
shall not prohibit the consummation of the Acquisition by Stage and SRI on the
terms set forth in the Merger Agreement.
Section 6.02. SUCCESSOR COMPANY SUBSTITUTED.
The Successor Company shall be the successor to Stage or SRI, as the
case may be, and shall succeed to, and be substituted for, and may exercise
every right and power of, Stage or SRI, as the case may be, under the
Indentures, but the predecessor Person in the case of a conveyance, transfer or
lease shall not be released from the obligation to pay the principal of and
interest on the Notes, in the case of SRI, or from the obligations under the
Guaranties, in the case of Stage.
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Section 6.03. WHEN SUBSIDIARY GUARANTOR MAY MERGE OR TRANSFER ASSETS.
No Subsidiary Guarantor shall, and Stage or SRI, as the case may be,
shall not permit any Subsidiary Guarantor to, consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless: (i)
the resulting, surviving or transferee Person (if not such Subsidiary Guarantor)
shall be a Person organized and existing under the laws of the jurisdiction
under which such Subsidiary Guarantor was organized or under the laws of the
United States of America, or any State thereof or the District of Columbia, and
such Person shall expressly assume, by Guaranty Agreement, in a form
satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor,
if any, under its Guaranty; (ii) immediately after giving effect to such
transaction or transactions on a pro forma basis (and treating any Debt which
becomes an obligation of the resulting, surviving or transferee Person as a
result of such transaction as having been issued by such Person at the time of
such transaction), no Default shall have occurred and be continuing; and (iii)
Stage or SRI, as the case may be, delivers to the Trustee an Officers'
Certificate and Opinion of Counsel, each stating that such consolidation, merger
or transfer and such Guaranty Agreement, if any, comply with the Indenture.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01. EVENTS OF DEFAULT.
Each of the following shall constitute an "EVENT OF DEFAULT":
(a) a default in any payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days;
(b) a default in the payment of the principal of, or premium, if
any, on any Note when the same becomes due and payable at its Stated Maturity,
upon redemption, upon declaration, upon required repurchase or otherwise;
(c) the failure by Stage, SRI or any Guarantor to comply with its
obligations under Article VI.
(d) the failure by Stage or SRI to comply for 30 days after the
notice specified below with any of its obligations in the covenants described
above under Article IV (other than a failure to purchase Notes) or under Section
5.03, 5.04, 5.05, 5.06, 5.07 (other than a failure to purchase Notes), 5.08,
5.09, 5.10, 5.11 or 5.12;
(e) the failure by Stage, SRI or any Guarantor to comply with any of
its agreements in the Notes or the Indentures (other than those referred to in
(a), (b), (c) or (d) above) and such failure continues for 60 days after the
notice specified below;
(f) a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any Debt
for money borrowed by Stage or any of its Subsidiaries (or the payment of which
is Guaranteed by Stage or any of its Subsidiaries) whether such Debt or
Guarantee now exists, or is created after the date of the
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Indentures, which default (i) is caused by failure to pay principal of such Debt
at the final maturity thereof ("PAYMENT DEFAULT") or (ii) results in the
acceleration of such Debt prior to its express maturity and, in each case, the
principal amount of any such Debt, together with the principal amount of any
other such Debt under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $15 million or more;
(g) Stage, SRI or any Significant Subsidiary of Stage pursuant to or
within the meaning of any Bankruptcy Law: (1) commences a voluntary case, (2)
consents to the entry of an order for relief against it in an involuntary case,
(3) consents to the appointment of a Custodian of it or for all or substantially
all of its property, or (4) makes a general assignment for the benefit of its
creditors;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (1) is for relief against Stage, SRI or any
Significant Subsidiary of Stage in an involuntary case, (2) appoints a Custodian
of Stage, SRI or any Significant Subsidiary of Stage or for all or any
substantial part of the property of Stage, SRI or any Significant Subsidiary of
Stage, or (3) orders the liquidation or winding up of Stage, SRI or any
Significant Subsidiary of Stage, and the order or decree remains unstayed and in
effect for 60 consecutive days;
(i) any final non-appealable judgment or decree in excess of $15
million is rendered against Stage, SRI or a Significant Subsidiary of Stage and
is not discharged and either an enforcement proceeding has been commenced upon
such judgment or decree or such judgment or decree shall remain undischarged for
a period of 60 days; or
(j) any Guaranty ceases to be in effect (other than in accordance
with the terms of the Indentures) or any Guarantor denies or disaffirms its
Guaranty obligations.
A Default under clause (d) or (e) is not an Event of Default until
the relevant Trustee or the Holders of at least 25% in principal amount of the
Notes notify SRI of the Default and SRI does not cure such Default within the
time specified after receipt of such notice.
SRI shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default pursuant to clause (c), (d), (e), (f), (g), (h), (i) or (j)
and any event which with the giving of notice or the lapse of time would become
any such Event of Default, its status and what action SRI is taking or proposes
to take in respect thereof.
Section 7.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clause (g) or clause (h) of Section 7.01) occurs and is continuing, the Trustee
by notice to SRI, or the Holders of at least 25% in aggregate principal amount
of the then outstanding Notes by written notice to SRI and the Trustee, may
declare the principal of and accrued but unpaid interest on all the Notes to be
due and payable (collectively, the "DEFAULT AMOUNT"). Upon such a declaration,
the Default Amount shall be due and payable immediately; PROVIDED that if any
Bank Debt shall remain outstanding, such declaration shall not become effective
until three Business Days after notice of such declaration has been given to the
Representative of the holders of the Bank Debt. In case of an Event of Default
specified in clause (g) or clause (h) of Section 7.01, all outstanding Notes
shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders of the Notes.
The Holders of a majority in aggregate
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principal amount of the then outstanding Notes by written notice to the Trustee
may on behalf of all of the Holders rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived. No such rescission shall affect any subsequent or other Default or
impair any right consequent thereto.
If the Default Amount becomes due and payable as a result of an
Event of Default, SRI or, if requested by SRI, the Trustee on SRI's behalf,
shall promptly so notify the holders of Designated Senior Debt or the
Representative of such holders.
Section 7.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes and this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any such Notes in the proceeding. A delay
or omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon any Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in such Event of Default. No remedy
shall be exclusive of any other remedy. All remedies shall be cumulative to the
extent permitted by law.
Section 7.04. WAIVER OF PAST DEFAULTS.
Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive an existing Default and its consequences, except (i) a Default
in the payment of the principal of, premium, if any, or interest on, the Notes;
or (ii) a Default in respect of a provision that under Section 10.02 cannot be
amended without the consent of each Holder affected thereby. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereto.
Section 7.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the terms of this Indenture or if, subject
to Section 8.01, the Trustee reasonably determines that such action, if taken,
would be unduly prejudicial to the rights of other Holders of Notes or would
involve the Trustee in personal liability.
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Section 7.06. LIMITATION ON SUITS.
Except to enforce the right to receive payment of principal,
premium, if any, or interest when due, no Holder of a Note may pursue any remedy
with respect to this Indenture or the Notes, unless:
(i) such Holder has previously given the Trustee notice that an
Event of Default is continuing;
(ii) Holders of at least 25% in principal amount of the Notes then
outstanding have requested the Trustee to pursue the remedy;
(iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity; and
(v) Holders of a majority in principal amount of the Notes then
outstanding have not given the Trustee a direction inconsistent with such
request within such 60-day period.
A Holder of a Note shall not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 7.07. UNCONDITIONAL RIGHT OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on such Note, on or after the respective due dates expressed in such
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of any
such Holder of a Note.
Section 7.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 7.01(a) or Section
7.01(b) occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against SRI for the entire amount then
due and owing, plus the amounts provided for in Section 8.07.
Section 7.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders of the Notes allowed in any judicial proceedings
relative to Stage, Stage's creditors or Stage's property, and, unless prohibited
by law or applicable regulations, may vote on behalf of the Holders of Notes in
any election of a trustee in bankruptcy or other Person performing similar
functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder of a Note to make payments to the Trustee, and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders of Notes, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and
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counsel, and any other amounts due to Trustee under Section 8.07. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder of a Note any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder of a Note thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder of a Note in any such proceeding.
Section 7.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article VII, it
shall pay out the money in the following order:
(i) FIRST: to the Trustee for amounts due to it under Section 8.07;
(ii) SECOND: to holders of Senior Debt to the extent required by
Article XI;
(iii) THIRD: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any, and interest,
respectively; and
(iv) FOURTH: to SRI.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 7.10.
Section 7.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 7.11 shall not apply to a suit by the Trustee, a suit by a Holder
of a Note pursuant to Section 7.07, or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 7.12. WAIVER OF STAY, EXTENSION AND USURY LAWS.
SRI (to the extent that it may lawfully do so) shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law wherever enacted, now or at any
time hereafter in force, that may affect the covenants or the performance of
this Indenture; and SRI (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE VIII
TRUSTEE
Section 8.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee shall not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct or bad faith, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 8.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
a direction received by it pursuant to Section 7.05.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraph
(a), paragraph (b) and paragraph (c) of this Section 8.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if the Trustee shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with SRI.
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(g) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 8.01 and to the provisions of the TIA.
Section 8.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely upon any document reasonably believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in any such document.
(b) Before the Trustee acts or refrains from taking any act, the
Trustee may require an Officers' Certificate or an Opinion of Counsel or both.
The Trustee shall not be liable for any action taken or omitted to be taken by
it in good faith in reliance on such Officers' Certificate or such Opinion of
Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent; PROVIDED, HOWEVER, that any such
agent is appointed by the Trustee with due care.
(d) The Trustee shall not be liable for any action taken or omitted
to be taken by it in good faith which it reasonably believes to be authorized or
within its rights or powers conferred upon it by this Indenture; PROVIDED,
HOWEVER, that the Trustee's conduct does not constitute negligence, willful
misconduct or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by the Trustee hereunder in good faith and in accordance
with the advice or opinion of such counsel.
Section 8.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with SRI, Stage or any or their
Affiliates with the same rights as it would have if the Trustee were not the
Trustee hereunder. However, in the event the Trustee acquires any conflicting
interest in accordance with the TIA it must eliminate such conflicting interest
within 90 days, apply to the SEC for permission to continue as Trustee or
resign. Any Paying Agent, Registrar or co-registrar may do the same with like
rights. The Trustee shall at all times remain subject to Section 8.10 and
Section 8.11.
Section 8.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for SRI's use of the proceeds of the Notes and it shall not be
responsible for any statement contained herein or any statement contained in the
Notes or any other document in connection with the sale of the Notes or pursuant
to this Indenture other than the Trustee's certificates of authentication.
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Section 8.05. NOTICE OF DEFAULT.
If a Default occurs and is continuing and if such Default is known
to the Trustee, the Trustee shall mail to each Holder of a Note a notice of such
Default within 90 days (or such shorter period as may be required by applicable
law) after such Default occurs. Except in the case of a Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 8.06. REPORTS BY TRUSTEE TO HOLDERS OF NOTES.
Within 60 days after each July 15, beginning with July 15 following
the date of this Indenture, the Trustee shall mail to Holders of the Notes a
brief report dated as of such reporting date that complies with TIA ss. 313(a)
to the extent such a report is required by TIA ss. 313(a). The Trustee also
shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to Stage and filed with the SEC and each stock exchange on
which the Notes may be listed. Stage shall promptly notify the Trustee upon the
Notes being listed on any stock exchange and any delisting thereof.
Section 8.07. COMPENSATION AND INDEMNITY.
SRI shall pay to the Trustee from time to time reasonable
compensation for the Trustee's acceptance of this Indenture and its services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. SRI shall reimburse the Trustee
for all reasonable out-of-pocket expenses incurred or made by it in the course
of its services hereunder. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts.
SRI shall indemnify the Trustee against any and all loss, liability
or reasonable expense incurred by it in connection with the administration of
this trust and the performance of its duties under this Indenture, except any
such loss, liability or expense attributable to the negligence, willful
misconduct or bad faith of the Trustee.
The Trustee shall notify SRI promptly of any claim for which it may
seek indemnity. Failure by the Trustee to so notify SRI shall not relieve SRI of
its obligations hereunder except to the extent that SRI may be materially
prejudiced by such failure. SRI shall defend the claim and the Trustee shall
cooperate in the defense of such claim. The Trustee may have separate counsel
and SRI shall pay the reasonable fees and expenses of such counsel. SRI need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own negligence, willful misconduct
or bad faith. SRI need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
SRI's payment obligations under this Section 8.07 shall survive the
satisfaction and discharge of this Indenture.
To secure SRI's payment obligations under this Section 8.07, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except
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such money or property that is held by it in trust for the benefit of Holders of
Notes to pay principal and interest on particular Notes.
If the Trustee shall incur expenses after the occurrence of a
Default specified in Section 7.01(vii) or Section 7.01(viii), such expenses
(including the reasonable fees and expenses of its agents and counsel) are
intended to constitute expenses of administration under Bankruptcy Law.
Section 8.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 8.08.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying SRI in writing. The Holders of Notes of not less
than a majority in principal amount of the Notes then outstanding may remove the
Trustee by so notifying the Trustee and SRI in writing. SRI shall remove the
Trustee if:
(i) the Trustee fails to comply with Section 8.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a Custodian or other public officer takes charge of the
Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), SRI shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by SRI.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, SRI or the Holders
of Notes of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee after written request by any Holder of a Note who has
been a Holder of a Note for at least six months fails to comply with Section
8.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
Any successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to SRI. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all of the rights, powers and duties of the Trustee under
this Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Note. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the Lien provided for
in Section 8.07.
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Notwithstanding replacement of the Trustee pursuant to this Section 8.08, SRI's
obligations under Section 8.07 shall continue for the benefit of the retiring
Trustee.
Section 8.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business or assets to,
another corporation or banking association, the resulting, surviving or
transferee entity without any further act shall constitute the successor
Trustee; PROVIDED, HOWEVER, that such entity shall be otherwise qualified and
eligible under this Article VIII.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor Trustee, and deliver such Notes so
authenticated, and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have.
Section 8.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture at all times shall have a Trustee which satisfies the
requirements of TIA 310(a). Trustee shall be a corporation organized and doing
business under the laws of the United States of America or of any State thereof
authorized under such laws to exercise corporate trustee power, shall be subject
to supervision or examination by federal or state authority and shall have a
combined capital and surplus of at least $50 million as set forth in its most
recently published annual report of condition. The Trustee shall be subject to
TIA ss. 310(b).
Section 8.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST SRI.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee which has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE.
(a) When (i) SRI delivers to the Trustee all outstanding Notes
(other than Notes replaced pursuant to Section 2.07) for cancellation; or (ii)
all outstanding Notes have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III of this
Indenture and SRI irrevocably deposits with the Trustee funds sufficient to pay
at maturity or upon redemption all outstanding Notes including interest thereon
to maturity or such redemption date (other than Notes replaced pursuant to
Section 2.07), and if in either case SRI pays all other sums payable hereunder
by SRI, then this Indenture shall, subject to Section
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9.01(c), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture on demand of SRI accompanied by an
Officers' Certificate and an Opinion of Counsel and at the cost and expense of
SRI.
(b) Subject to Section 9.01(c) and Section 9.02, SRI at any time may
terminate (i) all of Stage's and SRI's obligations under the Notes and this
Indenture ("LEGAL DEFEASANCE"); or (ii) Stage's and SRI's obligations under
Article IV, Section 5.03, Section 5.04, Section 5.05, Section 5.06, Section
5.07, Section 5.08, Section 5.09, Section 5.10, Section 5.11, Section 5.12,
Section 6.01(iii), Section 6.01(iv), Section 7.01(d), Section 7.01(f), Section
7.01(g) (with respect only to Significant Subsidiaries of Stage other than SRI),
Section 7.01(h) (with respect only to Significant Subsidiaries of Stage other
than SRI) and Section 7.01(i) ("COVENANT DEFEASANCE"). SRI may exercise its
legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If SRI exercises its legal defeasance option, payment of the Notes
may not be accelerated because of an Event of Default. If SRI exercises its
covenant defeasance option, payment of the Notes may not be accelerated because
of an Event of Default specified in Section 7.01(d), Section 7.01(f), Section
7.01(g) (with respect only to Significant Subsidiaries of Stage other than SRI),
Section 7.01(h) (with respect only to Significant Subsidiaries of Stage other
than SRI), Section 7.01(i) or the failure of SRI to comply with Sections
6.01(iii) and 6.01(iv). If SRI exercises its legal defeasance option or its
covenant defeasance option, each Guarantor will be released from all of its
obligations with respect to its Guaranties.
Upon satisfaction of the conditions set forth herein and at the
request of SRI, the Trustee shall acknowledge in writing the discharge of those
obligations of SRI terminated thereby.
(c) Notwithstanding clause (a) and clause (b) above, Stage's and
SRI's obligations contained in Section 2.03, Section 2.04, Section 2.05, Section
2.06, Section 2.07, Section 8.07, Section 8.08 and this Article IX shall survive
until the Notes have been paid in full. Thereafter, SRI's obligations contained
in Section 8.07, Section 9.04 and Section 9.05 shall survive.
Section 9.02. CONDITIONS TO DEFEASANCE.
SRI may exercise its legal defeasance option or its covenant
defeasance option only if:
(i) SRI irrevocably deposits in trust with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to maturity or redemption, as the case may be;
(ii) SRI delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that
the payments of principal and interest when due and without reinvestment
on the deposited U.S. Government Obligations plus any deposited money
without investment will provide cash at such times and in such amounts as
will be sufficient to pay principal and interest when due on all the Notes
to maturity or redemption, as the case may be;
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(iii) 91 days pass after the deposit is made and during the 91-day
period no Default specified in Section 7.01(g) or Section 7.01(h) in
either case with respect to Stage or SRI occurs which is continuing at the
end of the period;
(iv) the deposit does not constitute a default under any other
agreement binding on Stage or SRI and is not prohibited by Article XI;
(v) SRI delivers to the Trustee an Opinion of Counsel to the effect
that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the U.S. Investment
Company Act of 1940, as amended;
(vi) in the case of the legal defeasance option, SRI shall have
delivered to the Trustee an Opinion of Counsel in the United States
stating that (1) SRI has received from, or there has been published by,
the Internal Revenue Service a ruling, or (2) since the date of this
Indenture there has been a change in the applicable U.S. Federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of Notes will not recognize
income, gain or loss for U.S. Federal income tax purposes as a result of
such defeasance and will be subject to U.S. Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred;
(vii) in the case of the covenant defeasance option, SRI shall have
delivered to the Trustee an Opinion of Counsel in the United States to the
effect that the Holders of Notes will not recognize income, gain or loss
for U.S. Federal income tax purposes as a result of such covenant
defeasance and will be subject to U.S. Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred; and
(viii)SRI delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Notes as contemplated by this Article IX
have been complied with.
Before or after a deposit, SRI may make arrangements satisfactory to
the Trustee for the redemption of the Notes at a future date in accordance with
Article III.
Section 9.03. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article IX. The Trustee shall apply the
deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal
of, and premium, if any, and interest on the Notes.
Section 9.04. REPAYMENT TO SRI.
The Trustee and the Paying Agent shall promptly turn over to SRI
upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to SRI upon request any money held by them for the
payment of principal or
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interest that remains unclaimed for two years, and, thereafter, Holders of Notes
entitled to the money shall look to SRI for payment as general creditors.
Section 9.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS.
SRI shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
Section 9.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article IX by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
Stage's and SRI's obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article IX until such time as the Trustee or Paying Agent is permitted to apply
all such money or U.S. Government Obligations in accordance with this Article
IX; PROVIDED, HOWEVER, that, if SRI has made any payment of interest on or
principal of any of the Notes because of the reinstatement of its obligations,
SRI shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
SRI, Stage and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder of a Note:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to provide for the assumption of the obligations of Stage, SRI
or a Guarantor to the Holders of the Notes pursuant to Article VI;
(iii) to provide for uncertificated Notes in addition to or in place
of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code);
(iv) to add guarantees with respect to the Notes;
(v) to release a Guaranty, when permitted by the Indenture;
(vi) to secure the Notes;
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(vii) to add to the covenants of Stage and its Subsidiaries
hereunder for the benefit of the Holders of Notes or to surrender any
right or power conferred upon Stage, SRI or any Guarantor;
(viii) to make any change that would not adversely affect the rights
hereunder of any Holder of a Note; or
(ix) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
No amendment may be made to any provision of Article XI that would
adversely affect the rights of any holder of Senior Debt then outstanding unless
the holders of such Senior Debt (or their Representative) consent to such
change.
Upon the request of SRI accompanied by resolutions of the Boards of
Directors of Stage and SRI authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 10.06, the Trustee shall join with Stage and SRI in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations which may be contained therein, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture which affects its
own rights, duties or immunities under this Indenture or otherwise.
After an amendment, supplement or waiver under this Section 10.01
becomes effective, SRI shall mail to the Holders of Notes affected thereby a
notice briefly describing any such amendment, supplement or waiver. Any failure
of SRI to mail such notice, or any defect therein, shall not in any way impair
or affect the validity of any such amended or supplemental Indenture or waiver.
Subject to Section 7.04 and Section 7.07, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance by Stage or
SRI in any particular instance with any provision of this Indenture or the
Notes.
Section 10.02. WITH CONSENT OF HOLDERS OF NOTES.
SRI, Stage and the Trustee may amend or supplement this Indenture,
the Notes or any amended or supplemental Indenture with the written consent of
the Holders of Notes of at least a majority in aggregate principal amount of the
Notes then outstanding. However, without the consent of each Holder of a Note
affected, any amendment, supplement or waiver may not:
(i) reduce the amount of Notes the Holders of which must consent to
an amendment;
(ii) reduce the rate of or extend the time for payment of interest
on any Note;
(iii) reduce the principal of or extend the Stated Maturity of any
Note;
(iv) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed in accordance with
Article III;
(v) make any Notes payable in money other than that stated in the
Note;
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(vi) impair the right of any Holder of a Note to receive payment of,
principal of and interest on such Holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or
with respect to such Holder's Notes;
(vii) make any change in Section 7.04 or Section 7.07 or the second
sentence of this Section 10.02; or
(viii) make any change in any provision of Article XI that would
adversely affect the interests of any Holder of a Note.
Upon the request of SRI accompanied by resolutions of the Boards of
Directors of Stage and SRI authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory with the Trustee of the consent of the Holders of Notes as
aforesaid and upon receipt by the Trustee of the documents described in Section
10.06, the Trustee shall join with Stage and SRI in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 10.02 to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, SRI shall mail to the Holders of Notes affected thereby a
notice briefly describing any such amendment, supplement or waiver. Any failure
of SRI to mail such notice, or any defect therein, shall not in any way impair
or affect the validity of any such amended or supplemental Indenture or waiver.
Subject to Section 7.04 and Section 7.07, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance by Stage or
SRI in any particular instance with any provision of this Indenture or the
Notes.
Section 10.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in an amended or supplemental Indenture that complies with the TIA
as then in effect.
Section 10.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS.
Until an amendment, supplement or waiver becomes effective, a
consent to such amendment, supplement or waiver by a Holder of a Note is a
continuing and binding consent by the Holder of a Note and every subsequent
Holder of a Note or portion of a Note that evidences the same Debt as the
consenting Holder's Note, even if a notation of the consent or waiver is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver shall become effective in
accordance with its terms and thereafter shall bind every Holder of a Note.
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SRI may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Notes entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, such Persons which were Holders of Notes at
such record date (or their duly designated proxies), and only such Persons,
shall be entitled to give such consent or to revoke any consent previously given
or to take any such action, whether or not such Persons continue to be Holders
of Notes after such record date. No such consent shall be valid or effective for
more than 120 days after such record date.
Section 10.05. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment or supplement changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver such Note to the Trustee.
The Trustee may place an appropriate notation on the Note regarding the changed
terms and return it to the Holder of such Note. Alternatively, if SRI or the
Trustee so determines, SRI in exchange for such Note shall issue and the Trustee
shall authenticate a new Note that reflects such changed terms. Failure to make
the appropriate notation or to issue a new Note shall not affect the validity of
such amendment or supplement.
Section 10.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article X if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment or
supplement the Trustee shall be entitled to receive, and (subject to Section
8.01) shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that such amendment or supplement is authorized or
permitted pursuant to this Indenture.
Section 10.07. PAYMENT FOR CONSENTS.
Neither Stage, SRI, any Affiliate of Stage nor any Subsidiary,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Note for or as an
inducement to any consent, amendment, supplement or waiver with respect to any
term or provision of this Indenture or the Notes, unless such consideration is
offered to be paid or agreed to be paid to all Holders of Notes that consent,
waive or agree to amend or supplement in the time frame set forth in the
solicitation documents relating to any such consent, waiver or agreement to
amend or supplement.
ARTICLE XI
SUBORDINATION OF NOTES
Section 11.01. NOTES SUBORDINATE TO SENIOR DEBT; NOTES PARI PASSU WITH SENIOR
SUBORDINATED DEBT; NOTES SENIOR TO SUBORDINATED OBLIGATIONS.
SRI covenants and agrees, and each Holder of a Note, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XI, the payment of the
principal of and premium, if any, and interest on and all other
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obligations in respect of each and all of the Notes and this Indenture are
hereby expressly made subordinate and subject in right of payment to the prior
payment in full of all Senior Debt of SRI. All provisions of this Article XI
shall be subject to Section 11.14 hereof. The Notes shall rank PARI PASSU in
right of payment with all Senior Subordinated Debt of SRI. The Notes shall rank
senior in right of payment to all Subordinated Obligations of SRI.
Section 11.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (i) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to SRI or to its creditors, as
such, or to its assets; or (ii) any liquidation, dissolution or other winding up
of SRI, whether voluntary or involuntary and whether or not involving insolvency
or bankruptcy; or (iii) any assignment for the benefit of creditors or any other
marshalling of assets or liabilities of SRI, then and in any such event
specified in clause (i), clause (ii) or clause (iii) above (each such event, if
any, herein sometimes referred to as a "PROCEEDING") the holders of Senior Debt
of SRI will be first entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Debt of SRI, or provision shall be
made for such payment, in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of such Senior Debt before the Holders of the Notes
are entitled to receive any payment or distribution of any kind or character, on
account of principal of (or premium, if any) or interest on or other obligations
in respect of the Notes or on account of any purchase or other acquisition of
Notes by or on behalf of SRI (all such payments, distributions, purchases and
acquisitions herein referred to, individually and collectively, as a "NOTES
PAYMENT"), and to that end the holders of Senior Debt of SRI shall be entitled
to receive, for application to the payment thereof, any Notes Payment which may
be payable or deliverable in respect of the Notes in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this
Section 11.02, the Trustee or any Holder receives payment or distribution of
assets of SRI of any kind or character, before all the Senior Debt of SRI is
paid in full as provided above, then and in such event, such Notes Payment shall
be received and held in trust for the benefit of the holders of such Senior Debt
and paid over or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other person making payment
or distribution of assets of SRI for application to the payment of all Senior
Debt of SRI remaining unpaid, to the extent necessary to pay the Senior Debt of
SRI in full, after giving effect to any concurrent payment or distribution to or
for the holders of Senior Debt of SRI.
For purposes of this Article XI only, the words "any payment or
distribution of any kind or character" shall not be deemed to include a payment
or distribution of stock or securities of SRI provided for by a plan of
reorganization or readjustment authorized by an order or decree of a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy law or of any other corporation provided for by such plan of
reorganization or readjustment which stock or securities are (i) subordinated in
right of payment to all then outstanding Senior Debt of SRI, to at least the
same extent as the Notes are so subordinated as provided in this Article XI,
(ii) do not require any payments of interest or distributions greater than that
payable on the Notes, (iii) have no maturity or scheduled required prepayments,
repayments or redemptions earlier than one year after the scheduled final
maturity of the Bank Debt (giving effect to such reorganization or readjustment)
and (iv) are unsecured; PROVIDED that (1) if a new corporation results from such
reorganization or readjustment, such corporation assumes any Senior Debt of SRI
not paid in full in cash or cash equivalents in connection with
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such reorganization or readjustment; and (2) the rights of the holders of such
Senior Debt are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of SRI with, or the merger of
SRI into, another person or the liquidation or dissolution of SRI following the
conveyance or transfer of all or substantially all of its properties and assets
as an entirety to another person upon the terms and conditions set forth in
Article VI shall not be deemed a Proceeding for the purposes of this Section
11.02 if the person formed by such consolidation or into which SRI is merged or
the person which acquires by conveyance or transfer such properties and assets
as an entirety, as the case may be, shall, as part of such consolidation,
merger, conveyance or transfer, comply with the conditions set forth in Article
VI.
Section 11.03. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT.
In the event that any Senior Payment Default (as defined below)
shall have occurred and be continuing, then SRI may not make any Notes Payment
unless and until such Senior Payment Default shall have been cured or waived or
shall have ceased to exist or all amounts then due and payable in respect of
Designated Senior Debt of SRI shall have been paid in full, or provision shall
have been made for such payment, in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of such Designated Senior Debt. The term
"SENIOR PAYMENT DEFAULT" means any default in the payment of principal of (or
premium, if any) or interest on any Designated Senior Debt of SRI when due,
whether at the maturity thereof or by declaration or acceleration, call for
redemption or otherwise.
In the event that any Senior Nonmonetary Default (as defined below)
shall have occurred and be continuing, then, upon the receipt by SRI and the
Trustee of written notice of such Senior Nonmonetary Default from the
representative of holders of the Designated Senior Debt of SRI to which such
default relates, SRI may not make any Notes Payment for a period (the "PAYMENT
BLOCKAGE PERIOD") commencing on the date SRI and Trustee receive such written
notice (a "BLOCKAGE NOTICE") and ending 179 days after the date of such receipt
of such written notice (or earlier if terminated (i) by written notice to the
Trustee and SRI from the Person that gave such Blockage Notice; (ii) because
such Designated Senior Debt has been repaid in full; or (iii) because such
default is no longer continuing). Notwithstanding the provisions of the
immediately preceding sentence, unless the holders of such Designated Senior
Debt or the representative of such holders shall have accelerated the maturity
of such Designated Senior Debt, SRI may resume payments on the Notes after the
termination of such Payment Blockage Period. In any event, not more than one
Payment Blockage Period may be commenced during any period of 360 consecutive
days; PROVIDED, HOWEVER, that if a Blockage Notice is delivered by holders of
Designated Senior Debt other than the Bank Debt, holders of the Bank Debt shall
not be prohibited from delivering a Blockage Notice during the succeeding
360-day period. For all purposes of this paragraph, except as specifically
provided in the immediately preceding proviso, no Senior Nonmonetary Default
that existed or was continuing on the date of commencement of any blockage
period with respect to the Designated Senior Debt initiating such blockage
period will be, or can be, made the basis for the commencement of a subsequent
blockage period unless such default has been cured or waived for a period of not
less than 90 consecutive days. The term "SENIOR NONMONETARY DEFAULT" means the
occurrence or existence and continuance of any event of default, or of any event
which, after notice or lapse of time (or both), would become an event of
default, under the terms of any instrument pursuant to which any Designated
Senior Debt of SRI is outstanding, permitting (after notice or lapse of time or
both) one or more holders of such Designated Senior Debt (or a trustee or agent
on behalf of the holders thereof) to declare such Senior Debt due and payable
prior to the date on which it should otherwise become due and payable, other
than a Senior Payment Default.
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In the event that, notwithstanding the foregoing, SRI shall make any
Notes Payment to the Trustee or SRI or the Trustee shall make any Notes Payment
to any Holder prohibited by the foregoing provisions of this Section 11.03, then
and in such event, such Notes Payment shall be received and held in trust for
the benefit of and paid over and delivered forthwith to, the holders of the
Senior Debt of SRI remaining unpaid, to the extent necessary to pay in full all
the Senior Debt of SRI.
The provisions of this Section 11.03 shall not apply to any Notes
Payment with respect to which Section 11.02 would be applicable.
Section 11.04. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article XI or elsewhere in this Indenture
or in any of the Notes shall prevent (i) SRI, at any time except during the
pendency of any Proceeding referred to in Section 11.02 or under the conditions
described in Section 11.03, from making Notes Payments; or (ii) the application
by the Trustee of any money deposited with it hereunder to Notes Payments, if,
at the time of such application by the Trustee, it did not have knowledge that
such Notes Payment would have been prohibited by the provisions of this Article
XI; PROVIDED that notwithstanding the foregoing, such application shall
otherwise be subject to the provisions of Sections 11.02 and 11.03.
Section 11.05. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all amounts due or to become due
on or in respect of Senior Debt of SRI, or the provision for such payment, in
cash or cash equivalents or otherwise in a manner satisfactory to the holders of
Senior Debt of SRI, the Holders of the Notes shall be subrogated (equally and
ratably with the holders of all Debt of SRI, if any, which by its express terms
is subordinated to Senior Debt of SRI to substantially the same extent as the
Notes are subordinated to the Senior Debt of SRI and is entitled to like rights
of subrogation by reason of any payments or distributions made to holders of
such Senior Debt) to the rights of the holders of such Senior Debt of SRI to
receive payments and distributions of cash, property and securities applicable
to the Senior Debt of SRI until the principal of (and premium, if any) and
interest on the Notes shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of the Senior Debt of SRI of any
cash, property or securities to which the Holders of the Notes or the Trustee
would be entitled except for the provisions of this Article XI, and no payments
over pursuant to the provisions of this Article XI to the holders of Senior Debt
of SRI by Holders of the Notes or the Trustee, shall, as among SRI, its
creditors other than holders of its Senior Debt and the Holders of the Notes, be
deemed to be a payment or distribution by SRI to or on account of the Senior
Debt of SRI.
Section 11.06. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article XI are and are intended solely for
the purpose of defining the relative rights of the Holders of Notes on the one
hand and the holders of Senior Debt of SRI on the other hand. Nothing contained
in this Article XI or elsewhere in this Indenture or in the Notes is intended to
or shall (i) impair, as among SRI, its creditors other than holders of its
Senior Debt and the Holders of the Notes, the obligation of SRI, which is
absolute and unconditional, to pay to the Holders of the Notes the principal of
(and premium, if any) and interest on the Notes as and when the same shall
become due and payable in accordance with their terms; or (ii) affect the
relative rights against SRI of the Holders of the Notes and creditors
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of SRI other than the holders of Senior Debt of SRI; or (iii) prevent the
Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article XI of the holders of Senior Debt of SRI to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
Section 11.07. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Note by such Holder's acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article XI and appoints the Trustee his attorney-in-fact for any and all such
purposes.
Section 11.08. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Debt of SRI
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of SRI or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance by SRI with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt of SRI may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article XI or the
obligations hereunder of the Holders of the Notes to the holders of such Senior
Debt, do any one or more of the following: (i) change the manner, place or terms
of payment or extend the time of payment of, or renew, increase or alter, such
Senior Debt, or otherwise amend or supplement in any manner such Senior Debt or
any instrument evidencing the same or any agreement under which such Senior Debt
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Debt; (iii) release any
person liable in any manner for the payment or collection of such Senior Debt;
and (iv) exercise or refrain from exercising any rights against SRI and any
other person.
Section 11.09. NOTICE TO TRUSTEE.
SRI shall give prompt written notice to the Trustee of any fact
known to SRI which would prohibit the making of any payment to or by the Trustee
in respect of the Notes. Notwithstanding the provisions of this Article XI or
any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts which could prohibit the making of any
payment to or by the Trustee in respect of the Notes, unless and until the
Trustee shall have received written notice thereof specifically referencing this
Article XI from SRI or a holder of Senior Debt of SRI or from any trustee
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 8.01, shall be entitled in all respects to
assume that no such facts exist; PROVIDED, HOWEVER, that if the Trustee shall
not have received the notice provided for in this Section 11.09 at least one
Business Day prior to the date upon which by the terms hereof any money may
became payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Note), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power
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and authority to receive such money and to apply the same to the purpose for
which such money was received and shall not be affected by any notice to the
contrary which may be received by it within one Business Day prior to such date;
PROVIDED that notwithstanding the foregoing, receipt by the Holders of such
money shall otherwise be subject to the provisions of Sections 11.02 and 11.03.
Subject to the provisions of Section 8.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Debt of SRI (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Debt of SRI (or a trustee therefor). In the event that the Trustee determines in
good faith that further evidence is required with respect to the right of any
person as a holder of Senior Debt of SRI to participate in any payment or
distribution pursuant to this Article XI, the Trustee may request each person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Debt of SRI held by such person, the extent to which such person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article XI, and if such
evidence is not furnished, the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
Section 11.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of SRI referred to in
this Article XI, the Trustee, subject to the provisions of Section 8.01, and the
Holders of the Notes shall be entitled to rely upon any order or decree entered
by any court of competent jurisdiction in which such Proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders of
Notes, so long as such order, decree or certificate gives effect to the
provisions of this Article XI, for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holders of the
Senior Debt of SRI and other Debt of SRI, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XI.
Section 11.11. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt of SRI and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Notes or to
SRI or to any other person cash, property or securities to which any holders of
Senior Debt of SRI shall be entitled by virtue of this Article XI or otherwise.
With respect to the holders of Senior Debt of SRI, the Trustee undertakes to
perform or to observe only such of its covenants or obligations as are
specifically set forth in this Article XI and no implied covenants or
obligations with respect to holders of Senior Debt of SRI shall be read into
this Indenture against the Trustee.
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Section 11.12. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XI with respect to any Senior Debt of SRI which
may at any time be held by it, to the same extent as any other holder of Senior
Debt of SRI, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.
Nothing in this Article XI shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.07.
Section 11.13. ARTICLE XI APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by SRI and be then acting hereunder, the term "Trustee" as
used in this Article XI shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XI in addition to or in place of the Trustee; PROVIDED,
HOWEVER, that Section 11.12 shall not apply to SRI or any Affiliate of SRI if it
or such Affiliate acts as Paying Agent.
Section 11.14. TRUST MONEYS NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary, payments
from money or the proceeds of U.S. Government Obligations held in trust under
Article IX by the Trustee for the payment of principal of, and premium, if any,
and interest on the Notes shall not be subordinated to the prior payment of any
Senior Debt or subject to the restrictions on this Article XI, and none of the
Trustee or the Holders shall be obligated to pay over any such amount to SRI or
any holder of Senior Debt of SRI or any other creditor of SRI; PROVIDED that the
deposit of such amounts pursuant to Article IX shall not have violated the terms
of any Senior Debt.
ARTICLE XII
GUARANTIES
Section 12.01. GUARANTIES. Each Guarantor hereby unconditionally and irrevocably
guarantees, jointly and severally, to each Holder and to the Trustee and its
successors and assigns (a) the full and punctual payment of principal of and
interest on the Notes when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of SRI under this
Indenture and the Notes and (b) the full and punctual performance within
applicable grace periods of all other obligations of SRI under this Indenture
and the Notes (all the foregoing being hereinafter collectively called the
"Indenture Obligations"). Each Guarantor further agrees that the Indenture
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from such Guarantor and that such Guarantor will remain bound
under this Article XII notwithstanding any extension or renewal of any Indenture
Obligation.
Each Guarantor waives presentation to, demand of, payment from and
protest to the Company of any of the Indenture Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Notes or the Indenture
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Obligations. The obligations of each Guarantor hereunder shall not be affected
by (a) the failure of any Holder or the Trustee to assert any claim or demand or
to enforce any right or remedy against the Company or any other Person under
this Indenture, the Notes or any other agreement or otherwise; (b) any extension
or renewal of any thereof; (c) any rescission, waiver, amendment or modification
of any of the terms or provisions of this Indenture, the Notes or any other
agreement; (d) the release of any security held by any Holder or the Trustee for
the Indenture Obligations or any of them; (e) the failure of any Holder or the
Trustee to exercise any right or remedy against any other guarantor of the
Indenture Obligations; or (f) any change in the ownership of such Guarantor.
Each Guarantor further agrees that its Guaranty herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Indenture
Obligations.
Each Guaranty is, to the extent and in the manner set forth in
Article XIII, subordinated and subject in right of payment to the prior payment
in full in cash of all Senior Debt of the Guarantor giving such Guaranty and
each Guaranty is made subject to such provisions of this Indenture.
Except as expressly set forth in Sections 9.01(b), 12.02 and 12.06,
the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense of setoff, counterclaim, recoupment or termination
whatsoever or by reason of the invalidity, illegality or unenforceability of the
Indenture Obligations or otherwise. Without limiting the generality of the
foregoing, the obligations of each Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee to
assert any claim or demand or to enforce any remedy under this Indenture, the
Notes or any other agreement, by any waiver or modification of any thereof, by
any default, failure or delay, willful or otherwise, in the performance of the
obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
such Guarantor or would otherwise operate as a discharge of such Guarantor as a
matter of law or equity.
Each Guarantor further agrees that its Guaranty herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Indenture
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of SRI or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of SRI to pay the principal of or
interest on any Indenture Obligation when and as the same shall become due,
whether at maturity, by acceleration, by redemption or otherwise, or to perform
or comply with any other Indenture Obligation, each Guarantor hereby promises to
and will, upon receipt of written demand by the Trustee, forthwith pay, or cause
to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of
(i) the unpaid amount of such Indenture Obligations, (ii) accrued and unpaid
interest on such Indenture Obligations (but only to the extent not prohibited by
law) and (iii) all other monetary Indenture Obligations of SRI to the Holders
and the Trustee.
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Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any Indenture Obligations guaranteed hereby until
payment in full of all Indenture Obligations guaranteed hereby and all
obligations to which the guarantee of the Indenture Obligations are subordinated
as provided in Article XIII. Each Guarantor further agrees that, as between it,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the
maturity of the Indenture Obligations guaranteed hereby may be accelerated as
provided in Article VII for the purposes of such Guarantor's Guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Indenture Obligations guaranteed hereby, and (y)
in the event of any declaration of acceleration of such obligations as provided
in Article VII, such Indenture Obligations (whether or not due and payable)
shall forthwith become due and payable by such Guarantor for the purposes of
this Section.
Each Guarantor also agrees to pay any and all costs and expenses
(including attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Section.
Section 12.02. LIMITATION ON LIABILITY; CONTRIBUTION. Any term or provision of
this Indenture to the contrary notwithstanding, the maximum, aggregate amount of
the Indenture Obligations guaranteed hereunder by any Subsidiary Guarantor shall
not exceed the maximum amount that can be hereby guaranteed without rendering
this Indenture, as it relates to such Subsidiary Guarantor, voidable under
applicable federal, state or foreign law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally,
after giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Subsidiary under its Guaranty or pursuant to
its contribution obligations under this Indenture.
Each Subsidiary Guarantor shall have the right to seek contribution
from any non-paying Subsidiary Guarantor so long as the exercise of such right
does not impair the rights of the Holders under its Guaranty.
Section 12.03. SUCCESSORS AND ASSIGNS. This Article XII shall be binding upon
each Guarantor and its successors and assigns and shall inure to the benefit of
the successors and assigns of the Trustee and the Holders and, in the event of
any transfer or assignment of rights by any Holder or the Trustee, the rights
and privileges conferred upon that party in this Indenture and in the Notes
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
Section 12.04. NO WAIVER. Neither a failure nor a delay on the part of either
the Trustee or the Holders in exercising any right, power or privilege under
this Article XII shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article XII at
law, in equity, by statute or otherwise.
Section 12.05. MODIFICATION. No modification, amendment or waiver of any
provision of this Article XII, nor the consent to any departure by any Guarantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Trustee, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on any Guarantor in any case shall entitle such Guarantor to any other
for further notice or demand in the same, similar or other circumstances.
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Section 12.06. RELEASE OF SUBSIDIARY GUARANTOR. Upon the sale or other
disposition (including by way of consolidation or merger) of a Subsidiary
Guarantor or the sale or disposition of all or substantially all the assets of
such Subsidiary Guarantor (in each case other than to Stage or SRI or an
Affiliate of Stage or SRI) permitted by the Indenture, including any sale
pursuant to foreclosure on a pledge of the stock of such Subsidiary Guarantor
securing the Bank Debt in accordance with the applicable provisions of the
Uniform Commercial Code, such Subsidiary Guarantor shall be deemed released from
all obligations under this Article XII without any further action required on
the part of the Trustee or any Holder. At the request of SRI, the Trustee shall
execute and deliver an appropriate instrument evidencing such release.
ARTICLE XIII
SUBORDINATION OF GUARANTIES
Section 13.01. GUARANTIES SUBORDINATE TO SENIOR DEBT; GUARANTIES PARI PASSU WITH
SENIOR SUBORDINATED DEBT; GUARANTIES SENIOR TO SUBORDINATED
OBLIGATIONS.
Each Guarantor covenants and agrees, and each Holder of a Note, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article XIII, the obligations of
such Guarantor hereunder and in respect of the Indenture Obligations (the
"Guarantor Obligations") are hereby expressly made subordinate and subject in
right of payment to the prior payment in full of all Senior Debt of such
Guarantor. All provisions of this Article XIII shall be subject to Section 13.14
hereof. The Guarantor Obligations of a Guarantor shall rank PARI PASSU in right
of payment with all Senior Subordinated Debt of such Guarantor. The Guarantor
Obligations of a Guarantor shall rank senior in right of payment to all
Subordinated Obligations of such Guarantor.
Section 13.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (i) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to a Guarantor or SRI or to its
creditors, as such, or to its assets; or (ii) any liquidation, dissolution or
other winding up of a Guarantor or SRI, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy; or (iii) any assignment for
the benefit of creditors or any other marshalling of assets or liabilities of a
Guarantor or SRI, then and in any such event specified in clause (i), clause
(ii) or clause (iii) above (each such event, if any, herein sometimes referred
to as a "GUARANTOR PROCEEDING") the holders of Senior Debt of SRI or such
Guarantor will be first entitled to receive payment in full of all amounts due
or to become due on or in respect of all Senior Debt of SRI and such Guarantor,
or provision shall be made for such payment, in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of such Senior Debt, before
the Holders of the Notes are entitled to receive any payment or distribution of
any kind or character, on account of principal of (or premium, if any) or
interest on or other obligations in respect of the Notes or such Guarantor's
Guarantor Obligations or on account of any purchase or other acquisition of
Notes by or on behalf of such Guarantor (all such payments, distributions,
purchases and acquisitions herein referred to, individually and collectively, as
a "GUARANTY PAYMENT"), and to that end the holders of Senior Debt of SRI and
such Guarantor shall be entitled to receive, for application to the payment
thereof, any Guaranty Payment which may be payable or deliverable in respect of
the Notes in any such Guarantor Proceeding.
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In the event that, notwithstanding the foregoing provisions of this
Section 13.02, the Trustee or any Holder receives payment or distribution of
assets of a Guarantor of any kind or character, before all the Senior Debt of
SRI and such Guarantor is paid in full as provided above, then and in such
event, such Guaranty Payment shall be received and held in trust for the benefit
of the holders of such Senior Debt and paid over or delivered forthwith to the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other person making payment or distribution of assets of such Guarantor for
application to the payment of all Senior Debt of such Guarantor remaining
unpaid, to the extent necessary to pay the Senior Debt of SRI and such Guarantor
in full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt of such Guarantor.
For purposes of this Article XIII only, the words "any payment or
distribution of any kind or character" shall not be deemed to include a payment
or distribution of stock or securities of a Guarantor provided for by a plan of
reorganization or readjustment authorized by an order or decree of a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy law or of any other corporation provided for by such plan of
reorganization or readjustment which stock or securities are (i) subordinated in
right of payment to all then outstanding Senior Debt of such Guarantor, to at
least the same extent as the Guarantor Obligations of such Guarantor are so
subordinated as provided in this Article XIII, (ii) do not require any payments
of interest or distributions greater than that payable on the Notes, (iii) have
no maturity or scheduled required prepayments, repayments or redemptions earlier
than one year after the scheduled final maturity of the Bank Debt (giving effect
to such reorganization or readjustment) and (iv) are unsecured; PROVIDED that
(1) if a new corporation results from such reorganization or readjustment, such
corporation assumes any Senior Debt of such Guarantor not paid in full in cash
or cash equivalents in connection with such reorganization or readjustment; and
(2) the rights of the holders of such Senior Debt are not, without the consent
of such holders, altered by such reorganization or readjustment. The
consolidation of a Guarantor with, or the merger of a Guarantor into, another
person or the liquidation or dissolution of such Guarantor following the
conveyance or transfer of all or substantially all of its properties and assets
as an entirety to another person upon the terms and conditions set forth in
Article VI shall not be deemed a Guarantor Proceeding for the purposes of this
Section 13.02 if the person formed by such consolidation or into which such
Guarantor is merged or the person which acquires by conveyance or transfer such
properties and assets as an entirety, as the case may be, shall, as part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article VI.
Section 13.03. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT.
In the event that any Guarantor Senior Payment Default (as defined
below) shall have occurred and be continuing, then the applicable Guarantor may
not make any Guaranty Payment unless and until such Guarantor Senior Payment
Default shall have been cured or waived or shall have ceased to exist or all
amounts then due and payable in respect of Designated Senior Debt of such
Guarantor shall have been paid in full, or provision shall have been made for
such payment, in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of such Designated Senior Debt. The term "GUARANTOR SENIOR
PAYMENT DEFAULT" means any default in the payment of principal of (or premium,
if any) or interest on any Designated Senior Debt of SRI or a Guarantor when
due, whether at the maturity thereof or by declaration or acceleration, call for
redemption or otherwise.
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In the event that any Guarantor Senior Nonmonetary Default (as
defined below) shall have occurred and be continuing, then, upon the receipt by
the applicable Guarantor and the Trustee of written notice of such Guarantor
Senior Nonmonetary Default from the representative of holders of the Designated
Senior Debt to which such default relates, such Guarantor may not make any
Guaranty Payment for a period (the "GUARANTOR PAYMENT BLOCKAGE PERIOD")
commencing on the date the applicable Guarantor and Trustee receive such written
notice (a "GUARANTOR BLOCKAGE NOTICE") and ending 179 days after the date of
such receipt of such written notice (or earlier if terminated (i) by written
notice to the Trustee and the applicable Guarantor from the Person that gave
such Blockage Notice; (ii) because such Designated Senior Debt has been repaid
in full; or (iii) because such default is no longer continuing). Notwithstanding
the provisions of the immediately preceding sentence, unless the holders of such
Designated Senior Debt or the representative of such holders shall have
accelerated the maturity of such Designated Senior Debt, such Guarantor may
resume payments on its Guarantor Obligations after the termination of such
Guarantor Payment Blockage Period. In any event, not more than one Guarantor
Payment Blockage Period may be commenced during any period of 360 consecutive
days; PROVIDED, HOWEVER, that if a Guarantor Blockage Notice is delivered by
holders of Designated Senior Debt other than the Bank Debt, holders of the Bank
Debt shall not be prohibited from delivering a Guarantor Blockage Notice during
the succeeding 360-day period. For all purposes of this paragraph, except as
specifically provided in the immediately preceding proviso, no Senior
Nonmonetary Default that existed or was continuing on the date of commencement
of any blockage period with respect to the Designated Senior Debt initiating
such blockage period will be, or can be, made the basis for the commencement of
a subsequent blockage period unless such default has been cured or waived for a
period of not less than 90 consecutive days. The term "GUARANTOR SENIOR
NONMONETARY DEFAULT" means the occurrence or existence and continuance of any
event of default, or of any event which, after notice or lapse of time (or
both), would become an event of default, under the terms of any instrument
pursuant to which any Designated Senior Debt of SRI or a Guarantor is
outstanding, permitting (after notice or lapse of time or both) one or more
holders of such Designated Senior Debt (or a trustee or agent on behalf of the
holders thereof) to declare such Senior Debt due and payable prior to the date
on which it should otherwise become due and payable, other than a Guarantor
Senior Payment Default.
In the event that, notwithstanding the foregoing, a Guarantor shall
make any Guaranty Payment to the Trustee or a Guarantor or the Trustee shall
make any Guaranty Payment to any Holder prohibited by the foregoing provisions
of this Section 13.03, then and in such event, such Guaranty Payment shall be
received and held in trust for the benefit of and paid over and delivered
forthwith to, the holders of the Senior Debt of such Guarantor remaining unpaid,
to the extent necessary to pay in full all the Senior Debt of such Guarantor.
The provisions of this Section 13.03 shall not apply to any Guaranty
Payment with respect to which Section 13.02 would be applicable.
Section 13.04. PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article XIII or elsewhere in this
Indenture or in any of the Notes shall prevent (i) a Guarantor, at any time
except during the pendency of any Guarantor Proceeding referred to in Section
13.02 or under the conditions described in Section 13.03, from making Guaranty
Payments; or (ii) the application by the Trustee of any money deposited with it
hereunder to Guaranty Payments, if, at the time of such application by the
Trustee, it did not have knowledge that such Guaranty Payment would have been
prohibited by the provisions of
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this Article XIII; PROVIDED that notwithstanding the foregoing, such application
shall otherwise be subject to the provisions of Sections 13.02 and 13.03.
Section 13.05. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all amounts due or to become due
on or in respect of Senior Debt of a Guarantor, or the provision for such
payment, in cash or cash equivalents or otherwise in a manner satisfactory to
the holders of Senior Debt of such Guarantor, the Holders of the Notes shall be
subrogated (equally and ratably with the holders of all Debt of such Guarantor,
if any, which by its express terms is subordinated to Senior Debt of such
Guarantor to substantially the same extent as the Notes are subordinated to the
Senior Debt of such Guarantor and is entitled to like rights of subrogation by
reason of any payments or distributions made to holders of such Senior Debt) to
the rights of the holders of such Senior Debt of such Guarantor to receive
payments and distributions of cash, property and securities applicable to the
Senior Debt of such Guarantor until the principal of (and premium, if any) and
interest on the Notes shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of the Senior Debt of a Guarantor of
any cash, property or securities to which the Holders of the Notes or the
Trustee would be entitled except for the provisions of this Article XIII, and no
payments over pursuant to the provisions of this Article XIII to the holders of
Senior Debt of a Guarantor by Holders of the Notes or the Trustee, shall, as
among such Guarantor, its creditors other than holders of its Senior Debt and
the Holders of the Notes, be deemed to be a payment or distribution by such
Guarantor to or on account of the Senior Debt of such Guarantor.
Section 13.06. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article XIII are and are intended solely for
the purpose of defining the relative rights of the Holders of Notes on the one
hand and the holders of Senior Debt of the Guarantors on the other hand. Nothing
contained in this Article XIII or elsewhere in this Indenture or in the Notes is
intended to or shall (i) impair, as among a Guarantor, its creditors other than
holders of its Senior Debt and the Holders of the Notes, the obligation of such
Guarantor, which is absolute and unconditional, to pay to the Holders of the
Notes its Guarantor Obligations as and when the same shall become due and
payable in accordance with the terms of this Indenture; or (ii) affect the
relative rights against a Guarantor of the Holders of the Notes and creditors of
such Guarantor other than the holders of Senior Debt of such Guarantor; or (iii)
prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article XIII of the holders of Senior Debt of
a Guarantor to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
Section 13.07. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Note by such Holder's acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article XIII and appoints the Trustee his attorney-in-fact for any and all such
purposes.
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Section 13.08. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holder of any Senior Debt of a
Guarantor to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of such
Guarantor or by any act or failure to act, in good faith, by any such holder, or
by any noncompliance by such Guarantor with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt of a Guarantor may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders of
the Notes, without incurring responsibility to the Holders of the Notes and
without impairing or releasing the subordination provided in this Article XIII
or the obligations hereunder of the Holders of the Notes to the holders of such
Senior Debt, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew, increase or
alter, such Senior Debt, or otherwise amend or supplement in any manner such
Senior Debt or any instrument evidencing the same or any agreement under which
such Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing such Senior Debt;
(iii) release any person liable in any manner for the payment or collection of
such Senior Debt; and (iv) exercise or refrain from exercising any rights
against such Guarantor and any other person.
Section 13.09. NOTICE TO TRUSTEE.
Each Guarantor shall give prompt written notice to the Trustee of
any fact known to such Guarantor which would prohibit the making of any payment
to or by the Trustee in respect of the Notes. Notwithstanding the provisions of
this Article XIII or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which could prohibit
the making of any payment to or by the Trustee in respect of the Notes, unless
and until the Trustee shall have received written notice thereof specifically
referencing this Article XIII from a Guarantor or a holder of Senior Debt of
such Guarantor or from any trustee therefor; and, prior to the receipt of any
such written notice, the Trustee, subject to the provisions of Section 8.01,
shall be entitled in all respects to assume that no such facts exist; PROVIDED,
HOWEVER, that if the Trustee shall not have received the notice provided for in
this Section 13.09 at least one Business Day prior to the date upon which by the
terms hereof any money may became payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest on
any Note), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within one
Business Day prior to such date; PROVIDED that notwithstanding the foregoing,
receipt by the Holders of such money shall otherwise be subject to the
provisions of Sections 13.02 and 13.03.
Subject to the provisions of Section 8.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Debt of a Guarantor (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Debt of such Guarantor (or a trustee therefor). In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any person as a holder of Senior Debt of such Guarantor to participate
in any payment or distribution pursuant to this Article XIII, the Trustee may
request each person to furnish evidence to the
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reasonable satisfaction of the Trustee as to the amount of Senior Debt of such
Guarantor held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such person under this Article XIII, and if such evidence is not
furnished, the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
Section 13.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of a Guarantor referred
to in this Article XIII, the Trustee, subject to the provisions of Section 8.01,
and the Holders of the Notes shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Guarantor
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other person making such payment or distribution, delivered to the Trustee or to
the Holders of Notes so long as such order, decree or certificate gives effect
to the provisions of this Article XIII, for the purpose of ascertaining the
persons entitled to participate in such payment or distribution, the holders of
the Senior Debt of such Guarantor and other Debt of such Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article XIII.
Section 13.11. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt of a Guarantor and shall not be liable to any such
holders if it shall in good faith mistakenly pay over or distribute to Holders
of Notes or to such Guarantor or to any other person cash, property or
securities to which any holders of Senior Debt of such Guarantor shall be
entitled by virtue of this Article XIII or otherwise. With respect to the
holders of Senior Debt of such Guarantor, the Trustee undertakes to perform or
to observe only such of its covenants or obligations as are specifically set
forth in this Article XIII and no implied covenants or obligations with respect
to holders of Senior Debt of a Guarantor shall be read into this Indenture
against the Trustee.
Section 13.12. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XIII with respect to any Senior Debt of a
Guarantor which may at any time be held by it, to the same extent as any other
holder of Senior Debt of a Guarantor, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article XIII shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 8.07.
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Section 13.13. ARTICLE XIII APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by SRI and be then acting hereunder, the term "Trustee" as
used in this Article XIII shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIII in addition to or in place of the Trustee; PROVIDED,
HOWEVER, that Section 13.12 shall not apply to SRI or any Affiliate of SRI if it
or such Affiliate acts as Paying Agent.
Section 13.14. TRUST MONEYS NOT SUBORDINATED.
Notwithstanding anything contained herein to the contrary, payments
from money or the proceeds of U.S. Government Obligations held in trust under
Article IX by the Trustee for the payment of principal of, and premium, if any,
and interest on the Notes shall not be subordinated to the prior payment of any
Senior Debt or subject to the restrictions on this Article XIII, and none of the
Trustee or the Holders shall be obligated to pay over any such amount to SRI,
any Guarantor or any holder of Senior Debt of a Guarantor or any other creditor
of SRI or a Guarantor; PROVIDED that the deposit of such amounts pursuant to
Article IX shall not have violated the terms of any Senior Debt.
ARTICLE XIV
MISCELLANEOUS
Section 14.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss. 318(c), such imposed duties shall control.
Section 14.02. NOTICES.
Any notice or communication by SRI, Stage, any Subsidiary Guarantor
or the Trustee to the other is duly given if in writing and delivered in person
or mailed by first class mail (registered or certified, return receipt
requested), telecopier or overnight air courier guaranteeing next day delivery,
to the other's address:
If to SRI or Stage or any Subsidiary Guarantor:
c/o Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Telecopier No.: (713) 669-2709
Attention: James Marcum
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If to the Trustee:
State Street Bank and Trust Company
Two International Place (4th Floor)
Boston, Massachusetts 02110
Telecopier No: (617) 664-5371
Attention: Corporate Trust Department
(Specialty Retailers, Inc.
9% Senior Subordinated
Notes Due 2007)
SRI or the Trustee, by notice each to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders of
Notes) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder of a Note shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
Note Register. Any notice or communication shall also be so mailed to any Person
described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail
a notice or communication to a Holder of a Note or any defect in such notice
shall not affect its sufficiency with respect to other Holders of Notes.
If a notice or communication is mailed in the manner set forth above
within the time prescribed, such notice or communication shall be deemed to be
duly given whether or not the addressee receives it.
If SRI mails a notice or communication to Holders of Notes, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 14.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders of Notes pursuant to TIA ss. 312(b) may communicate with
other Holders of Notes with respect to their rights under this Indenture or the
Notes. SRI and Stage, the Trustee, the Registrar, the Paying Agent and any other
Person shall have the protection of TIA ss. 312(c).
Section 14.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by Stage, SRI or a Guarantor to the
Trustee to take any action under this Indenture, Stage, SRI or such Guarantor,
as the case may be, shall furnish to the Trustee:
(i) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
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(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all conditions and covenants have been satisfied.
Section 14.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant contained in this Indenture shall include:
(i) a statement that the Person making such certificate or opinion
has read such condition or covenant;
(ii) a statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether such condition or
covenant has been satisfied; and
(iv) a statement as to whether, in the opinion of such Person. such
condition or covenant has been satisfied.
Section 14.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders of Notes. The Registrar and Paying Agent may make reasonable rules
and set reasonable requirements for their functions.
Section 14.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of
Stage, SRI or any Guarantor, as such, shall have any liability for any
obligations of Stage, SRI or such Guarantor under the Notes or this Indenture or
for any claim based on, in respect of, or by reason of, such obligations. Each
Holder of a Note by accepting a Note waives and releases all such liability.
Such waiver and release form a part of the consideration for issuance of the
Notes.
Section 14.08. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
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Section 14.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of Stage or its Subsidiaries. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 14.10. SUCCESSORS.
All agreements of Stage, SRI and the Guarantors contained in this
Indenture and the Notes shall bind such entities and their respective
successors. All agreements of the Trustee in this Indenture shall bind the
Trustee and its successors.
Section 14.11. SEVERABILITY.
In case any provision of this Indenture or the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 14.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
such signed copy shall be deemed to be an original, and all of such signed
copies together shall represent one and the same agreement.
Section 14.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience only,
and shall not, for any reason, be deemed to be part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
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SIGNATURES
SPECIALTY RETAILERS, INC.,
as Issuer
By: /S/ JAMES MARCUM
Name: James Marcum
Title: Executive Vice President &
Chief Financial Officer
Attest:
/S/ MARK HESS
Name: Mark Hess
Title: Vice President, Financial Planning
STAGE STORES, INC.,
as Guarantor
By: /S/ JAMES MARCUM
Name: James Marcum
Title: Executive Vice President &
Chief Financial Officer
Attest:
/S/ MARK HESS
Name: Mark Hess
Title: Vice President, Financial Planning
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /S/ JILL OLSON
Name: Jill Olson
Title: Assistant Vice President
Attest:
/S/ JACQUELINE RIVERA
Name: Jacqueline River
Title: Assistant Secretary
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EXHIBIT A
[FORM OF FACE OF NOTE]
SPECIALTY RETAILERS, INC.
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO SRI OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.*
[Restricted Notes Legend]
"THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND UNDER APPLICABLE STATE
SECURITIES LAWS, AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER
OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF SRI THAT (A) THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii)
PURSUANT
- --------
* This legend should only be added if the Note is issued in global form.
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TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i)
THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
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No. Principal Amount $
CUSIP No. 847514AL0
9% Senior Subordinated Notes Due 2007
SPECIALTY RETAILERS, INC., a Texas corporation, promises to pay to
, or registered assigns, the principal sum of
Dollars on July 15, 2007.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Note are set forth on the reverse side
of this Note.
Dated: June 17, 1997
[SEAL] SPECIALTY RETAILERS, INC.
By
Title:
By
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND
TRUST COMPANY,
as Trustee, certifies
that this is one of the
Notes referred to in the
Indenture.
By
Authorized Signatory
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<PAGE>
[FORM OF REVERSE SIDE OF NOTE]
9% Senior Subordinated Notes Due 2007
1. INTEREST
SPECIALTY RETAILERS, INC., a Texas corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called "SRI"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above; PROVIDED, HOWEVER, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
interest will accrue on this security at a rate of 9 1/2% per annum from and
including the date on which any such Registration Default shall occur but
excluding the date on which all Registration Defaults have been cured.
SRI will pay interest semi-annually on January 15 and July 15 of
each year, commencing January 15, 1998. Interest on the Notes will accrue from
the most recent date to which interest has been paid, or, if no interest has
been paid, from June 17, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. SRI shall pay interest on overdue
principal at the rate borne by the Notes.
2. METHOD OF PAYMENT
SRI will pay interest on the Notes (except defaulted interest) to
the Persons who are registered Holders of Notes at the close of business on the
January 1 or July 1 next preceding the interest payment date even if Notes are
cancelled after the record date and on or before the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
SRI will pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts.
However, SRI may pay principal and interest by check payable in such money. It
may mail an interest check to a Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts
trust company (the "TRUSTEE"), will act as Paying Agent and Registrar. SRI may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
SRI or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. INDENTURE
SRI issued the Notes under an Indenture dated as of June 17, 1997
(the "INDENTURE"), between SRI, Stage Stores, Inc. ("Stage") as Guarantor and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and the TIA for a statement of
those terms.
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The Notes are unsecured senior subordinated obligations of SRI
limited to $100,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture imposes certain limitations on the incurrence of
additional indebtedness by Stage and certain of its Subsidiaries, the payment of
dividends on, and the redemption of, capital stock of Stage and certain of its
Subsidiaries, the making of Investments, restrictions on distributions from
certain Subsidiaries, the use of proceeds from the sale of assets and Subsidiary
stock, transactions with affiliates and certain matters regarding Accounts
Receivable Subsidiaries. The Indenture also restricts the ability of Stage, SRI
and certain of the Subsidiaries of Stage to consolidate or merge with or into,
or to transfer all or substantially all its assets to, another person. All of
these limitations, however, are subject to a number of important qualifications
contained in the Indenture.
5. OPTIONAL REDEMPTION
The Notes will be redeemable, at SRI's option, in whole or in part,
at any time and from time to time on or after July 15, 2002, upon not less than
30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address, appearing in the Note Register, at the following
redemption prices (expressed in percentages of principal amount at maturity),
plus accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12- month period
commencing on or after July 15 of the years set forth below:
REDEMPTION
YEAR PRICE
2002..............................104.500%
2003..............................103.000%
2004..............................101.500%
2005 and thereafter...............100.000%
In addition, at any time and from time to time prior to July 15,
2000, SRI may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the net cash proceeds of one or more Public Equity Offerings ,
at a redemption price (expressed as a percentage of principal amount) of
109.00%, plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); PROVIDED, HOWEVER, that at least $65,000,000
aggregate principal amount at maturity of the Notes must remain outstanding
after each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption shall be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Notes to be redeemed
at its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued interest on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Notes (or
such portions thereof) called for redemption.
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7. PUT PROVISIONS
Upon a Change of Control, any Holder of Notes will have the right to
require SRI to repurchase all or any part of the Notes of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Notes to be
repurchased plus accrued and unpaid interest (if any) to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. SENIOR SUBORDINATED NOTE GUARANTIES
As provided in the Indenture and subject to certain limitations
therein set forth, the obligations of SRI under the Indenture and this Note are
guaranteed on a senior subordinated basis by Stage and may in the future be
guaranteed on a senior subordinated basis by certain Subsidiaries of Stage.
9. SUBORDINATION
The Notes and the Guaranties are subordinated to Senior Debt. To the
extent provided in the Indenture, Senior Debt must be paid before the Notes may
be paid. SRI and each Guarantor agrees, and each Holder of a Note by accepting a
Note agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give effect to such subordination provisions and
appoints the Trustee as attorney-in-fact for such purpose.
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. Holders of Notes may transfer or
exchange Notes in accordance with the Indenture. The Registrar may require a
Holder of a Note, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Note selected for redemption (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed) or any Notes for a period of
15 days before a selection of Notes to be redeemed or 15 days before an interest
payment date.
11. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the sole owner
of such Note for all purposes.
12. UNCLAIMED MONEY
Subject to applicable abandoned property law, if money for the
payment of principal or interest remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to SRI at its request. After any such
payment, Holders entitled to the money must look only to SRI and not to the
Trustee or Paying Agent for payment.
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13. DISCHARGE AND DEFEASANCE
Subject to certain conditions, SRI at any time may terminate some or
all of its obligations under the Notes and the Indenture if SRI deposits with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Notes to redemption or maturity, as the case may be.
14. AMENDMENT; WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount outstanding of the Notes; and (ii) any
default or compliance with any provision may be waived with the written consent
of the Holders of a majority in principal amount of the Notes then outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of a Note, SRI, Stage and the Trustee may amend the Indenture or the
Notes to cure any ambiguity, omission, defect or inconsistency, or to comply
with Article VI of the Indenture, or to provide for uncertificated Notes in
addition to or in place of certificated Notes, or to add guarantees with respect
to the Notes or add additional covenants or surrender rights and powers
conferred on Stage, SRI or any Guarantor, or to release a Guaranty, when
permitted by the Indenture, or to secure the Notes, or to make any change that
would not adversely affect the rights of any Holder of a Note or to comply with
requirements of the SEC in connection with the qualification of the Indenture
under the TIA.
15. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest; (ii) default in payment of principal or premium, if
any, on the Notes at maturity, upon redemption, upon declaration, upon required
repurchase or otherwise; (iii) failure by Stage, SRI or any Guarantor to comply
with other covenants in the Indenture or the Notes, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
at final maturity) of other Debt of Stage or any of its Subsidiaries if the
amount accelerated (or so unpaid) aggregates $15 million or more; (v) certain
events of bankruptcy or insolvency with respect to Stage, SRI or any Significant
Subsidiary of Stage; (vi) certain judgments or decrees for the payment of money
in excess of $15 million; and (vii) certain events with respect to the
Guaranties of the Notes by Stage and certain Subsidiaries of Stage. If an Event
of Default occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable immediately; PROVIDED that if any Bank Debt remains outstanding, such
declaration will not become effective until three Business Days after notice
thereof has been given to the representative of the holders of the Bank Debt.
Certain events of bankruptcy or insolvency are Events of Default which will
result in the Notes being due and payable immediately upon the occurrence of
such Events of Default.
Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any
A-7
<PAGE>
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding such notice is in the interest of the Holders of
Notes.
16. TRUSTEE DEALINGS WITH SRI, STAGE AND THEIR AFFILIATES
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by SRI or their Affiliates and may otherwise deal with SRI, Stage or their
Affiliates with the same rights it would have if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of SRI, Stage
or any Guarantor or the Trustee shall not have any liability for any obligations
of SRI, Stage or any Guarantor under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations. By accepting a Note,
each Holder of a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
18. AUTHENTICATION
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the face of this Note.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT
Each Holder of a Note, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
21. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
22. CUSIP NUMBERS
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Pursuant to the recommendation promulgated by the Committee on
Uniform Security Identification Procedures SRI has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use such CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
--------------------------
SRI will furnish to any Holder of a Note upon written request and
without charge to such Holder of a Note a copy of the Indenture which contains
the text of this Note in larger type. Requests may be made to:
Specialty Retailers, Inc.
c/o Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: James Marcum
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<PAGE>
================================================================================
ASSIGNMENT FORM
To assign this Note, complete the form below:
I or we assign and transfer this Note to:
[PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE]
[INSERT ASSIGNEE'S SOC. SEC. OR TAX I.D. NO. ]
and irrevocably appoint ___________________ agent to transfer this Note on
the books of SRI. The agent may substitute another to act for him.
================================================================================
Date: Your Signature:
================================================================================
Sign exactly as your name appears on the face of this Note.
Signature Guarantee:
________________________________________________
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan
association or credit union) with membership in an
approved signature guarantee medallion program pursuant
to Securities and Exchange Commission Rule 17Ad-15.]
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<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION
OF TRANSFER OF RESTRICTED NOTES
This certificate relates to $_________ principal amount of Notes held in (check
applicable space) ____ book-entry or _____ definitive form by the undersigned.
The undersigned (check one box below):
| | has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Note or
Notes in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above); or
| | has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
The undersigned confirms that such Notes are being:
CHECK ONE BOX BELOW:
(1) | | acquired for the undersigned's own account, without
Transfer (in satisfaction of Section 2.06(a)(ii)(A) of the
Indenture); or
(2) | | transferred to SRI; or
(3) | | transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
(4) | | transferred pursuant to and in compliance with Regulation
S under the Securities Act of 1933, as amended; or
(5) | | transferred pursuant to and in compliance with Rule 144
under the Securities Act of 1933, as amended; or
(6) | | transferred pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered holder thereof; PROVIDED, HOWEVER, that if box (2), (3) or (4) is
checked, SRI or the Trustee may require evidence reasonably satisfactory to them
as to the compliance with the restrictions set forth in the legend on the face
of this Note.
----------------------------
Signature
A-11
<PAGE>
Signature Guarantee:
----------------------------------------------
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan
association or credit union) with membership in an
approved signature guarantee medallion program
pursuant to Securities and Exchange Commission Rule
17Ad-15.]
A-12
<PAGE>
OPTION OF HOLDER OF NOTE TO ELECT PURCHASE
If you elect to have this Note purchased by SRI pursuant to Article
IV or Section 5.07 of the Indenture, check the box:
[ ]
If you elect to have only part of this Note purchased by SRI
pursuant to Article IV or Section 5.07 of the Indenture, state the amount:
$
Date: Your Signature:
(Sign exactly as your name
appears on the face of the
Note)
Signature Guarantee:
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan association
or credit union) with membership in an approved signature
guarantee medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15.]
A-13
<PAGE>
[TO BE ATTACHED TO GLOBAL NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
<TABLE>
<S> <C> <C>
AMOUNT OF DECREASE IN AMOUNT OF INCREASE IN PRINCIPAL AMOUNT OF THIS SIGNATURE OF AUTHORIZED
DATE OF PRINCIPAL AMOUNT OF THIS PRINCIPAL AMOUNT OF THIS GLOBAL NOTE FOLLOWING SIGNATORY OF TRUSTEE OR NOTES
EXCHANGE GLOBAL NOTE GLOBAL NOTE SUCH DECREASE OR INCREASE CUSTODIAN
</TABLE>
A-14
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE NOTE AND
PRIVATE EXCHANGE NOTE]
*
**
SPECIALTY RETAILERS, INC.
No. $
CUSIP:
9% Senior Subordinated Notes Due 2007
Specialty Retailers, Inc., a Texas corporation, promises to pay to
or registered assigns, the principal sum of Dollars on
July 15, 2007.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
Additional provisions of this Note are set forth on the other side
of this Note.
SPECIALTY RETAILERS, INC.
by
Dated: _________________
[Seal]
----------------------------
Title:
----------------------------
Title
- ------------------------
* If the Note is to be issued in global form add the Global Notes Legend
from Exhibit A and the attachment to Exhibit A captioned "[TO BE ATTACHED TO
GLOBAL NOTES] - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".
** If the Note is a Private Exchange Note issued in a Private Exchange to
the Initial Purchasers holding an unsold portion of its initial allotment, add
the restricted securities legend from Exhibit A and include the "Certificate to
be Delivered upon Exchange or Registration of Transfer of Restricted Notes" from
Exhibit A.
B-1
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND
TRUST COMPANY,
as Trustee, certifies
that this is one of the
Notes referred to
in the Indenture.
by
--------------------
Authorized Signatory
B-2
<PAGE>
[FORM OF REVERSE SIDE OF NOTE]
9% Senior Subordinated Notes Due 2007
1. INTEREST
SPECIALTY RETAILERS, INC., a Texas corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called "SRI"), promises to pay interest on the
principal amount of this Note at the rate per annum shown above PROVIDED,
HOWEVER, that if a Registration Default (as defined in the Registration Rights
Agreement) occurs, interest will accrue on this security at a rate of 9 1/2% per
annum form and including the date on which any such Registration Default shall
occur but excluding the date on which all Registration Defaults have been cured.
SRI will pay interest semi-annually on January 15 and July 15 of
each year, commencing January 15, 1998. Interest on the Notes will accrue from
the most recent date to which interest has been paid, or, if no interest has
been paid, from June 17, 1997. Interest will be computed on the basis of a
360-day year of twelve 30-day months. SRI shall pay interest on overdue
principal at the rate borne by the Notes.
2. METHOD OF PAYMENT
SRI will pay interest on the Notes (except defaulted interest) to
the Persons who are registered Holders of Notes at the close of business on the
January 1 or July 1 next preceding the interest payment date even if Notes are
cancelled after the record date and on or before the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
SRI will pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts.
However, SRI may pay principal and interest by check payable in such money. It
may mail an interest check to a Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts
trust company (the "TRUSTEE"), will act as Paying Agent and Registrar. SRI may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
SRI or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. INDENTURE
SRI issued the Notes under an Indenture dated as of June 17, 1997
(the "INDENTURE"), between SRI, Stage Stores, Inc. ("Stage") as Guarantor and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. ss.ss. 77aaa- 77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the
B-3
<PAGE>
Indenture. The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of those terms.
The Notes are unsecured senior subordinated obligations of SRI
limited to $100,000,000 aggregate principal amount (subject to Section 2.07 of
the Indenture). The Indenture imposes certain limitations on the incurrence of
additional indebtedness by Stage and certain of its subsidiaries, the payment of
dividends on, and the redemption of, capital stock of Stage and certain of its
Subsidiaries, the making of Investments, restrictions on distributions from
certain Subsidiaries, the use of proceeds from the sale of assets and Subsidiary
stock, transactions with affiliates and certain matters regarding Accounts
Receivable Subsidiaries. The Indenture also restricts the ability of Stage, SRI
and certain of the Subsidiaries of Stage to consolidate or merge with or into,
or to transfer all or substantially all its assets to, another person. All of
these limitations, however, are subject to a number of important qualifications
contained in the Indenture.
5. OPTIONAL REDEMPTION
The Notes will be redeemable, at SRI's option, in whole or in part,
at any time and from time to time on or after July 15, 2002, upon not less than
30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address appearing in the Note Register, at the following
redemption prices (expressed in percentages of principal amount at maturity),
plus accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on or after July 15 of the years set forth below:
REDEMPTION
YEAR PRICE
---- -----
2002.............................. 104.500%
2003.............................. 103.000%
2004.............................. 101.500%
2005 and thereafter............... 100.000%
In addition, at any time and from time to time prior to July 15,
2000, SRI may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the net cash proceeds of one or more Public Equity Offerings,
at a redemption price (expressed as a percentage of principal amount) of
109.00%, plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); PROVIDED, HOWEVER,
that at least $65,000,000 aggregate principal amount at maturity of the Notes
must remain outstanding after each such redemption.
6. NOTICE OF REDEMPTION
Notice of redemption shall be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Notes to be redeemed
at its registered address. Notes in denominations larger than $1,000 may be
redeemed in
B-4
<PAGE>
part but only in whole multiples of $1,000. If money sufficient to pay the
redemption price of and accrued interest on all Notes (or portions thereof) to
be redeemed on the redemption date is deposited with the Paying Agent on or
before the redemption date and certain other conditions are satisfied, on and
after such date interest ceases to accrue on such Notes (or such portions
thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Notes will have the right to
require SRI to repurchase all or any part of the Notes of such Holder at a
purchase price in cash equal to 101% of the principal amount of the Notes to be
repurchased plus accrued and unpaid interest (if any) to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. SENIOR SUBORDINATED NOTE GUARANTIES
As provided in the Indenture and subject to certain limitations
therein set forth, the obligations of SRI under the Indenture and this Note are
guaranteed on a senior subordinated basis by Stage and may in the future be
guaranteed on a senior subordinated basis by certain Subsidiaries of Stage.
9. SUBORDINATION
The Notes and the Guaranties are subordinated to Senior Debt. To the
extent provided in the Indenture, Senior Debt must be paid before the Notes may
be paid. SRI and each Guarantor agrees, and each Holder of a Note by accepting a
Note agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give effect to such subordination provisions and
appoints the Trustee as attorney-in-fact for such purpose.
10. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. Holders of Notes may transfer or
exchange Notes in accordance with the Indenture. The Registrar may require a
Holder of a Note, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Note selected for redemption (except, in the case of a Note to be redeemed in
part, the portion of the Note not to be redeemed) or any Notes for a period of
15 days before a selection of Notes to be redeemed or 15 days before an interest
payment date.
11. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the sole owner
of such Note for all purposes.
B-5
<PAGE>
12. UNCLAIMED MONEY
Subject to applicable abandoned property law, if money for the
payment of principal or interest remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to SRI at its request. After any such
payment, Holders entitled to the money must look only to SRI and not to the
Trustee or Paying Agent for payment.
13. DISCHARGE AND DEFEASANCE
Subject to certain conditions, SRI at any time may terminate some or
all of its obligations under the Notes and the Indenture if SRI deposits with
the Trustee money or U.S. Government Obligations for the payment of principal
and interest on the Notes to redemption or maturity, as the case may be.
14. AMENDMENT; WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount outstanding of the Notes; and (ii) any
default or compliance with any provision may be waived with the written consent
of the Holders of a majority in principal amount of the Notes then outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder of a Note, SRI, Stage and the Trustee may amend the Indenture or the
Notes to cure any ambiguity, omission, defect or inconsistency, or to comply
with Article VI of the Indenture, or to provide for uncertificated Notes in
addition to or in place of certificated Notes, or to add guarantees with respect
to the Notes or add additional covenants or surrender rights and powers
conferred on Stage, SRI or any Guarantor, or to release a Guaranty, when
permitted by the Indenture, or to secure the Notes, or to make any change that
would not adversely affect the rights of any Holder of a Note or to comply with
requirements of the SEC in connection with the qualification of the Indenture
under the TIA.
15. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest; (ii) default in payment of principal or premium, if
any, on the Notes at maturity, upon redemption, upon declaration, upon required
repurchase or otherwise; (iii) failure by SRI to comply with other covenants in
the Indenture or the Notes, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay final maturity) of
other Debt of Stage or any of its Subsidiaries if the amount accelerated (or so
unpaid) aggregates $15 million or more; (v) certain events of bankruptcy or
insolvency with respect to Stage, SRI or any Significant Subsidiary of Stage;
(vi) certain judgments or decrees for the payment of money in excess of $15
million; and (vii) certain events with respect to the Guaranties of the Notes by
Stage and certain Subsidiaries of Stage. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding may declare the principal of and accrued
but unpaid interest on all the Notes to be due and payable immediately; PROVIDED
that if any Bank Debt remains outstanding, such declaration will not become
effective until
B-6
<PAGE>
three Business Days after notice thereof has been given to the representative of
the holders of the Bank Debt. Certain events of bankruptcy or insolvency are
Events of Default which will result in the Notes being due and payable
immediately upon the occurrence of such Events of Default.
Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default (except a
Default in payment of principal or interest) if it determines that withholding
such notice is in the interest of the Holders of Notes.
16. TRUSTEE DEALINGS WITH SRI, STAGE AND THEIR AFFILIATE
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by SRI, Stage or their Affiliates and may otherwise deal with SRI, Stage or
their Affiliates with the same rights it would have if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of SRI, Stage
or any Guarantor or the Trustee shall not have any liability for any obligations
of SRI, Stage or any Guarantor under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations. By accepting a Note,
each Holder of a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes.
18. AUTHENTICATION
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the face of this Note.
19. ABBREVIATIONS
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
B-7
<PAGE>
20. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT
Each Holder of a Note, by acceptance hereof, acknowledges and agrees
to the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Company to the extent provided therein.
21. GOVERNING LAW
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
22. CUSIP NUMBERS
Pursuant to the recommendation promulgated by the Committee on
Uniform Security Identification Procedures SRI has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use such CUSIP numbers in
notices of redemption as a convenience to Holders of Notes. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
--------------------------
SRI will furnish to any Holder of a Note upon written request and
without charge to such Holder of a Note a copy of the Indenture which contains
the text of this Note in larger type. Requests may be made to:
Specialty Retailers, Inc.
c/o Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: James Marcum
B-8
<PAGE>
================================================================================
ASSIGNMENT FORM
To assign this Note, complete the form below:
I or we assign and transfer this Note to:
[PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE]
[INSERT ASSIGNEE'S SOC. SEC. OR TAX I.D. NO. ]
and irremovably appoint ___________________ agent to transfer this Note on
the books of SRI. The agent may substitute another to act for him.
================================================================================
Date: Your Signature:
================================================================================
Sign exactly as your name appears on the face of this Note.
Signature Guarantee:
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan association
or credit union) with membership in an approved signature
guarantee medallion program pursuant to Securities and
Exchange Commission Rule 17Ad-15.]
B-9
<PAGE>
OPTION OF HOLDER OF NOTE TO ELECT PURCHASE
If you elect to have this Note purchased by SRI pursuant to Article
IV or Section 5.07 of the Indenture, check the box:
[ ]
If you elect to have only part of this Note purchased by SRI
pursuant to Article IV or Section 5.07 of the Indenture, state the amount:
$
Date: Your Signature:
(Sign exactly as your name
appears on the face of the
Note)
Signature Guarantee:
[Signature must be guaranteed by an Eligible Guarantor
Institution (bank, stockbroker, savings and loan association or
credit union) with membership in an approved signature guarantee
medallion program pursuant to Securities and Exchange Commission
Rule 17Ad- 15.]
B-10
EXHIBIT 4.4
SPECIALTY RETAILERS, INC.
8 1/2% Senior Notes Due 2005
9% Senior Subordinated Notes Due 2007
REGISTRATION RIGHTS AGREEMENT
June 11, 1997
Credit Suisse First Boston Corporation
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Ladies and Gentlemen:
Specialty Retailers, Inc., a Texas corporation (the "Company"), and
a wholly-owned subsidiary of Stage Stores, Inc., a Delaware corporation
("Stage") proposes to issue and sell to Credit Suisse First Boston Corporation,
Bear, Stearns & Co. Inc. and Donaldson, Lufkin & Jenrette Securities Corporation
(collectively, the "Initial Purchasers"), upon the terms set forth in a purchase
agreement of even date herewith (the "Purchase Agreement"), (i) $200,000,000
aggregate principal amount of its 8 1/2% Senior Notes Due 2005 (the "Senior
Notes") and (ii) $100,000,000 aggregate principal amount of its 9% Senior
Subordinated Notes Due 2007 (the "Senior Subordinated Notes," and together with
the Senior Notes, the "Notes"). The Notes will be issued pursuant to two
Indentures, each dated as of June 17, 1997 (collectively, the "Indentures"),
between the Company, Stage and State Street Bank and Trust Company (the
"Trustee"). As an inducement to the Initial Purchasers, the Company and Stage
agree with the Initial Purchasers, for the benefit of the holders of the Notes
(including, without limitation, the Initial Purchasers), the Exchange Notes (as
defined below) and the Private Exchange Notes (as defined below) (collectively
the "Holders"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company shall, at its cost,
prepare and, not later than 60 days after (or if the 60th day is not a business
day, the first business day thereafter) the date of original issue of the Notes
(the "Issue Date"), file with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a proposed offer (the "Registered
Exchange Offer") to
<PAGE>
the Holders of Transfer Restricted Notes (as defined in Section 6 hereof), who
are not prohibited by any law or policy of the Commission from participating in
the Registered Exchange Offer, to issue and deliver to such Holders, in exchange
for the Notes, a like aggregate principal amount of debt securities (the
"Exchange Notes") of the Company issued under the Indentures and identical in
all material respects to the Notes (except for the transfer restrictions
relating to the Notes). The Company shall use its best efforts to cause such
Exchange Offer Registration Statement to become effective under the Securities
Act within 150 days (or if the 150th day is not a business day, the first
business day thereafter) after the Issue Date of the Notes and shall keep the
Exchange Offer Registration Statement effective for not less than 30 days (or
longer, if required by applicable law) after the date notice of the Registered
Exchange Offer is mailed to the Holders (such period being called the "Exchange
Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company
will be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof provided that the Company has accepted all the Notes
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Notes (as defined in Section 6 hereof)
electing to exchange the Notes for Exchange Notes (assuming that such Holder is
not an affiliate of the Company within the meaning of the Securities Act,
acquires the Exchange Notes in the ordinary course of such Holder's business and
has no arrangements with any person to participate in the distribution of the
Exchange Notes and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offer) to trade such Exchange Notes
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States.
The Company acknowledges that, pursuant to current interpretations
by the Commission's staff of Section 5 of the Securities Act, in the absence of
an applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Notes, acquired for its own account as a result of market
making activities or other trading activities, for Exchange Notes (an
"Exchanging Dealer"), is required to deliver a prospectus containing the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and in Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Notes received by such
Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial
Purchaser that elects to sell Exchange Notes acquired in exchange for Notes
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Notes; PROVIDED, HOWEVER, that
2
<PAGE>
(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer or an Initial Purchaser, such period
shall be the lesser of 180 days and the date on which all Exchanging Dealers and
the Initial Purchasers have sold all Exchange Notes held by them (unless such
period is extended pursuant to Section 3(j) below) and (ii) the Company shall
make such prospectus and any amendment or supplement thereto, available to any
broker-dealer for use in connection with any resale of any Exchange Notes for a
period not less than 180 days after the consummation of the Registered Exchange
Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Company, simultaneously with the delivery of the Exchange Notes pursuant to the
Registered Exchange Offer, shall issue and deliver to such Initial Purchaser
upon the written request of such Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
of debt securities of the Company issued under the Indentures and identical in
all material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States) to the Notes (the "Private Exchange Notes"). The Notes, the Exchange
Notes and the Private Exchange Notes are herein collectively called the
"Securities."
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange offer open for not less than 30
days (or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York, which
may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private Exchange;
(ii) deliver to the Trustee for cancellation all the Notes so
accepted for exchange; and
3
<PAGE>
(iii) cause the Trustee to authenticate and deliver promptly to
each Holder of the Notes, Exchange Notes or Private Exchange Notes, as the case
may be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Indentures will provide that the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indentures and that all
the Securities will vote and consent together on all matters as one class and
that none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Note and Private Exchange Note issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the date of original issue of the Notes.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the Securities Act,
(iii) such Holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or if it is an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) if such Holder is not a broker-dealer, that it is
not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes and (v) if such Holder is a broker-dealer, that it will receive
Exchange Notes for its own account in exchange for Notes that were acquired as a
result of market-making activities or other trading activities and that it will
be required to acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
2. SHELF REGISTRATION. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
180 days of the Issue Date, (iii) any Initial Purchaser so requests with respect
to the Notes (or the Private Exchange Notes) not eligible under applicable law
or Commission policy to be exchanged for Exchange Notes in the Registered
Exchange Offer and held by it following consummation of the Registered Exchange
Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible under
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applicable law or Commission policy to participate in the Registered Exchange
Offer or, in the case of any Holder (other than an Exchanging Dealer) that
participates in the Registered Exchange Offer, such Holder does not, in
accordance with applicable law or Commission policy, receive freely tradeable
Exchange Notes on the date of the exchange, the Company shall take the following
actions:
(a) The Company shall, at its cost, as promptly as practicable (but
in no event more than 30 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use its best efforts to
cause to be declared effective a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, a
"Registration Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Notes by the Holders
thereof from time to time in accordance with the methods of distribution set
forth in the Shelf Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); PROVIDED, HOWEVER, that no Holder
(other than an Initial Purchaser) shall be entitled to have the Securities held
by it covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement applicable to such
Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the relevant
Securities, for a period of two years (or for such longer period if extended
pursuant to Section 3(j) below) from the date of its effectiveness or such
shorter period that will terminate when the Notes covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 under the Securities Act
without any limitations under clauses (c), (e), (f) and (h) of Rule 144 (or any
successor rule thereof). The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
Securities covered thereby not being able to offer and sell such securities
during that period, unless such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (i) to comply
in all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (ii) not to contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
3. REGISTRATION PROCEDURES. In connection with any Shelf
Registration contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and, in the event that an Initial Purchaser (with respect to
any portion of an unsold allotment from the original offering) is participating
in the Registered Exchange Offer or the Shelf Registration Statement,
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<PAGE>
shall use its best efforts to reflect in each such document when so filed with
the Commission, such comments as such Initial Purchaser reasonably may propose;
(ii) include the information set forth in Annex A hereto on the cover, in Annex
B hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer Registration
Statement and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if
requested by an Initial Purchaser, include the information required by Items 507
or 508 of Regulation S-K under the Securities Act, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement; (iv)
include within the prospectus contained in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," reasonably acceptable to
the Initial Purchasers, which shall contain a summary statement of the positions
taken or policies made by the staff of the Commission with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of Exchange Notes received by such broker-dealer in the
Registered Exchange Offer (a "Participating Broker-Dealer"), whether such
positions or policies have been publicly disseminated by the staff of the
Commission or such positions or policies, in the reasonable judgment of the
Initial Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in the
case of a Shelf Registration Statement, include the names of the Holders, who
propose to sell Securities pursuant to the Shelf Registration Statement, as
selling securityholders.
(b) The Company shall give notice to the Initial Purchasers, the
selling Holders of the Securities and any Participating Broker-Dealer from whom
the Company has received prior written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made) and, if requested by such
persons, confirm such notice in writing:
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel
of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order that the
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Registration Statement or the prospectus do not contain an untrue
statement of a material fact nor omit to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge, at
least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if any Initial Purchaser or any such Holder requests, all exhibits thereto
(including those incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Shelf Registration Statement and any
amendment or supplement thereto as such person may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of the Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement and any amendment or supplement thereto as such
persons may reasonably request. The Company consents, subject to the provisions
of this Agreement, to the use of the prospectus or any amendment or supplement
thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer
and such other persons required to deliver a prospectus following the Registered
Exchange Offer in connection with the offering and sale of the Exchange Notes
covered by the prospectus, or any amendment or supplement thereto, included in
such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of the Securities included therein and their respective counsel in
connection with the registration or qualification of the Securities for offer
and sale under the securities or "blue sky" laws of such states of the United
States as any Holder of the Securities reasonably requests in writing and do any
and all other acts or things necessary or advisable to enable the offer and sale
in such jurisdictions of the Securities covered by such Registration Statement;
PROVIDED, HOWEVER,
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<PAGE>
that the Company shall not be required to (i) qualify generally to do business
in any jurisdiction where it is not then so qualified or (ii) take any action
which would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities
to facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request a reasonable period of time prior to sales of the
Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Registration
Statement or supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Notes or purchasers
of Securities, the prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. If the Company notifies the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b)
above to suspend the use of the prospectus until the requisite changes to the
prospectus have been made, then the Initial Purchasers, the Holders of the
Securities and any such Participating Broker-Dealers shall suspend use of such
prospectus, and the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration Statement
provided for in Section 1 above shall each be extended by the number of days
from and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer shall have received such amended or supplemented
prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will obtain a CUSIP number for the Notes, the Exchange
Notes or the Private Exchange Notes, as the case may be, and provide the
applicable trustee with printed certificates for the Notes, the Exchange Notes
or the Private Exchange Notes, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registered
Exchange Offer or the Shelf Registration and will make generally available to
its security holders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earnings statement satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement, which statement shall cover such 12-month period.
(m) The Company shall cause the Indentures to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing such
changes, if any, as shall be necessary for such qualification. In the event that
such qualification would
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<PAGE>
require the appointment of a new trustee under either Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of
such Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as the
Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such registration the
Securities of any Holder that unreasonably fails to furnish such information
within a reasonable time after receiving such request.
(o) The Company shall enter into such customary agreements
(including if requested an underwriting agreement in customary form) and take
all such other action, if any, as any Holder of the Securities shall reasonably
request in order to facilitate the disposition of the Securities pursuant to any
Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall (i)
make reasonably available for inspection during normal business hours by the
selling Holders of the Securities, any underwriter participating in any
disposition pursuant to the Shelf Registration Statement and any attorney,
accountant or other agent retained by the selling Holders of the Securities or
any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the Company's
officers, directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Securities or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; PROVIDED, HOWEVER, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in Section 4
hereof.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel to
deliver an opinion and updates thereof relating to the Securities in customary
form addressed to such Holders and the managing underwriters, if any, thereof
and dated, in the case of the initial opinion, the effective date of such Shelf
Registration Statement (it being agreed that the matters to be covered by such
opinion shall include, without limitation, the due incorporation and good
standing of the Company and its subsidiaries; the qualification of the Company
and its subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 3(o) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal or governmental proceedings
involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Shelf Registration
Statement, the offering and sale of the applicable Securities, or any agreement
of the type referred to in Section 3(o) hereof; the compliance as to form of
such Shelf Registration Statement and any documents incorporated by reference
therein and of the Indentures with the requirements of the Securities Act and
the Trust Indenture Act, respectively; and, as of the date of the opinion and as
of the effective date of the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from such
Shelf Registration Statement and the prospectus included
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<PAGE>
therein, as then amended or supplemented, and from any documents incorporated by
reference therein of an untrue statement of a material fact or the omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of any such documents, in the
light of the circumstances existing at the time that such documents were filed
with the Commission under the Exchange Act); (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof requested
by any underwriters of the applicable Securities and (iii) its independent
public accountants and the independent public accountants with respect to any
other entity for which financial information is provided in the Shelf
Registration Statement to provide to the selling Holders of the applicable
Securities and any underwriter therefor a comfort letter in customary form and
covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, by Statement of Auditing Standards
No. 72.
(r) In the case of the Registered Exchange Offer, if requested by
any Initial Purchaser or any known Participating Broker-Dealer, the Company
shall cause (i) its counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer signed opinions in the form set forth in Sections
6(d) and (e) of the Purchase Agreement with such changes as are customary in
connection with the preparation of a Registration Statement and (ii) its
independent public accountants and the independent public accountants with
respect to any other entity for which financial information is provided in the
Registration Statement to deliver to such Initial Purchaser or such
Participating Broker-Dealer a comfort letter, in customary form, meeting the
requirements as to the substance thereof as set forth in Sections 6(a) and (b)
of the Purchase Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Company (or to such
other Person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or
caused to be marked, on the Notes so exchanged that such Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as
the case may be; in no event shall the Notes be marked as paid or otherwise
satisfied.
(t) The Company will use its best efforts to either (i) confirm that
the ratings obtained for the Notes prior to the initial sale of such Notes will
apply to the Securities covered by a Registration Statement or (ii), cause the
Securities covered by a Registration Statement to be rated with the appropriate
rating agencies, if so requested by Holders of a majority in aggregate principal
amount of Securities covered by such Registration Statement, or by the managing
underwriters, if any.
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "participate in the distribution,"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder
of such Securities or as an underwriter, a placement or sales agent or a broker
or dealer in respect thereof, or otherwise, assist such broker-dealer in
complying with the requirements of the Rules, including, without limitation, by
(i) if such Rules, including Rule 2720 thereto, shall so require, engaging a
"qualified independent underwriter" (as defined in Rule 2720) to participate in
the preparation of the Registration Statement relating to such
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<PAGE>
Securities, to exercise usual standards of due diligence in respect thereto and,
if any portion of the offering contemplated by such Registration Statement is an
underwritten offering or is made through a placement or sales agent, to
recommend the yield of such Securities, (ii) indemnifying any such qualified
independent underwriter to the extent of the indemnification of underwriters
provided in Section 5 hereof and (iii) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply with
the requirements of the Rules.
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a Registration
Statement contemplated hereby.
4. REGISTRATION EXPENSES. Stage shall bear all fees and expenses
incurred in connection with the performance of the Company's obligations under
Sections 1 through 3 hereof (including the reasonable fees and expenses, if any,
of Dewey Ballantine, counsel for the Initial Purchasers, incurred in connection
with the Registered Exchange Offer), whether or not the Registered Exchange
Offer or a Shelf Registration is filed or becomes effective, and, in the event
of a Shelf Registration, shall bear or reimburse the Holders of the Securities
covered thereby for the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Securities
covered thereby to act as counsel for the Holders of the Securities in
connection therewith; PROVIDED that the fees and disbursements of counsel for
which Stage shall be responsible pursuant to this Section 4 shall not exceed
$30,000 other than in connection with an underwritten Shelf Registration, in
which case Stage shall be responsible for reasonable fees and disbursements of
counsel designated by the Holders.
5. INDEMNIFICATION. (a) The Company and Stage shall jointly and
severally indemnify and hold harmless each Holder of the Securities, any
Participating Broker-Dealer and each person, if any, who controls such Holder or
such Participating Broker-Dealer within the meaning of the Securities Act or the
Exchange Act (each Holder, any Participating Broker-Dealer and such controlling
persons are referred to collectively as the "Indemnified Parties") from and
against any losses, claims, damages or liabilities, joint or several, or any
actions in respect thereof (including, but not limited to, any losses, claims,
damages, liabilities or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statement
not misleading, and shall reimburse, as incurred, the Indemnified Parties for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action in
respect thereto; PROVIDED, HOWEVER, that (i) the Company and Stage shall not be
liable in any such case to the extent that such loss, claim, damage or liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in a Registration Statement or prospectus
or in any amendment or supplement thereto or in any preliminary prospectus
relating to a Shelf Registration in reliance upon and in conformity with written
information pertaining to such Holder and furnished to the Company by or on
behalf
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of such Holder specifically for inclusion therein and (ii) with respect to any
untrue statement or omission or alleged untrue statement or omission made in any
preliminary prospectus relating to a Shelf Registration Statement, the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Holder or Participating Broker-Dealer from whom the person asserting any such
losses, claims, damages or liabilities purchased the Securities concerned, to
the extent that a prospectus relating to such Securities was required to be
delivered by such Holder or Participating Broker-Dealer under the Securities Act
in connection with such purchase and any such loss, claim, damage or liability
of such Holder or Participating Broker-Dealer results from the fact that there
was not sent or given to such person, at, or prior to the written confirmation
of the sale of such Securities to such person, a copy of the revised final
prospectus (exclusive of any material included therein but not attached thereto)
containing a correction of such alleged misstatements or omissions if the
Company had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; PROVIDED FURTHER, HOWEVER, that this indemnity agreement will be
in addition to any liability which the Company and Stage may otherwise have to
such Indemnified Party. The Company and Stage shall also jointly and severally
indemnify underwriters, selling brokers, dealer-managers and similar securities
industry professionals participating in the distribution (as described in such
Registration Statement) their officers and directors and each person who
controls such persons within the meaning of the Securities Act or the Exchange
Act to the same extent as provided above with respect to the indemnification of
the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, shall
indemnify and hold harmless the Company, Stage and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act from and against any losses, claims, damages or liabilities or any actions
in respect thereof, to which the Company, Stage or any such controlling person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred, the Company and Stage for
any legal or other expenses reasonably incurred by the Company, Stage or any
such controlling person in connection with investigating or defending any loss,
claim, damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability which such Holder may otherwise have to the
Company, Stage or any such controlling persons.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
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the indemnification obligation provided in paragraph (a) or (b) above. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, except as provided in the next sentence, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof the indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, except as provided in the next sentence, other than reasonable costs of
investigation. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, (ii) the indemnifying party shall have failed
to assume the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both such indemnified party and
an indemnifying party, and such indemnified party shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified person, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all such indemnified
parties, which firm shall be designated in writing by Credit Suisse First Boston
Corporation, in the case of subsection (a) above, or by Stage, in the case of
subsection (b) above, and that all such fees and expenses shall be reimbursed as
they are incurred). An indemnifying party shall not be liable for any settlement
of any such action effected without the written consent of such indemnifying
party but if settled with the written consent of such indemnifying party, such
indemnifying party agrees to indemnify and hold harmless any indemnified person
from and against any loss or liability by reason of such settlement.
Notwithstanding the immediately preceding sentence, if in any case where the
fees and expenses of counsel are at the expense of the indemnifying party and an
indemnified party shall have requested the indemnifying party to reimburse the
indemnified party for such fees and expenses of counsel as incurred, such
indemnifying party agrees that it shall be liable for any settlement of any
action effected without its written consent if (i) such settlement is entered
into more than ten business days after the receipt by such indemnifying party of
the aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then
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each indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the exchange of the Notes, pursuant to the Registered Exchange
Offer, or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying party or parties on the one hand and the indemnified
party on the other in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities (or actions in respect thereof)
as well as any other relevant equitable considerations. The relative fault of
the parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or Stage on the one hand or such Holder or such other indemnified person, as the
case may be, on the other, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (d). Notwithstanding any other
provision of this subsection (d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this subsection (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the
sale of the Securities pursuant to a Registration Statement and shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6 ADDITIONAL INTEREST UNDER CERTAIN CIRCUMSTANCES. (a) Additional
interest (the "Additional Interest") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iii) below a "Registration Default"):
(i) If by August 18, 1997, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been
filed with the Commission;
(ii) If by December 15, 1997, neither the Registered
Exchange Offer is consummated nor, if required in lieu thereof, the
Shelf Registration Statement is declared effective by the
Commission; or
14
<PAGE>
(iii) If after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective
(A) such Registration Statement thereafter ceases to be effective;
or (B) such Registration Statement or the related prospectus ceases
to be usable (except as permitted in paragraph (b)) in connection
with resales of Transfer Restricted Notes during the periods
specified herein because either (1) any event occurs as a result of
which the related prospectus forming part of such Registration
Statement would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein in the light of the circumstances under which they were made
not misleading, or (2) it shall be necessary to amend such
Registration Statement or supplement the related prospectus, to
comply with the Securities Act or the Exchange Act or the respective
rules thereunder.
Additional Interest shall accrue on the Notes over and above the interest set
forth in the title of the Notes from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults have been cured, at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B)
hereof shall be deemed not to have occurred and be continuing in relation to a
Shelf Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
PROVIDED, HOWEVER, that in any case if such Registration Default occurs for a
continuous period in excess of 30 days, Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i),
(ii) or (iii) of Section 6(a) above will be payable in cash on the regular
interest payment dates with respect to the Notes. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Notes" means each Security until (i) the
date on which such Transfer Restricted Note has been exchanged by a person other
than a broker-dealer for a freely transferrable Exchange Note in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Transfer Restricted Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such
15
<PAGE>
Transfer Restricted Note is distributed to the public pursuant to Rule 144 under
the Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act.
7 RULES 144 AND 144A. The Company shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required to file
such reports, it will, upon the request of any Holder of Transfer Restricted
Notes, make publicly available other information so long as necessary to permit
sales of their securities pursuant to Rules 144 and 144A. The Company covenants
that it will take such further action as any Holder of Transfer Restricted Notes
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Company will provide a
copy of this Agreement to prospective purchasers of Notes identified to the
Company by the Initial Purchasers upon request. Upon the request of any Holder
of Transfer Restricted Notes, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Company
to register any of its securities pursuant to the Exchange Act.
8 UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Notes covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Notes to be included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9 MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company, Stage and the
written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most
current address given by such Holder to the Company;
16
<PAGE>
(2) if to the Initial Purchasers, at its address as
follows:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Fax No.: (212) 325-8278
Attention: Investment Banking Department --
Transactions Advisory Group
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Fax No.: (212) 259-6333
Attention: Morton A. Pierce, Esq.
(3) if to the Company or Stage, at its address as
follows:
Specialty Retailers, Inc.
c/o Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Fax No.: (713) 669-2709
Attention: Carl Tooker
with a copy to:
Kirkland & Ellis
153 East 53rd Street
Citicorp Center, 39th Floor
New York, NY 10022
Fax No: (212) 446-4900
Attention: Lance C. Balk, Esq.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator, if sent
by facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) NO INCONSISTENT AGREEMENTS. Neither the Company nor Stage has as
of the date hereof, entered into, nor shall either of them, on or after the date
hereof, enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company, Stage and their successors and assigns.
17
<PAGE>
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) SECURITIES HELD BY THE COMPANY. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company, Stage or their affiliates
(other than subsequent Holders of Securities if such subsequent Holders are
deemed to be affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
18
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the several Initial Purchasers, the Company and Stage in accordance with
its terms.
Very truly yours,
SPECIALTY RETAILERS, INC.
By: /s/ JAMES MARCUM
Name: James Marcum
Title: Executive Vice President &
Chief Financial Officer
STAGE STORES, INC.
By: /s/ JAMES MARCUM
Name: James Marcum
Title: Executive Vice President &
Chief Financial Officer
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above
written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ DAVID RUSSELL
Name: David Russell
Title: Managing Director
19
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Notes where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
20
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account
in exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
21
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until , 199 , all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus.*
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the reasonable expenses of one counsel
for the Holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the Holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
- --------
* In addition, the legend required by Item 502(e) of Regulation S-K will appear
on the back cover page of the Exchange Offer prospectus.
22
<PAGE>
ANNEX D
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:______________________________________________
Address:___________________________________________
___________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
23
STAGE STORES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
Three
Months Fiscal Year
Ended -------------------------------------------------------
May 3, 1997 1996 1995 1994 1993 1992
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary item ........................... $ 7,094 $14,022 $10,730 $ 6,630 $13,426 $12,235
Income tax expense ......................................... 4,488 8,594 6,767 4,317 7,569 8,340
----------- ------- ------- ------- ------- -------
Income before income tax and extraordinary item ............ 11,582 22,616 17,497 10,947 20,995 20,575
----------- ------- ------- ------- ------- -------
Fixed charges charged to expense:
Rental expense (1) ...................................... 2,920 11,515 10,051 8,879 8,803 7,575
Interest expense ........................................ 8,942 46,482 44,770 41,694 37,607 32,384
----------- ------- ------- ------- ------- -------
Total fixed charges charged to expense .................. 11,862 57,997 54,821 50,573 46,410 39,959
----------- ------- ------- ------- ------- -------
Income before income tax, extraordinary item,
and fixed charges charged to expense .................... $23,444 $80,613 $72,318 $61,520 $67,405 $60,534
=========== ======= ======= ======= ======= =======
Fixed charges charged to accruals:
Rental expense (1) ...................................... $ 65 $ 334 $ 1,516 $ 446 $ 298 $ 803
Interest expense ........................................ -- -- -- -- -- 381
----------- ------- ------- ------- ------- -------
Total fixed charges charged to accruals ................. 65 334 1,516 446 298 1,184
----------- ------- ------- ------- ------- -------
Total fixed charges ........................................ $11,927 $58,331 $56,337 $51,019 $46,708 $41,143
=========== ======= ======= ======= ======= =======
Ratio of earnings to fixed charges ......................... 1.97 1.38 1.28 1.21 1.44 1.47
=========== ======= ======= ======= ======= =======
</TABLE>
- ----------------------
(1) Rental expense comprises one-third of all rental expenses incurred during
the period. This is deemed by management to be representative of the
interest factor of rental payments
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Specialty Retailers, Inc.
Jurisdiction of Incorporation: Texas
Stockholder: Stage Stores, Inc. 100%
Specialty Retailers, Inc. (NV)
Jurisdiction of Incorporation: Nevada
Stockholder: Stage Stores, Inc. 100%
SRI Receivables Purchase Co., Inc.
Jurisdiction of Incorporation: Delaware
Stockholder: Specialty Retailers, Inc. 100%
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Stage Stores, Inc. of our report dated
March 12, 1997 relating to the consolidated financial statements of Stage
Stores, Inc., which appears in such Prospectus.
PRICE WATERHOUSE LLP
Houston, Texas
July 31, 1997
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Specialty Retailers,
Inc. on Form S-4 of our report dated March 12, 1997 of C.R. Anthony Company for
the fifty-two weeks ended February 1, 1997 (which expresses an unqualified
opinion and includes an explanatory paragraph relating to C. R. Anthony Company
entering into an Agreement and Plan of Merger with Stage Stores, Inc.),
appearing in the Prospectus, which is part of this Registration Statement. We
also consent to the reference to us under the heading "Independent Accountants"
in such Prospectus.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
July 30, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) __
STATE STREET BANK AND TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-1867445
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
225 Franklin Street, Boston, Massachusetts 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------------
SPECIALTY RETAILERS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
TEXAS 04-3034294
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10201 MAIN STREET, HOUSTON, TEXAS 77025
(Address of principal executive offices) (Zip Code)
8 1/2% SENIOR NOTES DUE 2005
(TITLE OF INDENTURE SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO
COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF
ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE
CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED
IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR
IS IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED
BY SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
- 2 -
<PAGE>
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS
SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the July 10, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ ARTHUR J. MACDONALD
NAME ARTHUR J. MACDONALD
TITLE ASSISTANT VICE PRESIDENT
- 3 -
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by SPECIALTY
RETAILERS, INC. of its 8 1/2% SENIOR NOTES DUE 2005, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ ARTHUR J. MACDONALD
NAME ARTHUR J. MACDONALD
TITLE ASSISTANT VICE PRESIDENT
DATED: JULY 10, 1997
- 4 -
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business MARCH 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coin ................ 1,665,142
Interest-bearing balances ......................................... 8,193,292
Securities ................................................................. 10,238,113
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income .......................... 4,936,454
Allowance for loan and lease losses ............................... 70,307
Allocated transfer risk reserve ................................... 0
Loans and leases, net of unearned income and allowances ........... 4,866,147
Assets held in trading accounts ............................................ 957,478
Premises and fixed assets .................................................. 380,117
Other real estate owned .................................................... 884
Investments in unconsolidated subsidiaries ................................. 25,835
Customers' liability to this bank on acceptances outstanding ............... 45,548
Intangible assets .......................................................... 158,080
Other assets ............................................................... 1,066,957
Total assets ............................................................... 33,450,737
===========
LIABILITIES
Deposits:
In domestic offices ............................................... 8,270,845
Noninterest-bearing ...................................... 6,318,360
Interest-bearing ......................................... 1,952,485
In foreign offices and Edge subsidiary ............................ 12,760,086
Noninterest-bearing ...................................... 53,052
Interest-bearing ......................................... 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 926,821
Other borrowed money ....................................................... 671,164
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 46,137
Other liabilities .......................................................... 745,529
Total liabilities .......................................................... 31,637,223
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,426,881
Cumulative foreign currency translation adjustments ........................ (4,015)
-----------
Total equity capital ....................................................... 1,813,514
-----------
Total liabilities and equity capital ....................................... 33,450,737
===========
</TABLE>
- 5 -
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
- 6 -
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) __
STATE STREET BANK AND TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-1867445
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
225 Franklin Street, Boston, Massachusetts 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------------
SPECIALTY RETAILERS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
TEXAS 04-3034294
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10201 MAIN STREET, HOUSTON, TEXAS 77025
(Address of principal executive offices) (Zip Code)
9% SENIOR SUBORDINATED NOTES DUE 2007
(TITLE OF INDENTURE SECURITIES)
- 1 -
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15 NOT APPLICABLE.
ITEM 16.LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission
as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE
DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
- 2 -
<PAGE>
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the July 10, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ ARTHUR J. MACDONALD
NAME ARTHUR J. MACDONALD
TITLE ASSISTANT VICE PRESIDENT
- 3 -
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by SPECIALTY
RETAILERS, INC. of its 9% SENIOR SUBORDINATED NOTES DUE 2007, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ ARTHUR J. MACDONALD
NAME ARTHUR J. MACDONALD
TITLE ASSISTANT VICE PRESIDENT
DATED: JULY 10, 1997
- 4 -
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business MARCH 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................... 1,665,142
Interest-bearing balances ............................................ 8,193,292
Securities ................................................................... 10,238,113
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary .................................. 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income ............................. 4,936,454
Allowance for loan and lease losses .................................. 70,307
Allocated transfer risk reserve ...................................... 0
Loans and leases, net of unearned income and allowances .............. 4,866,147
Assets held in trading accounts .............................................. 957,478
Premises and fixed assets .................................................... 380,117
Other real estate owned ...................................................... 884
Investments in unconsolidated subsidiaries ................................... 25,835
Customers' liability to this bank on acceptances outstanding ................. 45,548
Intangible assets ............................................................ 158,080
Other assets ................................................................. 1,066,957
Total assets ................................................................. 33,450,737
===========
LIABILITIES
Deposits:
In domestic offices .................................................. 8,270,845
Noninterest-bearing ........................................... 6,318,360
Interest-bearing .............................................. 1,952,485
In foreign offices and Edge subsidiary ............................... 12,760,086
Noninterest-bearing ........................................... 53,052
Interest-bearing .............................................. 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .................................. 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities ............. 926,821
Other borrowed money ......................................................... 671,164
Subordinated notes and debentures ............................................ 0
Bank's liability on acceptances executed and outstanding ..................... 46,137
Other liabilities ............................................................ 745,529
Total liabilities ............................................................ 31,637,223
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................ 0
Common stock ................................................................. 29,931
Surplus ...................................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses) . 1,426,881
Cumulative foreign currency translation adjustments .......................... (4,015)
-----------
Total equity capital ......................................................... 1,813,514
-----------
Total liabilities and equity capital ......................................... 33,450,737
===========
</TABLE>
- 5 -
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
- 6 -
