UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NO. 000-21011
STAGE STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 76-0407711
incorporation or organization) (I.R.S. Employer Identifications No.)
10201 Main Street, Houston, Texas
(Address of principal executive 77025
offices) (Zip Code)
Registrant's telephone number, including area code: (800) 579-2302
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
------------------- ----------
COMMON STOCK ($0.01 PAR VALUE) NEW YORK STOCK EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting common stock held by non-affiliates as
of April 6, 1998 was $1,327,934,192.
At April 6, 1998, there were 26,557,339 shares of Common Stock and 1,250,584
shares of Class B Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held May 14, 1998 (the "Proxy Statement") are incorporated by reference into
Part III.
<PAGE>
PART I
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).
ITEM 1. BUSINESS
GENERAL
Stage Stores, Inc. (the "Company" or "Stage Stores") operates the store of
choice for well-known, national brand name family apparel in over 500 small
towns and communities across the central United States. Stage Stores' history
began in 1988 when the management of Palais Royal, together with a venture
capital firm, acquired the family owned Bealls and Palais Royal chains which
were originally founded in the 1920's. The Company has developed a unique
franchise focused on small markets, differentiating itself from the competition
by offering a broad range of merchandise with a high level of customer service
in convenient locations.
As a result of its small market focus, Stage Stores generally faces less
competition for brand name apparel because consumers in small markets generally
have only been able to shop for branded merchandise in distant regional malls.
In those small markets where the Company does compete for brand name apparel
sales, such competition generally comes from local retailers, small regional
chains and, to a lesser extent, national department stores. 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; and (iii)
proprietary credit card program. 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, Stage Stores generally does not directly compete
for branded apparel sales with national discounters such as Wal-Mart.
At January 31, 1998, the Company, through its wholly-owned subsidiary,
Specialty Retailers, Inc. ("SRI"), operated 607 stores primarily through its
"Stage", "Bealls" and "Palais Royal" trade names in twenty-four states
throughout the central United States. Approximately 85% of these stores are
located in small markets and communities with populations below 30,000. The
Company's store format (averaging approximately 16,000 total 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.
The Company's merchandising strategy focuses on the traditionally higher
margin categories of women's, men's and children's branded apparel, accessories
and footwear. Merchandise mix may vary from store to store to accommodate
differing demographic factors. The Company purchases merchandise from a vendor
base of over two thousand vendors. Over 85% of 1997 sales consisted of branded
merchandise, including nationally recognized brands such as Levi Strauss, Liz
Claiborne, Chaps/Ralph Lauren, Calvin Klein, Guess, Hanes, Nike, Reebok and
Haggar Apparel. Levi accounted for approximately 11% of the Company's 1997
retail purchases. No other vendor accounted for more than 6%. In addition, the
Company, through its membership in Associated Merchandising Corporation ("AMC",
a cooperative buying service), purchases imported merchandise for its private
label program. The membership provides the Company with synergistic purchasing
opportunities allowing it to augment its branded merchandise assortments.
Private label merchandise purchased through AMC accounted for approximately 5%
of the Company's total retail purchases for 1997.
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The Company offers a carefully edited but broad selection of moderately
priced, branded merchandise which is divided into distinct departments as
follows (percentages represent each department's contribution to Company sales):
Department 1997 1996
----------------------------------------
Men's/Young Men........ 20% 22%
Misses Sportswear...... 15 16
Shoes.................. 11 9
Juniors................ 9 12
Accessories & Gifts.... 9 9
Children............... 9 9
Intimate............... 5 5
Special Sizes.......... 5 5
Cosmetics.............. 5 5
Misses Dresses......... 3 4
Dresses & Suits........ 3 --
Boys................... 2 3
Furs & Coats........... 2 1
Activewear............. 2 --
----------------
100% 100%
================
EMPLOYEES
During 1997, the Company employed an average of 14,069 full and part-time
employees at all of its locations, of which 1,731 were salaried and 12,338 were
hourly. The Company's central office (which includes corporate, credit and
distribution center offices) employed an average of 402 salaried and 939 hourly
employees during 1997. In its stores during 1997, the Company employed an
average of 1,329 salaried and 11,399 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.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in a one hundred thirty
thousand square foot building in Houston, Texas. The Company leases the building
and most of the land at its Houston facility. The Company owns its approximately
450,000 square foot distribution center and its credit department facility, both
located in Jacksonville, Texas. The Jacksonville distribution center
collateralizes the Company's Credit Facility (as defined herein). See Note 6 to
the Consolidated Financial Statements.
2
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At January 31, 1998, the Company operated 607 stores located in twenty-four
states as follows:
Number of
State Stores
----- ------
Alabama......... 2
Arizona......... 4
Arkansas........ 26
California...... 1
Colorado........ 8
Illinois........ 13
Indiana......... 9
Iowa............ 14
Kansas.......... 25
Louisiana....... 45
Michigan........ 7
Minnesota....... 9
Mississippi..... 8
Missouri........ 18
Montana......... 11
Nebraska........ 6
New Mexico...... 26
North Dakota.... 2
Ohio............ 26
Oklahoma........ 71
South Dakota.... 6
Texas........... 257
Wisconsin....... 2
Wyoming......... 11
---------
Total........... 607
=========
Stores generally range in size from 4,200 to 55,000 square feet, with the
average being 16,000 square feet. The Company's stores are primarily located in
strip shopping centers. All store locations are leased except for three Bealls
stores and one Stage store which are owned. The majority of leases provide for a
base rent plus contingent rentals, generally based upon a percentage of net
sales.
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended January 31, 1998.
3
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's authorized common equity securities consist of par value
$0.01 per share common stock ("Common Stock") and par value $0.01 per share
Class B common stock ("Class B Common Stock"). Prior to April 16, 1998, the
Common Stock was quoted on the NASDAQ National Market System under the symbol
"STGE". Beginning April 16, 1998, the Company's Common Stock is quoted on the
New York Stock Exchange under the symbol "SGE". As of April 6, 1998, (the date
of record for Proxy Statement matters) there was one holder of Class B Common
Stock and 253 holders of record of Common Stock. The following table sets
forth, for the periods indicated, the high and low closing bid prices for the
Common Stock as reported by the NASDAQ National Market System. The Common Stock
commenced trading on October 25, 1996.
Common Stock
Prices
----------------
High Low
------- -------
Quarter ended November 2, 1996. $ 19.25 $ 18.25
Quarter ended February 1, 1997. 20.50 17.38
Quarter ended May 3, 1997...... 24.50 17.25
Quarter ended August 2, 1997... 29.19 19.25
Quarter ended November 1, 1997. 43.38 28.88
Quarter ended January 31, 1998. 43.13 32.25
Since its inception, the Company has not declared or paid any regular cash
or other dividends on its Common Stock other than in connection with the
Distribution (see Item 6. "Selected Financial Data"), and does not expect to pay
cash dividends for the foreseeable future. The Company anticipates that for the
foreseeable future, earnings will be reinvested in the business and used to
service indebtedness. The Company's existing indebtedness limits its ability to
pay dividends. The declaration and payment of dividends by the Company are
subject to the discretion of the Board. Any future determination to pay
dividends will depend on the Company's results of operations, financial
condition, capital requirements, contractual restrictions under its current
indebtedness and other factors deemed relevant by the Board.
4
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth selected consolidated financial data for the
periods indicated. The selected consolidated financial data were derived from
the Company's Consolidated Financial Statements. Certain reclassifications of
prior year data have been made to conform to the 1997 reporting format. These
reclassifications had no impact on operating income or net income (loss) for the
years presented. All dollar amounts are stated in thousands, except for per
share and store data.
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------------------------------------------
1997 1996 1995(1) 1994 1993
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales .................................. $ 1,073,316 $ 776,550 $ 682,624 $ 581,463 $ 557,422
Cost of sales and related buying,
occupancy and distribution
expenses ................................. 730,179 532,563 468,347 398,659 384,843
----------- --------- --------- --------- ---------
Gross profit ............................... 343,137 243,987 214,277 182,804 172,579
Selling, general and
administrative expenses .................. 240,011 172,579 149,102 126,200 115,008
Store opening and closure costs ............ 8,686 2,838 3,689 5,647 199
----------- --------- --------- --------- ---------
Operating income (2) ....................... 94,440 68,570 61,486 50,957 57,372
Interest, net .............................. 38,277 45,954 43,989 40,010 36,377
----------- --------- --------- --------- ---------
Income before income tax and
extraordinary items ...................... 56,163 22,616 17,497 10,947 20,995
Income tax expense ......................... 21,623 8,594 6,767 4,317 7,569
----------- --------- --------- --------- ---------
Income before extraordinary items .......... 34,540 14,022 10,730 6,630 13,426
Extraordinary items ........................ (18,295) (16,081) -- (308) (16,208)
----------- --------- --------- --------- ---------
Net income (loss) .......................... $ 16,245 $ (2,059) $ 10,730 $ 6,322 $ (2,782)
=========== ========= ========= ========= =========
Basic earnings (loss) per
common share (3) ......................... $ 0.63 $ (0.13) $ 0.88 $ 0.52 $ (0.23)
=========== ========= ========= ========= =========
Basic weighted average common
shares outstanding ....................... 25,808 15,394 12,255 12,224 12,204
=========== ========= ========= ========= =========
Diluted earnings (loss) per
common share (3) ......................... $ 0.61 $ (0.13) $ 0.86 $ 0.52 $ (0.23)
=========== ========= ========= ========= =========
Diluted weighted average common
shares outstanding ....................... 26,483 15,927 12,483 12,146 12,095
=========== ========= ========= ========= =========
MARGIN AND OTHER DATA:
Gross profit margin ........................ 32.0% 31.4% 31.4% 31.4% 31.0%
Selling, general and
administrative expense rate ............. 22.4% 22.2% 21.8% 21.7% 20.6%
Operating income margin (2) ................ 8.8% 8.8% 9.0% 8.8% 10.3%
STORE DATA: (4)
Comparable store sales growth .............. 4.1% 3.3% 0.8% 4.1% 6.3%
Net sales per selling area
square foot .............................. $ 147 $ 151 $ 157 $ 157 $ 149
Number of stores open at end of
period ................................... 607 315 256 188 180
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital ............................ $ 318,064 $ 235,219 $ 170,108 $ 148,229 $ 156,782
Total assets ............................... 759,396 509,283 408,254 366,243 343,406
Long-term debt ............................. 395,248 298,453 380,039 349,775 347,468
Stockholders' equity (deficit)(5) .......... 205,078 92,266 (72,314) (81,193) (87,727)
</TABLE>
5
<PAGE>
- -----------------------------------
(1) 1995 includes 53 weeks.
(2) Operating income and operating income margin decreased during 1994
compared to 1993 due primarily to the impact of the implementation of the
Company's accounts receivable securitization program (see Note 4 to the
Company's Consolidated Financial Statements) combined with a $5.2 million
provision associated with store closures.
(3) Historical per common share data reflects the impact of a .94727 for 1
reverse stock split of the common stock consummated concurrently with the
initial public offering of the Company's common stock. Additionally, the
Company adopted SFAS 128 (as defined herin) and Staff Accounting Bulletin
No. 98 during 1997. All prior period per common share data have been
restated to conform to the provisions of these statements.
(4) Comparable store sales growth and net sales per selling square foot for
1995 have been determined based on a comparable 52 week period.
(5) Stockholders' equity reflects extraordinary charges associated with
refinancings of $18.3 million in 1997, $16.1 million in 1996 and $16.2
million in 1993 as well as a $74.8 million cash distribution to the
Company's stockholders in 1993. Stockholders' equity at the end of 1996
reflects the impact of the initial public offering of the Company's common
stock.
6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Certain items discussed or incorporated by reference herein contain
forward-looking statements that involve risks and uncertainties including, but
not limited to, the seasonality of demand for apparel which can be affected by
weather patterns, levels of competition, competitors' marketing strategies,
changes in fashion trends and availability of product and the failure to achieve
the expected results of merchandising and marketing plans or store opening or
closing plans. The occurrence of any of the above could have a material adverse
impact on the Company's operating results. See "Risk Factors" below. Certain
information herein contains estimates which represent management's best judgment
as to the date hereof based on information currently available; however, the
Company does not intend to update this information to reflect developments or
information obtained after the date hereof and disclaims any legal obligation to
the contrary.
GENERAL
OVERVIEW. The Company operates the store of choice for well-known national
brand name family apparel in over 500 small towns and communities across the
central United States. The Company has recognized the high level of brand
awareness in small markets and has identified these markets as a profitable and
underserved niche. The Company has developed a unique franchise focused on these
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.
At January 31, 1998, the Company, through Specialty Retailers, Inc.
("SRI"), operated 607 stores primarily under its "Stage", "Bealls" and "Palais
Royal" trade names in twenty-four states throughout the central United States.
Approximately 85% of these stores are located in small markets and communities
with populations below 30,000. The Company's store format (averaging
approximately 16,000 total 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.
In recent years, the Company has undertaken several initiatives to realize
the full potential of its unique franchise in small markets, 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; (iii) continuing to refine the
Company's retailing concept; and (iv) closing unprofitable stores. As a result
of these initiatives, the lower operating costs of small market stores, and the
benefits of economies of scale, the Company has among the highest operating
income margins in the apparel retailing industry.
SIGNIFICANT 1997 EVENTS. During the second quarter of 1997, the Company
acquired C.R. Anthony Company ("CR Anthony") which operated 246 family apparel
stores in small markets throughout the central and midwestern United States
under the names "Anthony's" and "Anthony's Limited". The Company converted 130
of the acquired locations to the Company's format primarily under its "Stage"
and "Bealls" trade names during the third and fourth quarters of 1997. As of
March 31, 1998, the Company has converted an additional 69 CR Anthony stores to
the Company's format and trade names and intends to convert the majority of the
remaining CR Anthony stores during the Spring of 1998.
CR Anthony's operating strategy was to offer brand name and private label
apparel and footwear for the entire family at competitive prices. The stores
acquired are located in sixteen states, with the highest concentrations in
Texas, Oklahoma, Kansas and New Mexico. Approximately 87% of CR Anthony stores
are located in small markets and communities with populations generally below
30,000 and its stores' format average approximately 12,000 square feet.
The Company believes that the acquisition of CR Anthony is consistent with
its growth strategy and provided an opportunity for the Company to accelerate
its expansion program in existing markets and extend its presence in new
markets. The Company believes that the acquisition is attractive because: (i)
there is a relatively small number of markets in which the two companies
directly overlap; (ii) a majority of the acquired stores are in markets which
fit the Company's demographic profile; (iii) a majority of the acquired stores
are comparable in size to the Company's stores in similar markets; and (iv) the
acquired stores fit the Company's geographic requirements.
7
<PAGE>
The addition of the CR Anthony stores not only expands 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. As of January 31, 1998, the consolidation of
CR Anthony's general office functions into the Company was substantially
complete.
During the second quarter of 1997, the Company, through SRI, completed an
offering of $300.0 million of long-term indebtedness consisting of $200.0
million in aggregate principal amount of 8 1/2% Senior Notes due 2005 (the
"Senior Notes") and $100.0 million in aggregate principal amount of 9% Senior
Subordinated Notes due 2007 (the "Senior Subordinated Notes" and collectively
with the issuance of the Senior Notes, the "Note Offering"). The gross proceeds
from the Note Offering of approximately $299.7 million were used to: (i) retire
the Company's existing 10% Senior Notes due 2000 and 11% Senior Subordinated
Notes due 2003; (ii) to pay related fees and expenses; and (iii) to pay a
portion of the costs associated with the acquisition of CR Anthony. Concurrently
with this transaction, the Company entered into a new credit facility (the
"Credit Facility"). The Credit Facility provides for a $100.0 million working
capital and letter of credit facility and a $100.0 million expansion facility.
The Credit Facility replaced the Company's previous $75.0 million credit
facility (the "Old Credit Facility"). See Note 3 to the Company's Consolidated
Financial Statements.
During the third quarter of 1997, the Company completed an offering of
approximately 7.1 million shares of common stock at a price of $34 7/8 per share
(the "Secondary Offering"). 6.4 million shares of this offering were secondary
shares representing the shares owned by two venture capital firms. The remaining
650,000 shares were issued as primary shares, a result of an over-allotment
provision. The shares sold by the Company resulted in net proceeds to the
Company of approximately $20.7 million, which were used to reduce borrowings
outstanding under the Company's Credit Facility.
During the fourth quarter of 1997, the Company replaced the existing $40.0
million revolving certificate in its Accounts Receivable Trust (the "Old
Revolving Certificate") with a new and more efficient asset backed commercial
paper facility (the "Revolving Certificate"). The Revolving Certificate has an
$82.5 million capacity at terms and rates more favorable than the Old Revolving
Certificate. The larger facility will allow the Company to take advantage of the
increase in accounts receivable in the Trust as a result of the acquisition of
CR Anthony as well as to accommodate planned future growth. See Note 4 to the
Company's Consolidated Financial Statements.
The financial information, discussion and analysis that follow should be
read in conjunction with the Company's Consolidated Financial Statements
included elsewhere herein.
8
<PAGE>
RESULTS OF OPERATIONS
The following sets forth the results of operations as a percentage of
sales for the periods indicated.
Fiscal Year
------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Net sales ......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales and related
buying, occupancy and
distribution expenses .......... 68.0 68.6 68.6 68.6 69.0
------ ------ ------ ------ ------
Gross profit margin ............... 32.0 31.4 31.4 31.4 31.0
Selling, general and
administrative expenses ........ 22.4 22.2 21.8 21.7 20.6
Store opening and closure costs ... 0.8 0.4 0.6 0.9 0.1
------ ------ ------ ------ ------
Operating income margin ........... 8.8 8.8 9.0 8.8 10.3
Net interest expense .............. 3.6 5.9 6.4 6.9 6.5
====== ====== ====== ====== ======
Income before income tax
and extraordinary item ......... 5.2% 2.9% 2.6% 1.9% 3.8%
====== ====== ====== ====== ======
1997 COMPARED TO 1996
Sales for 1997 increased 38.2% to $1,073.3 million from $776.6 million in
1996. The increase in sales was due primarily to a $61.5 million increase in
sales from stores opened during 1997 and 1996 which are not included in
comparable store sales, $204.8 million of sales from the recently acquired CR
Anthony stores, as well as a 4.1% increase in comparable store sales. These
increases were partially offset by the impact of closing nine stores during
1997. The increase in comparable store sales was due primarily to the strength
in the Company's small market stores where comparable store sales increased
6.1%.
Gross profit increased 40.6% to $343.1 million in 1997 from $244.0 million
in 1996. Gross profit as a percentage of sales increased to 32.0% in 1997 from
31.4% in 1996. Gross profit for 1997 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 as well as reduced shrinkage expense as a rate of sales.
Selling, general and administrative expenses for 1997 increased 39.1% to
$240.0 million from $172.6 million in 1996. As a percentage of sales, these
expenses increased to 22.4% in 1997 from 22.2% in 1996 due to $5.6 million in
duplicative costs associated with the acquisition of CR Anthony and a decrease
in the service charge income associated with the Company's private label credit
card program as a percentage of sales resulting from a planned increase in the
liquidation rate in the portfolio as the Company focused on improving its
collection efforts. This decrease in service charge income as a percentage of
sales was partially offset by a reduction in bad debt expense as a percentage of
sales from 2.8% in 1996 to 2.0% in 1997. Advertising expenses as a percentage of
sales for 1997 and 1996 were 3.7% and 3.8%, respectively.
Operating income for 1997 increased 37.6% to $94.4 million from $68.6
million for 1996 due to the factors discussed above. Operating income as a
percentage of sales was 8.8% in 1997 and 1996.
Net interest expense decreased 16.7% to $38.3 million in 1997 from $46.0
million in 1996. Net interest expense decreased due to the retirement of the
Senior Discount Debentures in October 1996 in connection with the Company's
initial public offering (the "Initial Stock Offering") partially offset by
additional interest associated with the issuance of the $30.0 million in
aggregate principal amount of 12.5% Trust Certificate-Backed Notes (the "SRPC
Notes") during May 1996 and additional borrowings under the Company's Credit
Facility as a result of the CR Anthony acquisition and new store growth. During
the second quarter of 1997, the Company completed the Note Offering. As a result
of the Note Offering, the Company's weighted average interest rate on its senior
long-term debt decreased from 10.5% to 8.7%. This decrease in the weighted
average interest rate was offset by the increased borrowing levels incurred in
connection with the Note Offering.
9
<PAGE>
In connection with the Note Offering, the replacement of the Old Credit
Facility, and the replacement of the Old Revolving Certificate, the Company
recorded an extraordinary charge of $18.3 million, net of applicable income
taxes of $11.5 million.
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 $88.0 million 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, partially offset by an
increase in service charge income as a result of higher late fees assessed on
delinquent accounts. Bad debt expense as a percentage 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 percentage 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
percentage 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 the SRPC
Notes and $18.3 million in aggregate principal amount of 11% Series D Senior
Subordinated Notes due 2003 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 Initial Stock Offering.
In connection with the Initial Stock Offering and the replacement of an
existing credit facility, the Company recorded an extraordinary charge of $16.1
million, net of applicable income taxes of $9.8 million.
10
<PAGE>
SEASONALITY AND INFLATION
The Company's business is seasonal and sales and profits traditionally are
lower during the first nine months of the year (February through October) and
higher during the last three months of the year (November through January).
Working capital requirements fluctuate during the year and generally reach their
highest levels during the third and fourth quarters.
<TABLE>
<CAPTION>
Fiscal Year 1997 Fiscal Year 1996
------------------------------------------------- --------------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................ $191,512 $238,137 $274,269 $369,398 $163,177 $182,750 $ 182,562 $248,061
Gross profit ............. 61,925 73,902 86,822 120,488 52,081 56,623 56,208 79,075
Operating income ......... 20,524 19,736 15,789 38,391 16,045 13,925 12,342 26,258
Quarters' operating
income as a percent of
annual .................. 22% 21% 17% 40% 24% 20% 18% 38%
Income (loss) before
extraordinary items ..... 7,094 6,246 3,673 17,527 2,652 868 (265) 10,767
</TABLE>
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 the second quarter of 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 $30.0 million in aggregate principal amount of SRPC Notes during May
1996, the proceeds of which were used to fund the Uhlmans acquisition. The SRPC
Notes are secured by two certificates of beneficial ownership in a special
purpose trust (the "Retained Certificates"). Interest on the SRPC Notes is
payable semi-annually on June 15 and December 15 of each year. Amounts received
by SRPC from the Retained Certificates are expected to provide a source of cash
flows to pay the interest on the SRPC Notes. The scheduled amortization of
principal will commence in December 2000 and is subject to the collection
experience of the receivables underlying the Trust Certificates (as defined
herein) at that time. 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.
During the third quarter of 1996, the Company completed the Initial Stock
Offering. The net proceeds from the Initial Stock Offering were approximately
$165.7 million after deducting underwriting discounts and expenses related to
the Initial Stock Offering. The net proceeds were primarily used to retire the
Senior Discount Debentures. The remaining proceeds of approximately $26.5
million were used for general corporate purposes.
During the second quarter of 1997, the Company completed the Note
Offering. The gross proceeds from the issuance of these notes (approximately
$299.7 million) were used to: (i) retire the Old Senior and Old Senior
Subordinated Notes; (ii) to pay related fees and expenses; and (iii) to pay
costs associated with the acquisition of CR Anthony. Concurrently with this
transaction, the Company entered into the Credit Facility. The Credit Facility
provides for a $100.0 million working capital and letter of credit facility and
a $100.0 million expansion facility. The Credit Facility replaced the Company's
previous $75.0 million credit facility.
During the third quarter of 1997, the Company completed the Secondary
Offering. As a result of the Secondary Offering, the Company issued 650,000
primary shares. These shares resulted in net proceeds to the Company of
approximately $20.7 million, which were used to reduce borrowings outstanding
under the Company's Credit Facility.
11
<PAGE>
The Company securitizes substantially all of its trade accounts
receivables through SRPC, a wholly-owned special purpose entity. SRPC holds a
retained interest in the securitization vehicle, a special purpose trust (the
"Trust") which is represented by the Retained Certificates. The Company
transfers, on a daily basis, substantially 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.
Since its inception, the Trust has issued $165.0 million of term
certificates and a revolving certificate (collectively, the "Trust
Certificates") to third parties representing undivided interests in the Trust.
Prior to the fourth quarter of 1997, the Old Revolving Certificate was held by a
bank which agreed to purchase interest in the Trust equal to the amount of
accounts receivable in the Trust above the level required to support the term
certificates, up to a maximum of $40.0 million. During the fourth quarter of
1997, the Company replaced the Old Revolving Certificate with the Revolving
Certificate. The Revolving Certificate has a capacity of $82.5 million. Amounts
outstanding under the Revolving Certificate are funded by the issuance of
commercial paper in the open market through a facility agent at various rates
and maturities. If the commercial paper market is unavailable, amounts
outstanding under the Revolving Certificate would be funded by a liquidity
provider. The Revolving Certificate is a more efficient asset backed commercial
facility which has terms and rates more favorable than the Old Revolving
Certificate. The larger facility will allow the Company to take advantage of the
increase in accounts receivable in the Trust as a result of the acquisition of
CR Anthony as well as to accommodate planned future growth.
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.
Total working capital increased $82.9 million to $318.1 million at January
31, 1998 from $235.2 million at February 1, 1997, due primarily to the
acquisition of CR Anthony.
The Company's primary capital requirements are for working capital, debt
service and capital expenditures. Based upon the current capital structure,
management anticipates cash interest payments to be approximately $40.0 million
during each of 1998 and 1999. Capital expenditures are generally for new store
openings, remodeling of existing stores and facilities and customary store
maintenance. Capital expenditures in 1997 were $64.9 million as compared to
$26.1 million in 1996. Management expects capital expenditures to be
approximately $65.0 million during 1998, consisting primarily of 40 new store
openings, remodeling of existing stores, the conversion of the majority of the
remaining CR Anthony stores to the Company's format and the implementation of a
new merchandising system. Required aggregate principal payments on debt total
$2.7 million and $4.9 million for 1998 and 1999, respectively.
The Company's short-term liquidity needs are provided by: (i) existing
cash balances; (ii) operating cash flows; (iii) the Accounts Receivable Program;
and (iv) the Credit Facility. 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.
Management believes that funds provided by operations, together with funds
available under the Credit Facility 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.
Estimates as to
12
<PAGE>
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.
RISK FACTORS
LEVERAGE AND RESTRICTIVE COVENANTS: Due to the level of the Company's
indebtedness, any material adverse development affecting the business of the
Company could significantly limit its ability to withstand competitive pressures
and adverse economic conditions, to take advantage of expansion opportunities or
other significant business opportunities that may arise, or to meet its
obligations as they become due. The Company's debt imposes operating and
financial restrictions on the Company and certain of its subsidiaries. Such
restrictions limit the Company's ability to incur additional indebtedness, to
make dividend payments and to make capital expenditures. See "Liquidity and
Capital Resources."
FUTURE GROWTH AND RECENT ACQUISITIONS; LIQUIDITY: 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. 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 and the integration of new stores
into the Company's information systems and operations. 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.
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'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 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, particularly in its Houston area 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. 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
13
<PAGE>
branded merchandise, which could have a material adverse effect on the Company's
business and financial condition.
DEPENDENCE ON KEY PERSONNEL: The success of the Company depends to a large
extent on its executive management team, including the Company's Chairman 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.
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, some retailers have experienced
substantial increases in the rate of charge-offs in their credit card
portfolios. Although the Company did not experience this trend in 1997, any
significant 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 charge applied to outstanding
balances) could have a material adverse effect on the Company's business and
financial condition.
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 "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.
In addition, borrowings under the New Credit Facility bear a floating rate of
interest. If market rates of interest increase, the Company's operating results
could be materially adversely affected. See "Liquidity and Capital Resources."
YEAR 2000 INFRASTRUCTURE: The Company is currently in the process of
finalizing its evaluation of its information technology infrastructure for its
Year 2000 compliance. The Company does not expect that the cost to modify its
information technology infrastructure to be Year 2000 compliant will be material
to its financial condition or results of operations. The Company does not
anticipate any material disruption in its operations as a result of any failure
by the Company to be in compliance. The Company has limited information
concerning the Year 2000 compliance status of its suppliers. In the event that
the Company or any of its significant suppliers does not successfully and timely
achieve Year 2000 compliance, the Company's business or operations could be
adversely affected.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements and Schedules" included on page
19 for information required under this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, ages and all positions held by the
directors and executive officers of Stage Stores as of April 1, 1998:
NAME AGE POSITION
- --------------------------- ---------------------------------------------------
Carl Tooker 50 Chairman, Chief Executive Officer and President
James Marcum 38 Director, Vice Chairman and Chief Financial Officer
Harry Brown 51 Vice Chairman and Chief Merchandising Officer
Stephen Lovell 42 Vice Chairman and Chief Field Operations Officer
Ron Lucas 50 Executive Vice President, Human Resources
Harold Compton 50 Director
Robert Huth 52 Director
Richard Jolosky 63 Director
Jack Bush 63 Director
David Thomas 48 Director
John Wiesner 60 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 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 joined the Company on August 4, 1997 as Executive Vice President
and Chief Merchandising Officer and was promoted to Vice Chairman on March 5,
1998. 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 to 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., from
1978 to 1990.
Mr. Marcum joined the Company in June 1995 as Executive Vice President and
Chief Financial Officer, was elected to the Board on August 20, 1997 and was
promoted to Vice Chairman and Chief Financial Officer on March 5, 1998. 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 and was promoted to Vice Chairman on March 5, 1998. 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.
Mr. Lucas joined the Company in July 1995 as Senior Vice President, Human
Resources and was promoted to Executive Vice President on March 5, 1998. Between
1987 and 1995, Mr. Lucas served as Vice President,
15
<PAGE>
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. Compton has been a Director since March 1997. Mr. Compton is also
Executive Vice President and Chief Operating Officer of CompUSA, Inc. where he
has served since January 1995. Mr. Compton is also President of CompUSA Stores.
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.
Compton is a director of Linens `N Things, Inc. and Jumbo Sports.
Mr. Huth has been a Director since March 1997. Mr. Huth is also Director,
President and Chief Operating Officer of David's Bridal where he has served
since 1995. 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 Financial Officer.
Mr. Jolosky has been a Director since March 1997. Mr. Jolosky is also
Director and President of Payless ShoeSource, Inc. where he has served 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. Bush has been a Director since December 1997. Mr. Bush is also
President of Raintree Partners, Inc., a management consulting firm where he has
served since 1995, as well as Chairman of Carolina Art & Frame Company, Chief
Concept Officer of Artistree Art, Frame and Design Company, Chairman, Director
and Chief Executive Officer of Jumbo Sports, Director of Bradlees Stores and
Vice-Chairman of the Strategic Board of Directors of the College of Business and
Public Administration at the University of Missouri. From 1991 to August 1995,
he was President and Director of Michaels Stores, Inc.
Mr. Thomas has been a Director since September 1997. Mr. Thomas has been a
Managing Director of Citicorp Venture Capital, Ltd. for more than five years and
a Vice President of Court Square Capital Limited previous to that. Mr. Thomas is
a director of Lifestyle Furnishings International Ltd., Galey & Lord, Inc.,
Anvil Knitwear, Inc., Davco Restaurants Inc. and a number of private companies.
Mr. Wiesner has been a Director since July 1997 and currently serves as a
consultant to the Company through April 1998. 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. Mr. Wiesner is also currently a director of Lamont Apparel, Inc.
and Elder Beerman, Inc.
Certain other information regarding directors and officers is incorporated
herein by reference to the information under the heading "Director and Officer
and Ten Percent Stockholder Security Reports" in the Proxy Statement.
16
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Information regarding compensation of directors is incorporated herein by
reference to the information under the heading "Compensation of Directors" in
the Proxy Statement.
COMPENSATION OF EXECUTIVE OFFICERS
Information regarding compensation of executive officers is incorporated
herein by reference to the information under the heading "Executive
Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is incorporated herein by reference to the information under the
heading "Security Ownership of Certain Beneficial Owners and Management" in the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference to the information under the heading "Certain
Relationships and Related Transactions" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) and (d) Financial Statements
See "Index to Financial Statements and Schedules" on Page 19.
(b) Reports on Form 8-K
None.
(c) Exhibits - See "Exhibit Index" at X-1.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STAGE STORES, INC.
/s/ CARL TOOKER April 17, 1998
Carl Tooker
Chairman, Chief Executive Officer and President
STAGE STORES, INC.
/s/ JAMES MARCUM April 17, 1998
James Marcum
Vice Chairman and Chief Financial Officer (principal
financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ CARL TOOKER Chairman of the Board April 17, 1998
Carl Tooker of Directors
/s/ JAMES MARCUM Director April 17, 1998
James Marcum
/s/ JACK BUSH Director April 17, 1998
Jack Bush
/s/ ROBERT HUTH Director April 17, 1998
Robert Huth
/s/ JOHN WIESNER Director April 17, 1998
John Wiesner
18
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE
NUMBER
------
FINANCIAL STATEMENTS
Report of Independent Accountants................................. F-1
Consolidated Balance Sheet at January 31, 1998 and February 1, 1997 F-2
Consolidated Statement of Operations for 1997, 1996 and 1995...... F-3
Consolidated Statement of Cash Flows for 1997, 1996 and 1995...... F-4
Consolidated Statement of Stockholders' Equity for 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements........................ F-7
SCHEDULES
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
19
<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 January 31, 1998 and
February 1, 1997, and the results of their operations and their cash flows for
each of the three years in the period ended January 31, 1998, 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, 1998
F-1
<PAGE>
STAGE STORES, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except par values)
January 31, February 1,
1998 1997
--------- ---------
ASSETS
Cash and cash equivalents ........................... $ 23,315 $ 18,286
Undivided interest in accounts receivable trust ..... 61,211 80,672
Merchandise inventories, net ........................ 303,115 187,717
Prepaid expenses .................................... 20,417 15,690
Other current assets ................................ 57,788 32,797
--------- ---------
Total current assets .......................... 465,846 335,162
Property, equipment and leasehold improvements, net . 171,654 111,189
Goodwill, net ....................................... 95,486 47,173
Other assets ........................................ 26,410 15,759
--------- ---------
Total assets .................................. $ 759,396 $ 509,283
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable .................................... $ 91,799 $ 54,336
Accrued interest .................................... 2,044 12,908
Accrued expenses and other current liabilities ...... 53,939 32,699
--------- ---------
Total current liabilities ..................... 147,782 99,943
Long-term debt including credit facilities .......... 395,248 298,453
Other long-term liabilities ......................... 11,288 18,621
--------- ---------
Total liabilities ............................. 554,318 417,017
--------- ---------
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, 26,500 and 22,033 shares
issued and outstanding, respectively .............. 265 220
Class B common stock, par value $0.01, non-voting,
3,000 shares authorized, 1,250 shares
issued and outstanding ............................ 13 13
Additional paid-in capital .......................... 264,679 169,811
Accumulated deficit ................................. (59,879) (77,778)
--------- ---------
Stockholders' equity ............................. 205,078 92,266
--------- ---------
Commitments and contingencies ....................... -- --
--------- ---------
Total liabilities and stockholders' equity ....... $ 759,396 $ 509,283
========= =========
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except earnings per share)
Fiscal Year
-------------------------------------
1997 1996 1995
------------- ---------- ----------
Net sales ................................. $ 1,073,316 $ 776,550 $682,624
Cost of sales and related buying,
occupancy and distribution expenses ..... 730,179 532,563 468,347
----------- --------- --------
Gross profit .............................. 343,137 243,987 214,277
Selling, general and administrative expenses 240,011 172,579 149,102
Store opening and closure costs ........... 8,686 2,838 3,689
----------- --------- --------
Operating income .......................... 94,440 68,570 61,486
Interest, net ............................. 38,277 45,954 43,989
----------- --------- --------
Income before income tax and
extraordinary items .................... 56,163 22,616 17,497
Income tax expense ........................ 21,623 8,594 6,767
----------- --------- --------
Income before extraordinary items ......... 34,540 14,022 10,730
Extraordinary items -- early retirement
of debt ................................ (18,295) (16,081) --
=========== ========= ========
Net income (loss) ......................... $ 16,245 $ (2,059) $ 10,730
=========== ========= ========
BASIC EARNINGS (LOSS) PER COMMON SHARE DATA:
Basic earnings per common share before
extraordinary items .................... $ 1.34 $ 0.91 $ 0.88
Extraordinary items -- early retirement
of debt ................................ (0.71) (1.04) --
----------- --------- --------
Basic earnings (loss) per common share .... $ 0.63 $ (0.13) $ 0.88
=========== ========= ========
Basic weighted average common shares
outstanding ............................ 25,808 15,394 12,255
=========== ========= ========
DILUTED EARNINGS (LOSS) PER COMMON SHARE DATA:
Diluted earnings per common share before
extraordinary items .................... $ 1.30 $ 0.88 $ 0.86
Extraordinary items -- early retirement
of debt ................................ (0.69) (1.01) --
----------- --------- --------
Diluted earnings (loss) per common share .. $ 0.61 $ (0.13) $ 0.86
=========== ========= ========
Diluted weighted average common shares
outstanding ............................ 26,483 15,927 12,483
=========== ========= ========
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................. $ 16,245 $ (2,059) $ 10,730
--------- --------- --------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization .................... 19,828 14,181 12,816
Deferred income taxes ............................ 27,438 15,650 (4,065)
Accretion of discount ............................ 1,231 11,097 13,940
Amortization of debt issue costs ................. 2,274 2,104 1,860
Issuance of long-term debt in lieu of interest
payment ........................................ -- -- 147
Loss on early retirement of debt ................. 18,295 16,081 --
Changes in operating assets and liabilities:
Decrease (increase) in undivided interest in
accounts receivable trust .................... 22,777 (18,815) 7,885
Increase in merchandise inventories ............ (76,451) (28,199) (31,650)
Increase in other assets ....................... (26,970) (3,339) (6,611)
Increase (decrease) in accounts payable
and accrued liabilities ...................... 14,167 (6,614) 1,202
--------- --------- --------
Total adjustments ............................ 2,589 2,146 (4,476)
--------- --------- --------
Net cash provided by operating activities ...... 18,834 87 6,254
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted investments ................. -- -- (100)
Acquisitions, net of cash acquired ................. (4,946) (27,346) (1,167)
Additions to property, equipment and
leasehold improvements .......................... (64,859) (26,096) (28,638)
--------- --------- --------
Net cash used in investing activities .......... (69,805) (53,442) (29,905)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from:
Credit facilities ................................. 45,700 -- --
Long-term debt .................................... 299,718 30,000 16,458
Common stock ...................................... 22,522 165,969 68
Payments on:
Long-term debt .................................... (299,533) (140,677) (266)
Redemption of common stock ........................ -- (46) (122)
Additions to debt issue costs ..................... (12,407) (3,878) (807)
--------- --------- --------
Net cash provided by financing activities ...... 56,000 51,368 15,331
--------- --------- --------
Net increase (decrease) in cash and cash equivalents 5,029 (1,987) (8,320)
Cash and cash equivalents:
Beginning of year ................................ 18,286 20,273 28,593
--------- --------- --------
End of year ...................................... $ 23,315 $ 18,286 $ 20,273
========= ========= ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(in thousands)
FISCAL YEAR
------------------------------
1997 1996 1995
--------- -------- -------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid ............................... $ 45,988 $ 32,094 $27,845
========= ========= ========
Income taxes paid (refunded) ................ $ (14,436) $ 6,988 $ 5,939
========= ========= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In connection with various acquisitions, liabilities were assumed as
follows:
FISCAL YEAR
------------------------------
1997 1996 1995
--------- -------- -------
Fair value allocated to assets acquired ....... $ 120,665 $ 35,001 $ 1,702
Cash paid for assets acquired, including
acquisition expenses ........................ (4,946) (27,346) (1,167)
Value of Common Stock exchanged ............... (72,284) -- --
Purchase price payable at closing ............. -- -- (393)
--------- -------- -------
Liabilities assumed ........................... $ 43,435 $ 7,655 $ 142
========= ======== =======
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
<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> <C> <C>
Balance, January 28, 1995 ......................... 10,781 $107 1,391 $ 14 $ 3,572 $(84,886) $ (81,193)
Net income ........................................ -- -- -- -- -- 10,730 10,730
Vested compensatory stock options ................. -- -- -- -- 284 -- 284
Issuance of stock ................................. 115 2 -- -- 66 -- 68
Adjustment for minimum pension liability .......... -- -- -- -- -- (2,081) (2,081)
Retirement of stock ............................... (30) -- -- -- (122) -- (122)
------- ---- ------ ---- --------- -------- ---------
Balance, February 3, 1996 ......................... 10,866 109 1,391 14 3,800 (76,237) (72,314)
Net loss .......................................... -- -- -- -- -- (2,059) (2,059)
Vested compensatory stock options ................. -- -- -- -- 198 -- 198
Issuance of stock ................................. 11,032 110 -- -- 165,859 -- 165,969
Conversion of Class B common stock ................ 141 1 (141) (1) -- -- --
Adjustment for minimum pension liability .......... -- -- -- -- -- 518 518
Retirement of stock ............................... (6) -- -- -- (46) -- (46)
------- ---- ------ ---- --------- -------- ---------
Balance, February 1, 1997 ......................... 22,033 220 1,250 13 169,811 (77,778) 92,266
Net income ........................................ -- -- -- -- -- 16,245 16,245
Vested compensatory stock options ................. -- -- -- -- 107 -- 107
Issuance of stock ................................. 4,467 45 -- -- 94,761 -- 94,806
Adjustment for minimum pension liability .......... -- -- -- -- -- 1,654 1,654
------- ---- ------ ---- --------- -------- ---------
Balance, January 31, 1998 ......................... 26,500 $265 1,250 $ 13 $ 264,679 $(59,879) $ 205,078
======= ==== ====== ==== ========= ======== =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<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 January 31, 1998, the Company operated 607 stores
in twenty-four 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 "1997" is a reference to
the fiscal year ended January 31, 1998). 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
substantially 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 in accordance with 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
investments in 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.
MERCHANDISE INVENTORIES: The Company states its merchandise inventories
at the lower of cost or market based upon the retail method of accounting, cost
being determined using the last-in, first-out ("LIFO") method as compared to the
first-in, first-out ("FIFO") 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. If the FIFO method had been used, inventories at January 31,
1998 and February 1, 1997 would have been lower by $7.6 million and $5.3
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..................... 5-50
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
F-7
<PAGE>
STAGE STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
assets for the expected future tax consequences of temporary differences between
the carrying amounts for financial reporting purposes and the tax basis of
assets and liabilities.
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 $2.3 million, $2.1 million and $1.9
million for 1997, 1996 and 1995, 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 $7.4 million and
$5.4 million at January 31, 1998 and February 1, 1997, 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 $39.5 million,
$29.7 million and $25.9 million for 1997, 1996 and 1995, respectively. Prepaid
advertising costs were $3.6 million and $1.2 million at January 31, 1998 and
February 1, 1997, 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 reviews for the impairment of
long-lived assets and certain identifiable intangibles whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. The Company has not identified any
such impairment losses.
EARNINGS PER SHARE: The Company adopted Statement of Financial
Accounting Standard No. 128, "Earnings per Share" ("SFAS 128") during the fourth
quarter of 1997. SFAS 128 requires the Company to report both basic earnings per
share, which is based on the weighted average number of common shares
outstanding, and diluted earnings per share, which is based on the weighted
average number of common shares as well as all potentially dilutive common
shares outstanding. Stock options and restricted stock are the only potentially
dilutive shares the Company has outstanding for the periods presented. All prior
years' earnings per share data in the accompanying Consolidated Financial
Statements have been restated to reflect the provisions of SFAS 128. Prior to
the initial public offering of the Company's common stock (see Note 3), 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 in
October 1996.
RECLASSIFICATIONS: The accompanying Consolidated Financial Statements
include reclassifications from financial statements issued in previous years.
F-8
<PAGE>
NOTE 2 - C. R. ANTHONY COMPANY ACQUISITION
During June 1997, the Company acquired C.R. Anthony Company ("CR
Anthony") which operated 246 family apparel stores in small markets throughout
the central and midwestern United States under the names "Anthony's" and
"Anthony's Limited". The Company issued 3,607,044 shares in exchange for the
outstanding common stock of CR Anthony. The purchase price for CR Anthony
(including the common stock issued by the Company) was approximately $77.2
million, including acquisition costs and net of cash acquired. CR Anthony had
net sales of $288.4 million and net income of $4.8 million for the year ended
February 1, 1997.
The following unaudited pro forma information gives effect to the
acquisition of CR Anthony as if the transaction had occurred at the beginning of
the periods presented (in thousands, except per common share data):
Fiscal 1997 Fiscal 1996
------------ ------------
(unaudited)
Net sales.................................. $1,181,816 $1,064,942
============ ============
Income before extraordinary items.......... $ 33,482 $ 24,334
============ ============
Net income ................................ $ 15,187 $ 8,253
============ ============
Basic earnings per common share before
extraordinary items...................... $ 1.23 $ 1.28
============ ============
Basic earnings per common share............ $ 0.56 $ 0.43
============ ============
Diluted earnings per common share before
extraordinary items...................... $ 1.20 $ 1.25
============ ============
Diluted earnings per common share.......... $ 0.54 $ 0.42
============ ============
The above amounts are based on certain estimates and assumptions which
the Company believes are reasonable. The pro forma results do not purport to be
indicative of the results which would have occurred if the acquisition or
refinancing had actually taken place at the beginning of the periods presented,
nor are they necessarily indicative of the results of any future periods.
The acquisition of CR Anthony was accounted for under the purchase
method of accounting. Accordingly, the total acquisition cost was allocated to
the assets acquired and liabilities assumed at their estimated fair values based
upon information currently available to the Company. The excess of the purchase
price over the estimated fair value of such assets and liabilities was
recognized as goodwill and is being amortized on a straight-line basis over
forty years. This preliminary purchase price allocation will be adjusted, if
necessary, based on additional information as it becomes available.
NOTE 3 -COMMON STOCK OFFERINGS AND REFINANCINGS
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") at 112.7%
of the accreted value ($120.0 million). In addition, the Company replaced its
working capital facility in January 1997.
During June 1997, the Company, through SRI, completed a refinancing of
the Company's capital structure consisting of $300.0 million of long-term debt
and $200.0 million of working capital facility. The long-term indebtedness
consisted of $200.0 million in aggregate principal amount of 8 1/2% Senior Notes
due 2005 (the "Senior Notes") and $100.0 million in aggregate principal amount
of 9% Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes" and
collectively with the issuance of the Senior Notes, the "Note Offering"). The
gross proceeds from the Note Offering of approximately $299.7 million were used
to: (i) retire SRI's existing 10% Senior Notes due 2000 (the "Old Senior Notes")
and 11% Senior Subordinated Notes due 2003 (the "Old Senior
F-9
<PAGE>
Subordinated Notes"); (ii) to pay related fees and expenses; and (iii) to pay a
portion of the costs associated with the acquisition of CR Anthony. Concurrently
with this transaction, the Company entered into a new $200.0 million credit
facility (the "Credit Facility"). The Credit Facility provides for a $100.0
million working capital and letter of credit facility and a $100.0 million
expansion facility. The Credit Facility replaced the Company's previous $75.0
million credit facility (the "Old Credit Facility").
During September 1997, the Company completed an offering of
approximately 7.1 million shares of common stock at a price of $34 7/8 per
share. 6.4 million shares of this offering were secondary shares representing
the shares owned by two venture capital firms. The remaining 650,000 shares were
issued as primary shares, a result of an over-allotment provision. The shares
sold by the Company resulted in net proceeds to the Company of approximately
$20.7 million, which were used to reduce borrowings outstanding under the
Company's Credit Facility.
NOTE 4 - ACCOUNTS RECEIVABLE SECURITIZATION
Pursuant to the accounts receivable securitization (the "Accounts
Receivable Program"), the Company sells substantially 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 as well as
a revolving certificate outstanding which represent undivided interests in the
Trust. Prior to the fourth quarter of 1997, the revolving certificate was held
by a bank which 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, up to a maximum of $40.0 million (the "Old Revolving
Certificate"). During the fourth quarter of 1997, the Company replaced the Old
Revolving Certificate with a new revolving certificate (the "Revolving
Certificate"). Amounts outstanding under the Revolving Certificate, which are
currently limited to $82.5 million, are funded by the issuance of commercial
paper in the open market through a facility agent at various rates and
maturities. If the commercial paper market is unavailable, amounts outstanding
under the Revolving Certificate will be funded by a liquidity provider. 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 January
31, 1998 and February 1, 1997. There was $77.0 million outstanding under the
Revolving Certificate at January 31, 1998. No amounts were outstanding under the
Old Revolving Certificate at February 1, 1997.
Total accounts receivable transferred to the Trust during 1997, 1996 and
1995 were $508.9 million, $441.4 million and $411.6 million, respectively. The
cash flows generated from the accounts receivable in the Trust are dedicated to:
(i) the purchase of new accounts receivable generated by the Company; (ii)
payment of a return on the certificates; and (iii) the payment of a servicing
fee to SRI. Any remaining cash flows are remitted to SRPC. The term certificates
entitle the holders to receive a return, based upon the London Interbank Offered
Rate ("LIBOR"), plus a specified margin. Principal payments commence on December
31, 1999 but can be accelerated upon occurrence of certain events. The Company
is currently protected against increases above 12% with respect to the term
certificates under an agreement entered into with a bank. The Company is exposed
to a loss in the event of non-performance by the bank. However, the Company does
not anticipate non-performance by the bank. The Revolving Certificate entitles
the holder to receive a return based upon a commercial paper rate, or a base
rate plus a specified margin depending on the type of funding outstanding for
the Revolving Certificate. The purchase commitment for the Revolving Certificate
is three years, subject to renewal at the option of the parties. At January 31,
1998, the average rate of return on the term certificates and the Revolving
Certificate were 6.9% and 5.8%, respectively.
F-10
<PAGE>
The following table reflects the total consolidated operating
performance of the Company's Accounts Receivable Program, the results of which
are included in selling, general and administrative expenses in the Company's
Consolidated Financial Statements (in thousands):
Fiscal Year
----------------------------------
1997 1996 1995
--------- -------- ---------
Finance charge income billed to cardholders...$ 51,141 $48,555 $ 41,321
Return paid to certificateholders............. (12,612) (11,428) (11,529)
Servicing and bad debt expenses............... (38,399) (37,626) (28,551)
Other......................................... (86) 279 (62)
========= ======== =========
$ 44 $ (220) $ 1,179
========= ======== =========
NOTE 5 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements were as follows (in
thousands):
January 31, February 1,
1998 1997
---------------- ----------------
Land..................................... $ 3,074 $ 3,074
Buildings................................ 16,911 16,308
Fixtures and equipment................... 146,260 104,958
Leasehold improvements................... 96,798 63,022
----------- ----------
263,043 187,362
Accumulated depreciation................. 91,389 76,173
----------- ----------
$ 171,654 $ 111,189
=========== ==========
Depreciation expense was $16.8 million, $12.3 million and $10.8 million
for 1997, 1996 and 1995, respectively.
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
January 31, February 1,
1998 1997
-------------- --------------
Senior Notes.................................... $ 200,000 $ --
Old Senior Notes................................ 20 130,000
Senior Subordinated Notes, net of discount...... 99,673 --
Old Senior Subordinated Notes, net of discount.. -- 116,686
Credit facilities............................... 45,700 --
SRPC Notes...................................... 30,000 30,000
Other long-term debt............................ 22,547 24,404
----------- ----------
397,940 301,090
Less current maturities......................... 2,692 2,637
----------- ----------
$ 395,248 $ 298,453
=========== ==========
F-11
<PAGE>
The Senior Notes were issued by SRI with a principal amount of $200.0
million, bear interest at 8 1/2% payable semi-annually on January 15 and July
15, and mature July 15, 2005. The Senior Notes are general unsecured obligations
and rank senior to all subordinated debt of SRI including the Senior
Subordinated Notes.
The Senior Subordinated Notes were issued by SRI with a principal amount
of $100.0 million and at a discount which results in a combined effective
interest rate of 9.03%. The Senior Subordinated Notes bear interest at 9%
payable semi-annually on January 15 and July 15 and mature July 15, 2007. The
Senior Subordinated Notes are subordinated to the obligations under the Senior
Notes.
The Senior Notes and Senior Subordinated Notes are guaranteed by Stage
Stores and 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.
The Old 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. At February 1, 1997 an affiliate of a significant stockholder held $44.2
million of the Old Senior Notes. Interest expense related to the Old Senior
Notes held by related parties was $1.7 million for 1997 and $4.4 million for
1996 and 1995. All but $20,000 of the Old Senior Notes were retired in
connection with the Note Offering (see Note 3).
The Old 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 resulted in a combined effective interest rate for
both series of 11.3%. Both series bore interest at 11% payable semi-annually on
February 15 and August 15 and were retired in connection with the Note Offering
(see Note 3).
Concurrently with the Note Offering, SRI entered into the Credit
Facility. The Credit Facility provides for: (i) a $100.0 million working capital
and letter of credit facility (the "Working Capital Facility") pursuant to which
SRI shall have the right at any time prior to June 17, 2000 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 $125 million in the aggregate, subject to certain conditions, of which
up to $50 million may be used for letters of credit; and (ii) a $100.0 million
expansion facility (the "Expansion Facility"). The Credit Facility matures on
June 14, 2002 provided that in addition to certain mandatory reductions in
commitments, the commitments under the Expansion Facility will be reduced on the
fourth anniversary of the signing of the Credit Facility 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. SRI will pay a commitment fee on the unused commitments of
each of the Working Capital Facility and Expansion Facility payable quarterly in
arrears. The amount of the commitment fee will be determined based on the
Adjusted Leverage Ratio (as defined in the Credit Facility), and will range from
0.25% to 0.50% per annum. Advances under the Working Capital Facility and
Expansion Facility will bear interest at the Company's option, at the Base Rate
plus the applicable Margin Percentage or at the Eurodollar Rate plus the
applicable Margin Percentage (each as defined in the Credit Facility). The
Margin Percentage will be determined from time to time based on the Adjusted
Leverage Ratio and was 0.75% for the Base Rate and 1.75% for the Eurodollar Rate
at January 31, 1998. The effective interest rate for borrowings outstanding
under the Credit Facility was 7.8% at January 31, 1998.
The Credit Facility contains covenants which, among other things,
restrict the: (i) incurrence of additional debt; (ii) incurrence of capitalized
lease obligations; (iii) payment of dividends; (iv) formation of certain
business combinations; (v) acquisition of subordinated debt; (vi) use of
proceeds received under the agreement; (vii) aggregate amount of capital
expenditures; (viii) transactions with related parties; and (ix) changes in
lines of business. In addition, the Credit Facility will require 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. A portion of the Credit Facility is secured
by SRI's distribution center located in Jacksonville, Texas, including equipment
located therein and a pledge of SRPC stock. The net book value of the
distribution center was approximately $6.5 million at January 31, 1998.
F-12
<PAGE>
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.
In connection with various acquisitions, the Company has indebtedness
which bear interest between 7% and 12% and have maturity dates between 1998
through 2003.
Aggregate maturities of long-term debt for the next five years are: 1998
- - $2.7 million; 1999 - $4.9 million; 2000 - $4.9 million; 2001 - $32.7 million
and 2002 - $2.4 million.
Management estimates the fair value of its long-term debt to be $414.0
million and $320.1 million at January 31, 1998 and February 1, 1997,
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 January 31, 1998, there were 1,156,568 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 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.
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. As of January 31, 1998, there were 557,525
options and 220,000 shares of restricted stock outstanding under the Incentive
Plan.
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 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 generally become exercisable in installments of
20% per year on each of the first through the fifth
F-13
<PAGE>
anniversaries of the grant date and have a maximum term of ten years. Options
granted under the Incentive Plan generally become exercisable in installments of
25% per year on each of the first through fourth anniversaries of the grant date
and have a maximum term of ten years.
A summary of the option activity under the various plans follows:
Weighted
Number of Average
Outstanding Option
Options Price
------------ --------
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
Granted ....................................... 570,550 23.84
Surrendered ................................... (124,015) 13.31
Exercised ..................................... (208,023) 2.22
-----------
Options outstanding at January 31, 1998 ........... 1,714,093 $12.39
===========
Exercisable options at February 1, 1997 and February 3, 1996 were
181,358 and 241,355, respectively. A summary of outstanding and exercisable
options as of January 31, 1998 follows:
Weighted
Weighted Average
Number of Average Remaining Number of Weighted
Outstanding Exercise Contractual Exercisable Average
Option Price Options Price Life Options Exercise Price
- -------------- ------------ ----------- ------------- ------------ -------------
$0.11 110,632 $0.11 5.3 71,518 $0.11
2.27 168,906 2.27 6.3 74,702 2.27
3.04 223,470 3.04 7.4 107,157 3.04
5.28 426,126 5.28 8.1 73,410 5.28
10.56 19,034 10.56 8.4 6,372 10.56
16.50 - 24.00 698,675 22.10 9.0 -- --
24.01 - 30.00 29,250 28.70 9.5 -- --
30.01 - 40.00 38,000 37.73 9.8 -- --
------------ ------------
1,714,093 $10.98 333,159 $2.87
============ ============
During 1997, 220,000 shares of restricted stock with a weighted average
grant-date fair value of $32.04 were granted under the Incentive Plan. The stock
vests at the end of a three year period and contains certain accelerated vesting
provisions. No shares were vested at January 31, 1998. Compensation expense is
being amortized over the vesting period on a straight-line basis.
F-14
<PAGE>
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" in accounting for its plans.
Compensation expense was $0.5 million for 1997 and $0.3 million for 1996 and
1995. 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":
Fiscal Year
----------------------------
1997 1996 1995
------- ------- ----------
Pro forma net income (loss) ..................... $15,407 $(2,653) $ 10,592
Pro forma basic earnings (loss) per common share 0.60 (0.17) 0.86
Pro forma diluted earnings (loss) per common
share ......................................... 0.58 (0.17) 0.85
Weighted average grant-date value of options
granted ....................................... 13.96 8.33 3.59
The fair value of the options granted is estimated using the
Black-Scholes option-pricing model with the following assumptions for 1997: no
dividend yield; volatility of 47.32%; risk-free interest rate of 5.5%; assumed
forfeiture rate of 76.92% and an expected life of 7.42 years. For 1995 and 1996,
the following assumptions were used: 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):
January 31, February 1,
1998 1997
--------- ----------
Actuarial present value of benefits:
Vested benefit obligations ........................ $(27,547) $(24,650)
======== ========
Accumulated benefit obligations ................... $(29,234) $(25,660)
======== ========
Projected benefit obligations ........................ $(34,716) $(33,790)
Market value of plan assets, primarily fixed
income and equity securities ...................... 26,924 20,990
-------- --------
Pension obligations in excess of assets .............. (7,792) (12,800)
Unrecognized prior service income .................... (15) (21)
Unrecognized net loss ................................ 6,405 11,772
Adjustment required to recognize minimum
liability ......................................... (908) (3,621)
-------- --------
Accrued pension cost ................................. $ (2,310) $ (4,670)
======== ========
F-15
<PAGE>
Assumptions utilized in determining projected obligations and funding amounts:
Discount rate ............................................ 7.75% 7.50%
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.
The components of pension cost for the Retirement Plan were as follows
(in thousands):
Fiscal Year
----------------------------------
1997 1996 1995
--------- -------- ---------
Service cost........................... $ 1,738 $ 1,269 $ 771
Interest cost.......................... 2,328 2,085 2,139
Actual loss (return) on plan assets.... (2,521) (2,047) (3,377)
Net amortization and deferral.......... 501 789 2,292
--------- -------- ---------
$ 2,046 $ 2,096 $ 1,825
========= ======== =========
The Company has a contributory 401(k) savings plan covering
substantially all qualifying employees. Under the 401(k), participants may
contribute up to 15% of their qualifying earnings, subject to certain
restrictions. The Company currently matches 25% of each participant's
contributions, limited to 6% of each participant's salary. The Company's
matching contributions were approximately $0.4 million for 1997 and 1996 and
$0.2 million for 1995.
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
----------------------------------
1997 1996 1995
--------- -------- ---------
Minimum rentals......................... $ 37,601 $30,397 $ 26,943
Contingent rentals...................... 4,545 3,318 2,618
Equipment rentals....................... 1,240 829 593
--------- -------- ---------
$ 43,386 $34,544 $ 30,154
========= ======== =========
F-16
<PAGE>
Minimum rental commitments on long-term operating leases at January 31,
1998, net of sub-leases, are as follows (in thousands):
Fiscal Year:
1998........................................... $ 45,053
1999........................................... 41,600
2000........................................... 35,851
2001........................................... 30,008
2002........................................... 24,918
Thereafter..................................... 117,465
========
$294,895
========
NOTE 10 - INCOME TAXES
All Company operations are domestic. Income tax expense charged to
continuing operations consisted of the following (in thousands):
Fiscal Year
----------------------------------
1997 1996 1995
--------- -------- ---------
Federal income tax expense (benefit):
Current............................. $ 11,012 $(7,443) $ 9,772
Deferred............................ 8,413 15,399 (3,630)
--------- -------- ---------
19,425 7,956 6,142
--------- -------- ---------
State income tax expense (benefit):
Current............................. 193 764 1,060
Deferred............................ 2,005 (126) (435)
--------- -------- ---------
2,198 638 625
--------- -------- ---------
$ 21,623 $ 8,594 $ 6,767
========= ======== =========
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
----------------------------------
1997 1996 1995
--------- -------- ---------
Federal income tax expense at the
statutory rate........................ $ 19,657 $ 7,915 $ 6,124
State income taxes, net................. 1,428 414 406
Permanent differences, net.............. 538 265 290
Other, net.............................. -- -- (53)
--------- -------- ---------
$ 21,623 $ 8,594 $ 6,767
========= ======== =========
In connection with the early retirement of various indebtedness, the
Company recorded extraordinary charges of $18.3 million and $16.1 million in
1997 and 1996, respectively. These charges were net of applicable income taxes
of $11.5 million and $9.8 million in 1997 and 1996, respectively.
The 1997 income tax benefit relating to the extraordinary items is
comprised of a $9.9 million deferred federal tax benefit and a $1.6 million
deferred state tax benefit. The 1996 income tax benefit relating to
F-17
<PAGE>
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. Deferred tax liabilities (assets) consist of the following (in
thousands):
January 31, February 1,
1998 1997
--------------- ---------------
Gross deferred tax liabilities:
Depreciation and amortization.......... $ 11,811 $ 12,903
Inventory reserves..................... 2,841 3,735
State income taxes..................... 6,554 495
Other.................................. 1,497 1,660
----------- ----------
22,703 18,793
----------- ----------
Gross deferred tax assets:
Retained Certificates.................. (3,070) (2,173)
Accrued consolidation costs............ (665) (1,318)
Net operating loss carryforwards....... (24,604) (2,961)
AMT tax credit carryforward ........... (3,094) --
Accrued expenses....................... (4,380) (1,607)
Pensions............................... (1,378) (2,163)
Escalating leases...................... (2,242) (1,482)
Charitable contribution carryforward... (632) (575)
Accrued payroll costs.................. (2,557) (1,212)
Other.................................. (184) (403)
----------- ----------
(42,806) (13,894)
----------- ----------
Deferred tax assets valuation allowance.... -- --
----------- ----------
$ (20,103) $ 4,899
=========== ==========
As a result of the extraordinary loss on the early retirement of debt
during 1997 and 1996, the Company has recorded a $3.1 million and $17.0 million
federal income tax receivable, respectively.
The Company has net operating loss carryforwards for federal income tax
purposes of approximately $57.0 million, which if not utilized will expire in
varying amounts between 2007 and 2013. Included in this amount is approximately
$13.0 million which is subject to an annual limitation of approximately $2.7
million. The Company has net operating loss carryforwards for state income tax
purposes of approximately $89.0 million, which if not utilized, will expire in
varying amounts between 2003 and 2013.
NOTE 11 - EARNINGS PER SHARE
During the fourth quarter of 1997, the Company adopted Statement of
Financial Accounting Standard No. 128 ("SFAS 128"), "Earnings per Share." Stock
options and restricted stock are the only potentially dilutive shares the
Company has outstanding for the periods presented.
Options to purchase 10,000 shares of common stock at $39.00 per share
and 15,000 shares of common stock at $38.63 per share were outstanding at the
end of fiscal 1997 but were not included in the computation of diluted earnings
per share because the options' exercise price was greater than the average
market price of the common shares. Additionally, 220,000 shares of restricted
common stock were granted during 1997 and considered anti-dilutive at the end of
fiscal 1997.
F-18
<PAGE>
Options to purchase 255,763 shares of common stock at $21.11 per share
were outstanding at the end of fiscal 1996 but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares.
All options to purchase common stock outstanding during 1995 were
included in the computation of diluted earnings per share.
NOTE 12 - QUARTERLY FINANCIAL INFORMATION
Unaudited quarterly financial data is summarized as follows (in
thousands):
Fiscal Year 1997
-------------------------------------
Q1 Q2 Q3 Q4
-------- --------- --------- --------
Net sales ............................... $191,512 $238,137 $274,269 $369,398
Gross profit ............................ 61,925 73,902 86,822 120,488
Operating income ........................ 20,524 19,736 15,789 38,391
Income before extraordinary items ....... 7,094 6,246 3,673 17,527
Net income (loss) ....................... 7,094 (11,134) 3,523 16,762
Basic earnings (loss) per common share
data:
Basic earnings per common share before
extraordinary items ................ 0.30 0.27 0.13 0.63
Extraordinary items - early retirement
of debt ............................ -- (0.74) -- (0.03)
Basic earnings (loss) per common share 0.30 (0.48) 0.13 0.60
Diluted earnings (loss) per common
share data:
Diluted earnings per common share
before extraordinary items ......... 0.30 0.25 0.13 0.62
Extraordinary items - early retirement
of debt ............................ -- (0.68) -- (0.03)
Diluted earnings (loss) per common
share .............................. 0.30 (0.44) 0.13 0.59
Fiscal Year 1996
-------------------------------------
Q1 Q2 Q3 Q4
-------- --------- -------- ---------
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 items 2,652 868 (265) 10,767
Net income (loss) ....................... 2,652 868 (16,071) 10,492
Basic earnings (loss) per common share
data:
Basic earnings (loss) per common share
before extraordinary items ......... 0.20 0.07 (0.02) 0.46
Extraordinary items - early retirement
of debt ............................ -- -- (1.16) (0.01)
Basic earnings (loss) per common share 0.20 0.07 (1.18) 0.45
Diluted earnings (loss) per common share
data:
Diluted earnings (loss) per common
share before extraordinary items ... 0.21 0.07 (0.02) 0.45
Extraordinary items - early retirement
of debt ............................ -- -- (1.12) (0.01)
Diluted earnings (loss) per common
share .............................. 0.21 0.07 (1.14) 0.44
F-19
<PAGE>
NOTE 13 - 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 and $0.8 million for
1996 and 1995, respectively. Upon consummation of the initial public offering
(see Note 3), this agreement was terminated. As a result, there were no such
fees in 1997.
The Company has made loans, in an aggregate principal amount of $1.2
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 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 approximately $14.7 million
at January 31, 1998, all of which were collateralized by the Credit Facility
(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.
F-20
<PAGE>
NOTE 15 - CONSOLIDATING FINANCIAL STATEMENTS
SRI is the primary obligor under the long-term indebtedness issued in
connection with the Note Offering (see Note 3). Stage Stores and Specialty
Retailers, Inc. (NV), a wholly-owned subsidiary of Stage Stores (which was
incorporated during June 1997), are guarantors under such indebtedness. The
consolidating condensed financial information for Stage Stores and its
wholly-owned subsidiaries are presented below. The company's investments in it's
wholly-owned subsidiaries are accounted for using the equity method. The
financial data for SRI Receivables Purchase Co. does not reflect the total
consolidated operating performance of the Company's Accounts Receivable Program.
For a summary of the total consolidated operating performance of the Company's
Accounts Receivable Program, see Note 4.
CONSOLIDATING CONDENSED BALANCE SHEET
FEBRUARY 1, 1997
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SRI
Specialty Receivables Stage Stage
Retailers, Purchase SRI SRI Stores, Stores
ASSETS Inc. Co. Elimination Consolidated Inc. Eliminations Consolidated
------ -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents ....... $ 18,270 $ -- $ -- $ 18,270 $ 16 $ -- $ 18,286
Undivided interest in accounts
receivable trust .............. (9,419) 90,091 -- 80,672 -- -- 80,672
Merchandise inventories, net .... 187,717 -- -- 187,717 -- -- 187,717
Prepaid expenses ................ 15,679 11 -- 15,690 -- -- 15,690
Other current assets ............ 27,165 5,632 -- 32,797 -- -- 32,797
-----------------------------------------------------------------------------------------------
Total current assets ............ 239,412 95,734 -- 335,146 16 -- 335,162
Property, equipment and leasehold
improvements, net ............. 111,189 -- -- 111,189 -- -- 111,189
Goodwill, net ................... 47,173 -- -- 47,173 -- -- 47,173
Other assets .................... 8,308 7,451 -- 15,759 -- -- 15,759
Investment in subsidiaries ...... 35,482 -- (35,482) -- 28,144 (28,144) --
-----------------------------------------------------------------------------------------------
Total assets .................... $ 441,564 $103,185 $(35,482) $509,267 $ 28,160 $(28,144) $ 509,283
===============================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable ................ $ 54,336 $ -- $ -- $ 54,336 $ -- $ -- $ 54,336
Accrued interest ................ 12,411 497 -- 12,908 -- -- 12,908
Accrued expenses and other
current liabilities ........... 31,866 722 -- 32,588 111 -- 32,699
-----------------------------------------------------------------------------------------------
Total current liabilities ....... 98,613 1,219 -- 99,832 111 -- 99,943
Long-term debt .................. 268,453 30,000 -- 298,453 -- -- 298,453
Intercompany notes/advances ..... 29,176 35,041 -- 64,217 (64,217) -- --
Other long-term liabilities ..... 17,178 1,443 -- 18,621 -- -- 18,621
-----------------------------------------------------------------------------------------------
Total liabilities ............... 413,420 67,703 -- 481,123 (64,106) -- 417,017
Preferred stock ................. -- -- -- -- -- -- --
Common stock .................... -- -- -- -- 220 -- 220
Class B common stock ............ -- -- -- -- 13 -- 13
Additional paid-in capital ...... 3,317 29,726 (29,726) 3,317 169,811 (3,317) 169,811
Accumulated equity (deficit) .... 24,827 5,756 (5,756) 24,827 (77,778) (24,827) (77,778)
-----------------------------------------------------------------------------------------------
Stockholders' equity ............ 28,144 35,482 (35,482) 28,144 92,266 (28,144) 92,266
-----------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity .......... $ 441,564 $103,185 $(35,482) $509,267 $ 28,160 $(28,144) $ 509,283
===============================================================================================
</TABLE>
F-21
<PAGE>
CONSOLIDATING CONDENSED BALANCE SHEET
JANUARY 31, 1998 (in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SRI
Specialty Receivables Stage Specialty Stage
Retailers, Purchase SRI SRI Stores, Retailers, Stores
Inc. Co. Elimination Consolidated Inc. Inc.(NV) Eliminations Consolidated
-----------------------------------------------------------------------------------------------------
ASSETS
------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 23,299 $ -- $ -- $ 23,299 $ 16 $ -- $ -- $ 23,315
Undivided interest in
accounts receivable
trust .................. (11,234) 72,445 -- 61,211 -- -- -- 61,211
Merchandise
inventories, net ....... 303,115 -- -- 303,115 -- -- -- 303,115
Prepaid expenses ......... 19,944 473 -- 20,417 -- -- -- 20,417
Other current assets ..... 49,980 7,808 -- 57,788 -- -- -- 57,788
-----------------------------------------------------------------------------------------------------
Total current assets ..... 385,104 80,726 -- 465,830 16 -- -- 465,846
Property, equipment
and leasehold
improvements, net ...... 170,401 -- -- 170,401 -- 1,253 -- 171,654
Goodwill, net ............ 95,486 -- -- 95,486 -- -- -- 95,486
Other assets ............. 20,653 5,757 -- 26,410 -- -- -- 26,410
Investment in
subsidiaries ........... 40,312 -- (40,312) -- 205,075 -- (205,075) --
-----------------------------------------------------------------------------------------------------
Total assets ............. $ 711,956 $86,483 $(40,312) $758,127 $ 205,091 $ 1,253 $(205,075) $ 759,396
=====================================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
---------
Accounts payable ......... $ 91,799 $ -- $ -- $ 91,799 $ -- $ -- $ -- $ 91,799
Accrued interest ......... 1,556 488 -- 2,044 -- -- -- 2,044
Accrued expenses and
other current
liabilities ............ 53,545 142 -- 53,687 252 -- -- 53,939
-----------------------------------------------------------------------------------------------------
Total current
liabilities ............ 146,900 630 -- 147,530 252 -- -- 147,782
Long-term debt ........... 365,248 30,000 -- 395,248 -- -- -- 395,248
Intercompany
notes/advances ......... 149,258 14,324 -- 163,582 (436) (163,146) -- --
Other long-term
liabilities ............ 9,874 1,217 -- 11,091 197 -- -- 11,288
-----------------------------------------------------------------------------------------------------
Total liabilities ........ 671,280 46,171 -- 717,451 13 (163,146) -- 554,318
Preferred stock .......... -- -- -- -- -- -- -- --
Common stock ............. -- -- -- -- 265 -- -- 265
Class B common stock ..... -- -- -- -- 13 -- -- 13
Additional paid-in
capital ................ 3,317 34,556 (34,556) 3,317 264,679 159,002 (162,319) 264,679
Accumulated equity
(deficit) .............. 37,359 5,756 (5,756) 37,359 (59,879) 5,397 (42,756) (59,879)
-----------------------------------------------------------------------------------------------------
Stockholders' equity ..... 40,676 40,312 (40,312) 40,676 205,078 164,399 (205,075) 205,078
-----------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity ... $ 711,956 $86,483 $(40,312) $758,127 $ 205,091 $ 1,253 $(205,075) $ 759,396
=====================================================================================================
</TABLE>
F-22
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED FEBRUARY 3, 1996
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SRI
Specialty Receivables Stage Stage
Retailers, Purchase SRI SRI Stores, Stores
Inc. Co. Elimination Consolidated Inc. Eliminations Consolidated
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales .......................... $682,624 $ -- $ -- $682,624 $ -- $ -- $682,624
Cost of sales and
related buying,
occupancy and
distribution
expenses ......................... 468,347 -- -- 468,347 -- -- 468,347
-----------------------------------------------------------------------------------------------
Gross profit ....................... 214,277 -- -- 214,277 -- -- 214,277
Selling, general and
administrative
expenses ......................... 171,342 (22,245) -- 149,097 5 -- 149,102
Store opening and
closure costs .................... 3,689 -- -- 3,689 -- -- 3,689
-----------------------------------------------------------------------------------------------
Operating income (loss) ............ 39,246 22,245 -- 61,491 (5) -- 61,486
Interest expense, net .............. 31,554 (1,053) -- 30,501 13,488 -- 43,989
-----------------------------------------------------------------------------------------------
Income (loss) before
income taxes ..................... 7,692 23,298 -- 30,990 (13,493) -- 17,497
Income tax expense
(benefit) ........................ 2,666 8,651 -- 11,317 (4,550) -- 6,767
-----------------------------------------------------------------------------------------------
Income (loss) before
equity in net
earnings of
subsidiaries and
extraordinary item ............... 5,026 14,647 -- 19,673 (8,943) -- 10,730
Equity in net earnings
of subsidiaries .................. 14,647 -- (14,647) -- 19,673 (19,673) --
-----------------------------------------------------------------------------------------------
Income (loss) before
extraordinary item ............... 19,673 14,647 (14,647) 19,673 10,730 (19,673) 10,730
Extraordinary item -
early retirement of debt ......... -- -- -- -- -- -- --
-----------------------------------------------------------------------------------------------
Net income (loss) .................. $ 19,673 $ 14,647 $(14,647) $ 19,673 $ 10,730 $ (19,673) $ 10,730
===============================================================================================
</TABLE>
F-23
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED FEBRUARY 1, 1997
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SRI
Specialty Receivables Stage Stage
Retailers, Purchase SRI SRI Stores, Stores
Inc. Co. Elimination Consolidated Inc. Eliminations Consolidated
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ........................ $ 776,550 $ -- $ -- $ 776,550 $ -- $ -- $ 776,550
Cost of sales and
related buying,
occupancy and
distribution
expenses ....................... 532,563 -- -- 532,563 -- -- 532,563
-----------------------------------------------------------------------------------------------
Gross profit ..................... 243,987 -- -- 243,987 -- -- 243,987
Selling, general and
administrative expenses ........ 178,497 (5,935) -- 172,562 17 -- 172,579
Store opening and
closure costs .................. 2,838 -- -- 2,838 -- -- 2,838
-----------------------------------------------------------------------------------------------
Operating income ................. 62,652 5,935 -- 68,587 (17) -- 68,570
Interest expense, net ............ 34,671 344 -- 35,015 10,939 -- 45,954
-----------------------------------------------------------------------------------------------
Income (loss) before
income taxes ................... 27,981 5,591 -- 33,572 (10,956) -- 22,616
Income tax expense (benefit) ..... 10,261 2,023 -- 12,284 (3,690) -- 8,594
-----------------------------------------------------------------------------------------------
Income (loss) before
equity in net
earnings of
subsidiaries and
extraordinary item ............. 17,720 3,568 -- 21,288 (7,266) -- 14,022
Equity in net earnings
of subsidiaries ................ 3,568 -- (3,568) -- 5,207 (5,207) --
-----------------------------------------------------------------------------------------------
Income (loss) before
extraordinary item ............. 21,288 3,568 (3,568) 21,288 (2,059) (5,207) 14,022
Extraordinary item -
early retirement of debt ....... (16,081) -- -- (16,081) -- -- (16,081)
-----------------------------------------------------------------------------------------------
Net income (loss) ................ $ 5,207 $ 3,568 $(3,568) $ 5,207 $ (2,059) $(5,207) $ (2,059)
===============================================================================================
</TABLE>
F-24
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JANUARY 31, 1998
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SRI
Specialty Receivables Stage Specialty Stage
Retailers, Purchase SRI SRI Stores, Retailers, Stores
Inc. Co. Elimination Consolidated Inc. Inc.(NV) Eliminations Consolidated
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............ $ 1,073,316 $ -- $ -- $ 1,073,316 $ -- $ -- $ -- $ 1,073,316
Cost of sales and
related buying,
occupancy and
distribution
expenses ........... 730,179 -- -- 730,179 -- -- -- 730,179
----------------------------------------------------------------------------------------------------------
Gross profit ......... 343,137 -- -- 343,137 -- -- -- 343,137
Selling, general and
administrative
expenses ........... 242,843 (2,865) -- 239,978 30 3 -- 240,011
Store opening and
closure costs ...... 8,686 -- -- 8,686 -- -- -- 8,686
----------------------------------------------------------------------------------------------------------
Operating income
(loss) ............. 91,608 2,865 -- 94,473 (30) (3) -- 94,440
Interest expense,
net ................ 47,746 (1,164) -- 46,582 -- (8,305) -- 38,277
----------------------------------------------------------------------------------------------------------
Income (loss) before
income taxes ....... 43,862 4,029 -- 47,891 (30) 8,302 -- 56,163
Income tax expense
(benefit) .......... 17,234 1,483 -- 18,717 -- 2,906 -- 21,623
----------------------------------------------------------------------------------------------------------
Income (loss) before
equity in net
earnings of
subsidiaries and
extraordinary item . 26,628 2,546 -- 29,174 (30) 5,396 -- 34,540
Equity in net earnings
of subsidiaries .... 1,904 -- (1,904) -- 16,275 -- (16,275) --
----------------------------------------------------------------------------------------------------------
Income (loss) before
extraordinary item . 28,532 2,546 (1,904) 29,174 16,245 5,396 (16,275) 34,540
Extraordinary item -
early retirement
of debt ............ (17,653) (642) -- (18,295) -- -- -- (18,295)
----------------------------------------------------------------------------------------------------------
Net income (loss) .... $ 10,879 $ 1,904 $(1,904) $ 10,879 $ 16,245 $ 5,396 $(16,275) $ 16,245
==========================================================================================================
</TABLE>
F-25
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED FEBRUARY 3, 1996
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SRI
Specialty Receivables Stage Stage
Retailers, Purchase SRI SRI Stores, Stores
Inc. Co. Elimination Consolidated Inc. Eliminations Consolidated
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by
(used in) operating activities ...... $(17,088) $ 24,063 $ -- $ 6,975 $ (721) $ -- $ 6,254
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted investments .... (100) -- -- (100) -- -- (100)
Acquisitions, net of cash acquired .... (1,167) -- -- (1,167) -- -- (1,167)
Additions to property, equipment
and leasehold improvements .......... (28,638) -- -- (28,638) -- -- (28,638)
Proceeds from the sale of accounts
receivable, net ..................... (2,391) 2,391 -- -- -- -- --
-----------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing Activities ................ (32,296) 2,391 -- (29,905) -- -- (29,905)
-----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of long-term debt ................... 16,458 -- -- 16,458 -- -- 16,458
Proceeds from issuance
of common stock ..................... -- -- -- -- 68 -- 68
Payments on long-term debt ............ (266) -- -- (266) -- -- (266)
Redemption of common stock ............ -- -- -- -- (122) -- (122)
Additions to debt issue costs ......... (795) -- -- (795) (12) -- (807)
Dividends paid to SRI ................. 26,454 (26,454) -- -- -- -- --
-----------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities ................ 41,851 (26,454) -- 15,397 (66) -- 15,331
-----------------------------------------------------------------------------------------------
Net decrease in cash
and cash equivalents ................ (7,533) -- -- (7,533) (787) -- (8,320)
Cash and cash equivalents:
Beginning of year ................... 27,797 -- -- 27,797 796 -- 28,593
-----------------------------------------------------------------------------------------------
End of year ......................... $ 20,264 $ -- $ -- $ 20,264 $ 9 $ -- $ 20,273
===============================================================================================
</TABLE>
F-26
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED FEBRUARY 1, 1997
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SRI
Specialty Receivables Stage Stage
Retailers, Purchase SRI SRI Stores, Stores
Inc. Co. Elimination Consolidated Inc. Eliminations Consolidated
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net cash provided by (used in)
operating activities ............. $(20,479) $ 20,583 $ -- $ 104 $ (17) $ -- $ 87
-----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisitions, net of
cash acquired ..................... (27,346) -- -- (27,346) -- -- (27,346)
Intercompany notes/advances ......... -- -- -- -- (165,899) 165,899
Additions to property, equipment
and leasehold improvements ........ (26,096) -- -- (26,096) -- -- (26,096)
Proceeds from the sale of accounts
receivable, net ................... 18,284 (18,284) -- -- -- -- --
-----------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing Activities ............ (35,158) (18,284) -- (53,442) (165,899) 165,899 (53,442)
-----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of long-term debt ................. -- 30,000 -- 30,000 -- -- 30,000
Proceeds from issuance
of common stock ................... -- -- -- -- 165,969 -- 165,969
Payments on long-term debt .......... (140,677) -- -- (140,677) -- -- (140,677)
Intercompany notes/advances ......... 165,899 -- -- 165,899 -- (165,899) --
Redemption of common stock .......... -- -- -- -- (46) -- (46)
Additions to debt issue costs ....... (1,056) (2,822) -- (3,878) -- -- (3,878)
Dividends paid to SRI ............... 29,477 (29,477) -- -- -- -- --
-----------------------------------------------------------------------------------------------
Net cash provided by
(used in) financing activities ... 53,643 (2,299) -- 51,344 165,923 (165,899) 51,368
-----------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents .............. (1,994) -- -- (1,994) 7 -- (1,987)
Cash and cash equivalents:
Beginning of year ................. 20,264 -- -- 20,264 9 -- 20,273
-----------------------------------------------------------------------------------------------
End of year ....................... $ 18,270 $ -- $ -- $ 18,270 $ 19 $ -- $ 18,286
===============================================================================================
</TABLE>
F-27
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED JANUARY 31, 1998
(in thousands, unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SRI
Specialty Receivables Stage Specialty Stage
Retailers, Purchase SRI SRI Stores, Retailers Stores
Inc. Co. Elimination Consolidated Inc. Inc.(NV) Eliminations Consolidated
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net cash provided by
(used in) operating
activities .......... $ 36,822 $(17,988) $ -- $ 18,834 $ -- $ -- $ -- $ 18,834
--------------------------------------------------------------------------------------------------------
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Acquisitions, net of
cash acquired ....... (4,946) -- -- (4,946) -- -- -- (4,946)
Investment in
subsidiaries ........ 21,243 -- -- 21,243 (21,243) -- --
Intercompany
notes/advances ...... 22,522 -- -- 22,522 (1,279) (21,243) -- --
Additions to property,
equipment and
leasehold
improvements ........ (64,859) -- -- (64,859) -- -- -- (64,859)
Proceeds from the sale
of accounts
receivable, net ..... (19,962) 19,962 -- -- -- -- -- --
Dividends from
subsidiary .......... 1,904 -- (1,904) -- -- -- -- --
--------------------------------------------------------------------------------------------------------
Net cash provided by
(used in) investing
Activities ........ (44,098) 19,962 (1,904) (26,040) (22,522) (21,243) -- (69,805)
--------------------------------------------------------------------------------------------------------
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from working
capital facility .... 45,700 -- -- 45,700 -- -- -- 45,700
Proceeds from issuance
of long-term debt ... 299,718 -- -- 299,718 -- -- -- 299,718
Proceeds from issuance
of common stock ..... -- -- -- -- 22,522 -- -- 22,522
Proceeds from capital
contributions ....... (21,243) -- -- (21,243) -- (21,243) -- --
Payments on long-
term debt ........... (299,533) -- -- (299,533) -- -- -- (299,533)
Additions to debt
issue costs ......... (12,337) (70) -- (12,407) -- -- -- (12,407)
Dividend paid ......... -- (1,904) 1,904 -- -- -- -- --
--------------------------------------------------------------------------------------------------------
Net cash provided by
(used in) financing
activities ........ 12,305 (1,974) 1,904 12,235 22,522 21,243 -- 56,000
--------------------------------------------------------------------------------------------------------
Net increase in cash
and cash equivalents 5,029 -- -- 5,029 -- -- -- 5,029
Cash and cash
equivalents:
Beginning of year ... 18,270 -- -- 18,270 16 -- -- 18,286
--------------------------------------------------------------------------------------------------------
End of year ......... $ 23,299 $ -- $ -- $ 23,299 $ 16 $ -- $ -- $ 23,315
========================================================================================================
</TABLE>
F-28
<PAGE>
EXHIBIT INDEX
The following documents are the exhibits to the Form 10-K. For convenient
reference, each exhibit is listed according to the Exhibit Table of Regulation
S-K.
EXHIBIT
NUMBER EXHIBIT
------ -------
*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 Certificate of Incorporation of Specialty
Retailers, Inc. (Incorporated by Reference to Exhibit 3.3 of
Registration No. 333-32695 on Form S-4).
*3.4 Amended and Restated Bylaws of Specialty Retailers, Inc.
(Incorporated by Reference to Exhibit 3.4 of Registration No.
333-32695 on Form S-4).
*3.5 Certificate of Incorporation of Specialty Retailers, Inc. (NV)
(Incorporated by Reference to Exhibit 3.5 of Registration No.
333-32695 on Form S-4).
*3.6 Bylaws of Specialty Retailers, Inc. (NV) (Incorporated by
Reference to Exhibit 3.6 of Registration No. 333-32695 on Form
S-4).
*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 (Incorporated by Reference to
Exhibit 4.1 of Registration No. 333-32695 on Form S-4).
*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 (Incorporated by Reference
to Exhibit 4.2 of Registration No. 333-32695 on Form S-4).
*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 (Incorporated by
Reference to Exhibit 4.3 of Registration No. 333-32695 on
Form S-4).
*4.4 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).
X-1
<PAGE>
*4.5 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).
*4.6 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).
*4.7 Series 1997-1 Supplement dated as of December 3, 1997 to Amended
and Restated Pooling and Servicing Agreement dated as of August
11, 1995 and Amended on May 30, 1996 by and among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) on behalf of the Series 1997-1
Certificateholders (Incorporated by Reference to Exhibit 10.1
on Form 10-Q of Stage Stores, Inc., dated November 1, 1997).
**4.8 Class A Certificate Purchase Agreement amount SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc., the Class A
Purchasers party thereto and Credit Suisse First Boston dated as
of December 3, 1997.
**4.9 Class B Certificate Purchase Agreement amount SRI Receivables
Purchase Co., Inc., Specialty Retailers, Inc., the Class B
Purchasers party thereto and Credit Suisse First Boston dated as
of December 3, 1997.
*4.10 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).
*4.11 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
Certificateholders dated May 30, 1996 (Incorporated by
Reference to Exhibit 4.6 on Form 10-Q of Apparel Retailers,
Inc., dated May 4, 1996).
*4.12 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).
*4.13 Certificate Purchase Agreements between SRI Receivables Purchase
Co., Inc. and the Purchasers of the Series 1993-1 Offered
Certificates (Incorporated by Reference to Exhibit 4.10 of
Registration No. 33-68258 on Form S-4).
*4.14 Certificate Purchase Agreement among SRI Receivables Purchase Co.,
Inc., 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).
X-2
<PAGE>
*10.1 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).
*10.2 Apparel Retailers, Inc. Stock Option Plan (Incorporated by
Reference to Exhibit 10.13 of Registration No. 33-68258 on Form
S-4).
**10.3 Employment Agreement between Stage Stores, Inc. and Carl E.Tooker
dated April 1, 1998.
*10.4 Stock Option Agreement between Specialty Retailers, Inc. and Carl
E. Tooker dated June 9, 1993 (Incorporated by Reference to
Exhibit 10.18 of Registration No. 33-68258 on Form S-4).
**10.5 Employment Agreement between Harry Brown and Stage Stores, Inc.
dated April 1,1998.
**10.6 Employment Agreement between James Marcum and Stage Stores, Inc.
dated April 1, 1998.
**10.7 Employment between Stephen Lovell and Stage Stores, Inc. dated
April 1, 1998.
**10.8 Employment Agreement between Ron Lucas and Stage Stores, Inc.
dated April 1, 1998.
**10.9 Employment Agreement between Jim Bodemuller and Stage Stores, Inc.
dated April 1, 1998.
*10.10 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).
*10.11 Stage Stores, Inc. Equity Incentive Plan (Incorporated by
Reference to Exhibit 10.29 of Registration No. 333-5855 of Form
S-1).
*21.1 List of Registrant's Subsidiaries (Incorporated by Reference to
Exhibit 21.1 of Registration No. 333-32695 on Form S-4).
**23.1 Consent of Price Waterhouse LLP.
**27.1 Financial Data Schedule.
- ----------
* Previously Filed
** Filed Herewith
X-3
EXHIBIT 4.8
EXECUTION COPY
- --------------------------------------------------------------------------------
CLASS A CERTIFICATE PURCHASE AGREEMENT
Dated as of December 3, 1997
among
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor,
SPECIALTY RETAILERS, INC.,
individually and as Originator and Servicer,
THE CLASS A PURCHASERS PARTIES HERETO,
and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
Class A Agent and Facility Agent
--------------------
Relating to
SRI Receivables Master Trust
Series 1997-1
--------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS..................................................1
1.1 Definitions.................................................1
1.2 Other Definitional Provisions...............................8
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS..............................8
2.1 Purchases...................................................8
2.2 Reductions, Increases and Extensions of Commitments........10
2.3 Fees, Expenses, Payments, Etc..............................12
2.4 Requirements of Law........................................13
2.5 Taxes......................................................15
2.6 Indemnification............................................17
SECTION 3. CONDITIONS PRECEDENT........................................19
3.1 Condition to Initial Purchase..............................19
3.2 Condition to Additional Purchase...........................21
SECTION 4. REPRESENTATIONS AND WARRANTIES..............................22
4.1 Representations and Warranties of SRPC.....................22
4.2 Representations and Warranties of SRI......................24
4.3 Representations and Warranties of the Class A Agent,
the Facility Agent and the Class A Purchasers............26
SECTION 5. COVENANTS...................................................27
5.1 Covenants of SRPC..........................................27
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY...............30
6.1 Covenants of SRPC, Etc.....................................30
6.2 Covenants of Class A Purchasers............................30
SECTION 7. THE AGENTS..................................................31
7.1 Appointment................................................31
7.2 Delegation of Duties.......................................31
7.3 Exculpatory Provisions.....................................31
7.4 Reliance by Agent..........................................32
7.5 Notices....................................................32
7.6 Non-Reliance on Agent and Other Class A Purchasers.........32
7.7 Indemnification............................................33
7.8 Agents in Their Individual Capacities......................33
7.9 Successor Agent............................................34
(i)
<PAGE>
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT................35
8.1 Transfers of Class A Certificates........................35
8.2 Tax Characterization.....................................39
SECTION 9. MISCELLANEOUS...............................................39
9.1 Amendments and Waivers...................................39
9.2 Notices..................................................40
9.3 No Waiver; Cumulative Remedies...........................42
9.4 Successors and Assigns...................................42
9.5 Successors to Servicer...................................42
9.6 Counterparts.............................................43
9.7 Severability.............................................43
9.8 Integration..............................................43
9.9 Governing Law............................................43
9.10 Termination...............................................44
9.11 Limited Recourse; No Proceedings..........................44
9.12 Survival of Representations and Warranties................44
9.13 Submission to Jurisdiction; Waivers.......................45
9.14 WAIVERS OF JURY TRIAL.....................................45
LIST OF EXHIBITS
EXHIBIT A Form of Investment Letter
EXHIBIT B Form of Joinder Supplement
EXHIBIT C Form of Transfer Supplement
(ii)
<PAGE>
CLASS A CERTIFICATE PURCHASE AGREEMENT, dated as of December 3,
1997, by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation
("SRPC"), individually and as Transferor (as defined in the Master Pooling and
Servicing Agreement referred to below), SPECIALTY RETAILERS, INC., a Texas
corporation ("SRI"), individually and as Servicer (as defined in the Master
Pooling and Servicing Agreement referred to below), the CLASS A PURCHASERS from
time to time parties hereto (collectively, the "CLASS A PURCHASERS") and CREDIT
SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York
Branch, as agent for the Class A Purchasers (together with its successors in
such capacity, the "CLASS A AGENT") and as facility agent for the Class A
Purchasers and the Class B Purchasers, as defined below (together with its
successors in such capacity, the "FACILITY AGENT").
W I T N E S S E T H:
WHEREAS, SRPC, as Transferor, SRI, as Servicer, and Bankers Trust
(Delaware), a Delaware banking corporation, as trustee (together with its
successors in such capacity, the "TRUSTEE"), are parties to a certain Amended
and Restated Pooling and Servicing Agreement dated as of August 11, 1995,
amended as of May 30, 1996 (as the same may from time to time be further amended
or otherwise modified, the "MASTER POOLING AND SERVICING AGREEMENT"), pursuant
to which the Transferor has created the SRI Receivables Master Trust (the
"TRUST"), and to a Series 1997-1 Supplement thereto, dated as of December 3,
1997 (as the same may from time to time be amended or otherwise modified, the
"SUPPLEMENT" and, together with the Master Pooling and Servicing Agreement, the
"POOLING AND SERVICING AGREEMENT");
WHEREAS, the Trust proposes to issue its Class A-1 Variable
Funding Certificates, Series 1997-1 (the "CLASS A CERTIFICATES") and its Class
B-1 Variable Funding Certificates, Series 1997-1 (the "CLASS B CERTIFICATES"
and, together with the Class A Certificates, the "SENIOR CERTIFICATES") pursuant
to the Pooling and Servicing Agreement;
WHEREAS, the Trust also proposes to issue its Class C-1 Variable
Funding Certificates, Series 1997-1 (the "CLASS C CERTIFICATES" and, together
with the Senior Certificates, the "SERIES 1997-1 CERTIFICATES") pursuant to the
Pooling and Servicing Agreement; and
WHEREAS, the Class A Purchasers are willing to purchase the Class
A Certificates on the Closing Date and from time to time thereafter to purchase
Additional Class A Invested Amounts (as defined in the Supplement) thereunder on
the terms and conditions provided for herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby expressly acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS. All capitalized terms used herein as defined
terms and not defined herein shall have the meanings given to them in the
Pooling and Servicing Agreement. Each capitalized term defined herein shall
relate only to the Series 1997-1 and to no other Series of Investor Certificates
issued by the Trust.
-1-
<PAGE>
"AFFECTED PARTY" shall mean, with respect to any Structured
Purchaser, any Support Party of such Structured Purchaser.
"AGREEMENT" shall mean this Class A Certificate Purchase
Agreement, as amended, supplemented or otherwise modified from time to time.
"ASSIGNEE" and "ASSIGNMENT" have the respective meanings
specified in subsection 8.1(e) of this Agreement.
"AVAILABLE COMMITMENT" shall mean, on any day for a Committed
Class A Purchaser, such Class A Purchaser's Commitment in effect on such day
MINUS the sum of (i) such Class A Purchaser's Percentage Interest of the Class A
Principal Balance on such day PLUS (ii) if such Class A Purchaser is a Liquidity
Provider for a Noncommitted Class A Purchaser, such Class A Purchaser's
Liquidity Percentage, MULTIPLIED BY such Noncommitted Class A Purchaser's
Percentage Interest of the Class A Principal Balance on such day.
"CLASS A AGENT" has the meaning specified in the preamble to this
Agreement.
"CLASS A CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLASS A FACILITY FEE" shall mean the ongoing facility fees
payable to the Class A Agent or the Class A Purchasers in the amounts and on the
dates set forth in the Class A Fee Letter.
"CLASS A FEE LETTER" shall mean that certain letter agreement,
designated therein as the Series 1997-1 Class A Fee Letter and dated as of the
date hereof, among the Class A Agent, SRPC and SRI, as such letter agreement may
be amended or otherwise modified from time to time.
"CLASS A OWNERS" shall mean the Class A Purchasers that are
owners of record of the Class A Certificates or, with respect to any Class A
Certificate held by the Class A Agent hereunder as nominee on behalf of Class A
Purchasers, the Class A Purchasers that are owners of the Class A Invested
Amount represented by such Class A Certificate as reflected on the books of the
Class A Agent in accordance with this Agreement.
"CLASS A PURCHASE LIMIT" shall mean for any date the aggregate
Commitments of the Class A Purchasers on such date.
"CLASS A PURCHASER" has the meaning specified in the preamble to
this Agreement.
"CLASS A REPAYMENT AMOUNT" shall mean the sum of all amounts
payable with respect to (i) the Class A Invested Amount, (ii) Class A Interest
and (iii) all amounts payable pursuant to Section 2.4 or 2.5 hereof.
"CLASS B CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLASS B PURCHASE AGREEMENT" shall mean the Class B Certificate
Purchase Agreement, dated as of the date hereof, among SRPC, individually and as
Transferor, SRI, individually and as Servicer, the Class B Purchasers parties
thereto, the Class B Agent referred to therein and the Facility Agent, as
amended, modified or otherwise supplemented from time to time.
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"CLASS B PURCHASERS" has the meaning specified in the Class B
Purchase Agreement.
"CLASS C CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLOSING DATE" shall mean December 3, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITMENT" shall mean, for any Committed Class A Purchaser, the
maximum amount of such Committed Class A Purchaser's commitment to purchase a
portion of the Class A Invested Amount, as set forth in the Joinder Supplement
or the Transfer Supplement by which such Committed Class A Purchaser became a
party to this Agreement or assumed the Commitment (or a portion thereof) of
another Committed Class A Purchaser, as such amount may be adjusted from time to
time pursuant to Transfer Supplement(s) executed by such Committed Class A
Purchaser and its Assignee(s) and delivered pursuant to Section 8.1 of this
Agreement or pursuant to Section 2.2 of this Agreement. In the event that a
Committed Class A Purchaser maintains a portion of its Commitment hereunder in
its capacity as a Liquidity Provider for one or more Noncommitted Class A
Purchasers, such Committed Class A Purchaser shall be deemed to hold separate
Commitments hereunder (i) in each such capacity and (ii) if applicable, to the
extent its Commitment does not relate to any Noncommitted Class A Purchaser.
"COMMITMENT EXPIRATION DATE" shall mean, for a Committed Class A
Purchaser, the date set forth as the Commitment Expiration Date in the Joinder
Supplement or the Transfer Supplement by which such Committed Class A Purchaser
became a party to this Agreement or assumed the Commitment (or a portion
thereof) of another Committed Class A Purchaser, as such date may be extended
from time to time in accordance with subsection 2.2(e) hereof.
"COMMITMENT PERCENTAGE" shall mean, for a Committed Class A
Purchaser, such Class A Purchaser's Commitment as a percentage of the aggregate
Commitments of all Committed Class A Purchasers.
"COMMITTED CLASS A PURCHASER" shall mean any Class A Purchaser
which has a Commitment, as set forth in its respective Joinder Supplement, and
any Assignee of such Class A Purchaser to the extent of the portion of such
Commitment assumed by such Assignee pursuant to its respective Transfer
Supplement.
"COMMITTED PURCHASER PERCENTAGE" shall mean, with respect to a
Committed Class A Purchaser, its Commitment (exclusive of any portion thereof
held by it in its capacity as a Liquidity Provider), as a percentage of the
aggregate Commitments of all Committed Class A Purchasers.
"DISSENTING PURCHASER" has the meaning specified in subsection
2.2(e) of this Agreement.
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"DOWNGRADED PURCHASER" has the meaning specified in subsection
8.1(j) of this Agreement.
"EXCLUDED TAXES" has the meaning specified in subsection 2.5(a)
of this Agreement.
"EXTENSION NOTICE DEADLINE" has the meaning specified in
subsection 2.2(e) of this Agreement.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"INDEMNITEE" has the meaning specified in subsection 2.6(a) of
this Agreement.
"INDEMNITOR" has the meaning specified in subsection 2.6(a) of
this Agreement.
"INVESTING OFFICE" shall mean initially, the office of any Class
A Purchaser (if any) designated as such, in the case of any initial Class A
Purchaser, in its Joinder Supplement and, in the case of any Assignee, in the
related Transfer Supplement, and thereafter, such other office of such Class A
Purchaser or such Assignee as may be designated in writing to the Class A Agent,
the Transferor, the Servicer and the Trustee by such Class A Purchaser or
Assignee.
"INVESTMENT LETTER" has the meaning specified in subsection
8.1(a) of this Agreement.
"JOINDER SUPPLEMENT" has the meaning specified in subsection
2.2(d) of this Agreement.
"LIQUIDITY PERCENTAGE" shall mean, for a Committed Class A
Purchaser which is a Liquidity Provider for a Noncommitted Class A Purchaser,
such Class A Purchaser's Commitment held in such capacity as a percentage of the
aggregate Commitments of all Liquidity Providers (held in their capacities as
such) for such Noncommitted Class A Purchaser.
"LIQUIDITY PROVIDER" shall mean, with respect to a Noncommitted
Class A Purchaser, each Committed Class A Purchaser identified as a Liquidity
Provider for such Noncommitted Class A Purchaser in the Joinder Supplement or
Transfer Supplement pursuant to which such Noncommitted Class A Purchaser became
a party hereto, and any Assignee of such Committed Class A Purchaser to the
extent such Assignee has assumed, pursuant to a Transfer Supplement, the
Commitment of such Committed Class A Purchaser held in its capacity as a
Liquidity Provider. In the event that a Liquidity Provider acquires a portion of
the Class A Principal Balance from its Noncommitted Class A Purchaser by
Assignment, a corresponding portion of its Commitment shall thereupon cease to
be held by it in its capacity as a Liquidity Provider for such Noncommitted
Class A Purchaser (but shall otherwise remain in effect, subject to the terms
and conditions of this Agreement, as a portion of the Commitment of such
Committed Class A Purchaser).
"MASTER POOLING AND SERVICING AGREEMENT" has the meaning
specified in the recitals to this Agreement.
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<PAGE>
"NONCOMMITTED CLASS A PURCHASER" shall mean a Class A Purchaser
which is not a Committed Class A Purchaser or a Nonextending Class A Purchaser.
"NONCOMMITTED PURCHASER PERCENTAGE" shall mean for each
Noncommitted Class A Purchaser, the aggregate Commitments of its Liquidity
Providers from time to time as a percentage of the aggregate Commitments of all
Committed Class A Purchasers.
"NONEXTENDING CLASS A PURCHASER" shall mean, after its respective
Commitment Expiration Date, each Committed Class A Purchaser which has declined
to extend such Commitment Expiration Date in accordance with subsection 2.2(e)
hereof.
"PARTICIPANT" has the meaning specified in subsection 8.1(d) of
this Agreement.
"PARTICIPATION" has the meaning specified in subsection 8.1(d)
of the Agreement.
"PERCENTAGE INTEREST" shall mean, for a Class A Purchaser on any
day, the percentage equivalent of (a) the sum of (i) the portion of the Class A
Initial Invested Amount (if any) purchased by such Class A Purchaser, PLUS (ii)
the aggregate Additional Class A Invested Amounts (if any) purchased by such
Class A Purchaser prior to such day pursuant to Section 6.15 of the Pooling and
Servicing Agreement, PLUS (iii) any portion of the Class A Principal Balance
acquired by such Class A Purchaser as an Assignee from another Class A Purchaser
pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1
of this Agreement, MINUS (iv) the aggregate amount of principal payments made to
such Class A Purchaser prior to such day, MINUS (v) any portion of the Class A
Principal Balance assigned by such Class A Purchaser to an Assignee pursuant to
a Transfer Supplement executed and delivered pursuant to Section 8.1 of this
Agreement, DIVIDED BY (b) the aggregate Class A Principal Balance on such day.
"POOLING AND SERVICING AGREEMENT" has the meaning specified in
the recitals to this Agreement.
"PURCHASE DATE" shall mean the Closing Date and each Business Day
on which the purchase of an Additional Class A Invested Amount is to occur in
accordance with Section 6.15 of the Pooling and Servicing Agreement and Section
2.1 hereof.
"REDUCTION AMOUNT" has the meaning specified in subsection 2.6(a)
of this Agreement.
"REGULATORY CHANGE" shall mean, as to each Class A Purchaser, any
change occurring after the date of the execution and delivery of the Joinder
Supplement or the Transfer Supplement by which it became party to this
Agreement; in the case of a Participant, any change occurring after the date on
which its Participation became effective, or in the case of an Affected Party,
any change occurring after the date it became such an Affected Party, in any (or
the adoption after such date of any new):
(i) United States Federal or state law or foreign law applicable
to such Class A Purchaser, Affected Party or Participant; or
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(ii) regulation, interpretation, directive, guideline or request
(whether or not having the force of law) applicable to such Class A
Purchaser, Affected Party or Participant of any court or other judicial
authority or any Governmental Authority charged with the interpretation
or administration of any law referred to in clause (i) or of any fiscal,
monetary or other Governmental Authority or central bank having
jurisdiction over such Class A Purchaser, Affected Party or Participant.
"RELATED DOCUMENTS" shall mean, collectively, this Agreement
(including the Class A Fee Letter and all Joinder Supplements and Transfer
Supplements), the Class B Purchase Agreement (including each fee letter, joinder
supplement and transfer supplement thereunder), the Master Pooling and Servicing
Agreement, the Supplement, the Series 1997-1 Certificates and the Receivables
Purchase Agreement.
"REQUIRED CLASS A OWNERS" shall mean, at any time, Class A Owners
having Percentage Interests aggregating greater than 66-2/3%.
"REQUIRED CLASS A PURCHASERS" shall mean, at any time, Committed
Class A Purchasers having Commitments aggregating greater than 66-2/3% of the
aggregate Commitments of all Committed Class A Purchasers.
"REQUIREMENT OF LAW" shall mean, as to any Person, any law,
treaty, rule or regulation, or determination of an arbitrator or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether federal, state or local (including usury laws,
the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board
of Governors of the Federal Reserve System).
"RISK RATE" shall mean, for any day, a rate per annum equal to
the sum of (i) the CSFB Corporate Base Rate in effect for such day, plus (ii)
2.00%.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SENIOR CERTIFICATES" has the meaning specified in the recitals
to this Agreement
"SERIES 1997-1 CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"SRI" has the meaning specified in the preamble to this Agreement
and, as used herein (except to the extent that the context otherwise requires),
shall mean SRI in its individual capacity (including its capacity as
Originator).
"STAGE" shall mean Stage Stores, Inc., a Delaware corporation
which is the parent of SRI.
"STRUCTURED PURCHASER" shall mean any Class A Purchaser which is
a special purpose corporation, the principal business of which consists of
issuing commercial paper, medium term notes or other securities to fund its
acquisition and maintenance of receivables, accounts, instruments, chattel
paper, general intangibles and other similar assets or interests therein, and
which is identified as a Structured Purchaser in the Joinder Agreement or
Transfer Supplement by which such Committed Class A Purchaser became a party to
this Agreement.
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"SUPPLEMENT" has the meaning specified in the recitals to this
Agreement.
"SUPPORT FACILITY" shall mean any liquidity or credit support
agreement with a Structured Purchaser which relates to this Agreement (including
any agreement to purchase an assignment of or participation in Class A
Certificates).
"SUPPORT PARTY" shall mean any bank or other financial
institution extending or having a commitment to extend funds to or for the
account of a Structured Purchaser (including by agreement to purchase an
assignment of or participation in Class A Certificates) under a Support
Facility. Each Liquidity Provider for a Noncommitted Class A Purchaser which is
a Structured Purchaser shall be deemed to be a Support Party for such Structured
Purchaser.
"TAXES" has the meaning specified in subsection 2.5(a) of this
Agreement.
"TERMINATION DATE" shall mean, (a) with respect to a Committed
Class A Purchaser, the first to occur of (i) the Commitment Expiration Date of
such Committed Class A Purchaser, or (ii) the Amortization Period Commencement
Date, and (b) with respect to a Noncommitted Class A Purchaser, the first to
occur of (i) the latest Commitment Expiration Date of its Liquidity Providers,
or (ii) the Amortization Period Commencement Date.
"TERMINATION EVENT" shall mean the occurrence of a Trust Pay Out
Event, a Series 1997-1 Pay Out Event or a Servicer Default, or the occurrence of
an event or condition which would be a Trust Pay Out Event, a Series 1997-1 Pay
Out Event or a Servicer Default but for a waiver of or failure to declare or
determine such event by the Certificateholders or the Trustee.
"TRANSFER" has the meaning specified in subsection 8.1(c) of this
Agreement.
"TRANSFEREE" has the meaning specified in subsection 8.1(c) of
this Agreement.
"TRANSFER SUPPLEMENT" has the meaning specified in subsection
8.1(e) of this Agreement.
"TRUST" has the meaning specified in the recitals to this
Agreement.
"TRUSTEE" has the meaning specified in the recitals to this
Agreement.
"UTILIZATION FEE" shall mean the ongoing utilization fees, if
any, payable to the Class A Agent or the Class A Purchasers in the amounts and
on the dates set forth in the Class A Fee Letter.
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"WRITTEN" or "IN WRITING" (and other variations thereof) shall
mean any form of written communication or a communication by means of telex,
telecopier device, telegraph or cable.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto.
(b) The words "hereof", "herein", and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and Section,
subsection and Exhibit references are to this Agreement, unless otherwise
specified. The words "including" and "include" shall be deemed to be followed by
the words "without limitation".
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 PURCHASES. (a) On and subject to the terms and conditions of
this Agreement, (i) each Noncommitted Class A Purchaser which is a party hereto
on the Closing Date may purchase its Noncommitted Purchaser Percentage of the
Class A Certificates on the Closing Date for a purchase price equal to its
Noncommitted Purchaser Percentage of the Class A Initial Invested Amount, (ii)
each Liquidity Provider which is a party hereto on the Closing Date, severally,
agrees to acquire its respective Liquidity Percentage of the Class A
Certificates not so acquired by its related Noncommitted Class A Purchaser on
the Closing Date, and (iii) each Committed Class A Purchaser which is a party
hereto on the Closing Date, severally, agrees to purchase its Committed
Purchaser Percentage of the Class A Certificates, in each case for a purchase
price equal to the portion of the Class A Initial Invested Amount represented
thereby on the Closing Date. Such purchase price shall be made available to the
Transferor, subject to the satisfaction of the conditions specified in Section
3.1 hereof, at or prior to 11:00 a.m. New York City time on the Closing Date, by
deposit of immediately available funds to an account of the Transferor specified
in writing by the Transferor to the Class A Agent. The Class A Purchasers hereby
direct that the Class A Certificates be registered in the name of the Class A
Agent, as nominee on behalf of the Class A Purchasers from time to time
hereunder.
(b) On and subject to the terms and conditions of this Agreement
and prior to its respective Termination Date, (i) each Noncommitted Class A
Purchaser may purchase its Noncommitted Purchaser Percentage of any Additional
Class A Invested Amount offered for purchase pursuant to Section 6.15 of the
Pooling and Servicing Agreement, (ii) each Liquidity Provider, severally, agrees
to acquire its respective Liquidity Percentage of the Class A Certificates not
so acquired by its related Noncommitted Class A Purchaser, and (iii) each
Committed Class A Purchaser, severally, agrees to purchase its Committed
Purchaser Percentage of the Additional Class A Invested Amount so offered for
purchase, in each case for a purchase price equal to the Additional Class A
Invested Amount so purchased; PROVIDED that in no event shall a Committed Class
A Purchaser be required on any date to purchase an Additional Class A Invested
Amount exceeding its aggregate Available Commitment, determined prior to giving
effect to such purchase. Such purchase price shall be made available to the
Transferor, subject to the satisfaction of the conditions specified in Section
3.2 hereof, at or prior to 11:00 a.m. New York City time on the applicable
Purchase Date by deposit of immediately available funds to an account or
accounts specified in writing by the Transferor to the Class A Agent.
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(c) The purchase of the Class A Initial Invested Amount shall be
made on prior notice from the Transferor to the Class A Agent received by the
Class A Agent not later than 9:00 a.m. New York City time on the Closing Date,
and each purchase of any Additional Class A Invested Amount on the applicable
Purchase Date shall be made on prior notice from the Transferor received by the
Class A Agent not later than 2:00 p.m. New York City time on the Business Day
immediately preceding such Purchase Date. Each such notice shall be irrevocable
and shall specify (i) the aggregate Class A Initial Invested Amount or
Additional Class A Invested Amount to be purchased, (ii) the applicable Purchase
Date (which shall be a Business Day), and (iii) instructions as to the deposit
of the proceeds of the purchase. The Class A Agent shall promptly forward a copy
of such notice to each Class A Purchaser. Each Noncommitted Class A Purchaser
shall notify the Class A Agent by 9:30 a.m., New York City time, on the
applicable Purchase Date whether it has determined to make the purchase offered
to it pursuant to subsection 2.1(a) or 2.1(b), as applicable. In the event that
a Noncommitted Class A Purchaser shall not have timely provided such notice such
Noncommitted Class A Purchaser shall be deemed to have determined not to make
such purchase. The Class A Agent shall notify the Transferor, the Servicer and
each Liquidity Provider for such Noncommitted Class A Purchaser on or prior to
10:00 a.m., New York City time, on the applicable Purchase Date of whether such
Noncommitted Class A Purchaser has so determined to purchase its share of the
Class A Initial Invested Amount or the Additional Class A Invested Amount, as
the case may be, and, in the event that Noncommitted Class A Purchasers have not
determined to purchase its entire share of the Class A Initial Invested Amount
or Additional Class A Invested Amount, as the case may be, the Class A Agent
shall specify in such notice (i) the portion of the Class A Initial Invested
Amount or the Additional Class A Invested Amount, as the case may be, to be
purchased by each Liquidity Provider, (ii) the applicable Purchase Date (which
shall be a Business Day), and (iii) instructions as to the deposit of the
proceeds of the purchase. The Class A Agent shall notify the Transferor, the
Servicer, the Trustee and each Class A Purchaser on the Closing Date (in the
case of the purchase of the Class A Initial Invested Amount) or not later than
the Business Day following the applicable Purchase Date (in the case of any
purchases of Additional Class A Invested Amounts) of the identity of each Class
A Purchaser which purchased any portion of the Class A Initial Invested Amount
or any Additional Class A Invested Amount on such day, whether such Class A
Purchaser was a Noncommitted Class A Purchaser or a Committed Class A Purchaser
and the portion of the Class A Initial Invested Amount or Additional Class A
Invested Amount purchased by such Class A Purchaser.
(d) In no event may any Additional Class A Invested Amount be
offered for purchase hereunder or under Section 6.15 of the Pooling and
Servicing Agreement, nor shall any Committed Class A Purchaser be obligated to
purchase any Additional Class A Invested Amount, to the extent that such
Additional Class A Invested Amount would exceed the aggregate Available
Commitments.
(e) The Class A Certificates shall be paid as provided in the
Pooling and Servicing Agreement, and the Class A Agent shall allocate to the
Class A Owners each payment in respect of the Class A Certificates received by
the Class A Agent in its capacity as Class A Certificateholder as provided
therein. Except as otherwise provided in the Pooling and Servicing Agreement,
payments in reduction of the Class A Principal Balance shall be applied (i)
prior to the Amortization Period Commencement Date, first to Class A Owners
which are Committed Class A Purchasers, pro rata based on their respective
Percentage Interests of the Class A Principal Balance, and the remainder, if
any, to Class A Owners which are Noncommitted Class A Purchasers, pro rata based
on their respective Percentage Interests of the Class A Principal Balance, and
(ii) from and after the Amortization Period Commencement Date, to Class A Owners
pro rata based on their respective Percentage Interests of the Class A Principal
Balance, or in any such case in such other proportions as each affected Class A
Purchsaer may agree upon in writing from time to time with the Facility Agent,
the Class A Agent, SRPC and SRI.
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2.2 REDUCTIONS, INCREASES AND EXTENSIONS OF COMMITMENTS. (a) At
any time the Transferor may, upon at least 10 Business Days' prior written
notice to the Class A Agent, reduce the aggregate Commitments. Each such partial
reduction shall be in an aggregate amount of $5,000,000 or integral multiples
thereof (or such other amount requested by the Transferor to which the Class A
Agent consents). Reductions of the aggregate Commitments pursuant to this
subsection 2.2(a) shall be allocated (i) to the Commitment of each Committed
Class A Purchaser, other than a Commitment held as a Liquidity Provider, PRO
RATA based on the Commitment Percentage represented by such Commitment, and (ii)
to the aggregate Commitments of Liquidity Providers for each Noncommitted Class
A Purchaser PRO RATA based on the Noncommitted Purchaser Percentage of such
Noncommitted Class A Purchaser, and the portion of such reduction which is so
allocated to the aggregate Commitments of Liquidity Providers for a Noncommitted
Class A Purchaser shall be allocated to the Commitment of each such Liquidity
Provider PRO RATA based on its respective Liquidity Percentage.
(b) On the Termination Date for a Committed Class A Purchaser,
the Commitment of such Committed Class A Purchaser shall be automatically
reduced to zero.
(c) The aggregate Commitments of the Committed Class A Purchasers
may be increased from time to time through the increase of the Commitment of one
or more Committed Class A Purchasers; PROVIDED, HOWEVER, that no such increase
shall have become effective unless (i) the Class A Agent and the Transferor
shall have given their written consent thereto, (ii) such increasing Committed
Class A Purchaser shall have entered into an appropriate amendment or supplement
to this Agreement (or its Joinder Supplement or Transfer Supplement) reflecting
such increased Commitment and (iii) such conditions, if any, as the Class A
Agent shall have required in connection with its consent (including the delivery
of legal opinions with respect to such Committed Class A Purchaser, the
agreement of such Committed Class A Purchaser to become a Liquidity Provider for
one or more Structured Purchasers hereunder and approvals from the Rating
Agency) shall have been satisfied. The Transferor may also increase the
aggregate Commitments of the Committed Class A Purchasers from time to time by
adding additional Committed Class A Purchasers in accordance with subsection
2.2(d).
(d) Subject to the provisions of subsections 8.1(a) and 8.1(b)
applicable to initial purchasers of Class A Certificates, any Person may from
time to time with the consent of the Class A Agent and the Transferor become a
party to this Agreement as an initial or an additional Noncommitted Class A
Purchaser or an initial or an additional Committed Class A Purchaser by (i)
delivering to the Transferor an Investment Letter and (ii) entering into an
agreement substantially in the form attached hereto as EXHIBIT B hereto (a
"JOINDER SUPPLEMENT"), with the Class A Agent and the Transferor, acknowledged
by the Servicer, which shall specify (A) the name and address of such Person for
purposes of Section 9.2 hereof, (B) whether such Person will be a Noncommitted
Class A Purchaser or Committed Class A Purchaser and, if such Person will be a
Committed Class A Purchaser, its Commitment and Commitment Expiration Date, (C)
if such Person is a Noncommitted Class A Purchaser, the identity of its
Liquidity Providers and their respective Liquidity Percentages, (D) if such
Person is a Liquidity Provider, the Noncommitted Class A Purchaser for which it
is acting as such and the portion of such Person's Commitment which is held by
it in its capacity as Liquidity Provider, and (E) the other information provided
for in such form of Joinder Supplement. Upon its receipt of a duly executed
Joinder Supplement, the Class A Agent shall on the effective date determined
pursuant thereto give notice of such effectiveness to the Transferor, the
Servicer and the Trustee, and the Servicer will provide notice thereof to each
Rating Agency (if required). If, at the time the effectiveness of the Joinder
Supplement for an additional Committed Class A Purchaser (other than solely as a
Liquidity Provider), the other Class A Purchasers are Class A Owners, it shall
be a condition to such effectiveness that such additional Committed Class A
Purchaser purchase from each other Class A Purchaser an interest in the Class A
Certificates in an amount equal to (i) such other Class A Purchaser's Percentage
Interest of the Class A Principal Balance, times (ii) a fraction, the numerator
of which equals the Commitment of such additional Class A Purchaser (excluding
any portion thereof held by such Committed Class A Purchaser as a Liquidity
Provider), and the denominator of which equals the aggregate Commitments of the
Class A Purchasers (determined after giving effect to the additional Commitment
of the additional Class A Purchaser as set forth in such Joinder Supplement),
for a purchase price equal to the portion of the Class A Principal Balance
purchased.
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(e) So long as no Termination Event has occurred and is
continuing, no more than 120 and no less than 90 days prior to the applicable
Commitment Expiration Date, the Transferor may request, through the Class A
Agent, that each Committed Class A Purchaser extend its Commitment Expiration
Date to the date which is 364 days after the Commitment Expiration Date then in
effect, which decision will be made by each Committed Class A Purchaser in its
sole discretion. Upon receipt of any such request, the Class A Agent shall
promptly notify each Committed Class A Purchaser thereof. At least 60 but not
more than 75 days prior to the applicable Commitment Expiration Date, each
Committed Class A Purchaser shall notify the Class A Agent of its willingness or
refusal to so extend its Commitment Expiration Date, and the Class A Agent shall
notify the Transferor of such willingness or refusal by the Committed Class A
Purchasers on such 60th day (such day, the "EXTENSION NOTICE DEADLINE"). Any
Committed Class A Purchaser which notifies the Class A Agent of its refusal to
extend or which does not expressly notify the Class A Agent that it is willing
to extend its Commitment Expiration Date by the applicable Extension Notice
Deadline shall be deemed to be (x) a Nonextending Class A Purchaser after its
Commitment Expiration Date and (y) a "DISSENTING PURCHASER" from the date of its
refusal notice or such 60th day (as applicable) through its Commitment
Expiration Date. The approval of the Class A Agent shall be required to extend
the Commitment Expiration Date of each of the consenting Committed Class A
Purchasers, such extension to be effective as of the applicable Commitment
Expiration Date so long as a Termination Event shall not have occurred on or
prior to such date.
(f) Promptly after the Extension Notice Deadline, the Class A
Agent shall promptly notify each other Class A Purchaser, the Transferor and the
Servicer of the identity of any Dissenting Purchaser and the amount of its
Commitment. Either the Class A Agent or the Transferor, with the consent of the
Class A Agent and, if the Dissenting Purchaser is a Liquidity Provider, each
affected Structured Purchaser, may (but neither shall be required to) request
one or more other Class A Purchasers, or seek another financial institution
acceptable to the Class A Agent in its reasonable discretion, and, if the
Dissenting Purchaser is a Liquidity Provider, each affected Structured Purchaser
in its sole discretion, to acquire all or a portion of the Commitment of the
Dissenting Purchaser and all amounts payable to it hereunder and under the
Pooling and Servicing Agreement in accordance with Section 8.1. Each Dissenting
Purchaser hereby agrees to assign all or a portion of its Commitment and the
amounts payable to it hereunder and under the Pooling and Servicing Agreement to
a replacement investor identified by the Class A Agent in accordance with the
preceding sentence, subject to ratable payment such Dissenting Purchaser's
Percentage Interest of the Class A Principal Balance, together with all accrued
and unpaid interest thereon, and a ratable portion of all fees and other amounts
due to it hereunder.
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2.3 FEES, EXPENSES, PAYMENTS, ETC. (a) SRPC agrees to pay to the
Class A Agent for the account of the Class A Purchasers the Class A Facility
Fee, the Utilization Fee and other amounts set forth in the Class A Fee Letter
at the times specified therein.
(b) SRPC further agrees to pay within 30 days following receipt
of an invoice therefor to the Class A Agent, the Facility Agent and the initial
Class A Purchasers all reasonable costs and expenses in connection with the
preparation, execution, delivery, initial syndication, administration (including
any requested amendments, waivers or consents of any of the Related Documents)
of this Agreement and each related Support Facility, and the other documents to
be delivered hereunder or in connection herewith, including the reasonable fees
and out-of-pocket expenses of counsel for the Class A Agent, the Facility Agent
and each of the initial Class A Purchasers with respect thereto.
(c) SRI agrees to pay to the Class A Agent, the Facility Agent
and each Class A Purchaser, promptly following presentation of an invoice
therefor, all reasonable costs and expenses (including reasonable fees and
expenses of counsel), if any, in connection with the enforcement of any of the
Related Documents, and the other documents delivered thereunder or in connection
therewith.
(d) SRI further agrees to pay on demand any and all stamp,
transfer and other taxes (other than Taxes covered by Section 2.5) and
governmental fees payable in connection with the execution, delivery, filing and
recording of any of the Related Documents and each related Support Facility or
the other documents and agreements to be delivered hereunder and thereunder or
otherwise in connection with the issuance of Series 1997-1, and agrees to save
each Class A Purchaser and the Class A Agent and the Facility Agent harmless
from and against any liabilities with respect to or resulting from any delay in
paying or any omission to pay such taxes and fees.
(e) Periodic fees or other periodic amounts payable hereunder
shall be calculated, unless otherwise specified in the Class A Fee Letter, on
the basis of a 360-day year and for the actual days elapsed.
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(f) All payments to be made hereunder or under the Supplement,
whether on account of principal, interest, fees or otherwise, shall be made
without setoff or counterclaim and shall be made prior to 2:30 p.m., New York
City time, on the due date thereof to the Class A Agent's account specified in
subsection 9.2(b) hereof, in United States dollars and in immediately available
funds. Payments received by the Class A Agent after 2:30 p.m. New York City time
shall be deemed to have been made on the next Business Day. Notwithstanding
anything herein to the contrary, if any payment due hereunder becomes due and
payable on a day other than a Business Day, the payment date thereof shall be
extended to the next succeeding Business Day and interest shall accrue thereon
at the applicable rate during such extension. To the extent that (i) the
Trustee, SRPC, SRI, the Transferor or the Servicer makes a payment to the Class
A Agent, the Facility Agent or a Class A Purchaser or (ii) the Class A Agent,
the Facility Agent or a Class A Purchaser receives or is deemed to have received
any payment or proceeds for application to an obligation, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy or insolvency law, state or
Federal law, common law, or for equitable cause, then, to the extent such
payment or proceeds are set aside, the obligation or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such
payment or proceeds had not been received or deemed received by the Class A
Agent, the Facility Agent or the Class A Purchaser, as the case may be.
(g) The obligations of SRPC under this Section 2.3 are subject to
subsection 9.11(a) hereof.
2.4 REQUIREMENTS OF LAW. (a) In the event that any Class A
Purchaser shall have reasonably determined that any Regulatory Change shall:
(i) subject such Class A Purchaser to any tax of any kind
whatsoever with respect to this Agreement, its Commitment or its
beneficial interest in the Class A Certificates, or change the basis of
taxation of payments in respect thereof (except for Taxes covered by
Section 2.5 and taxes included in the definition of Excluded Taxes in
subsection 2.5(a) and changes in the rate of tax on the overall net
income of such Class A Purchaser); or
(ii) impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, such Class A Purchaser;
and the result of any of the foregoing is to increase the cost to
such Class A Purchaser, by an amount which such Class A Purchaser deems to be
material, of maintaining its Commitment or its interest in the Class A
Certificates or to reduce any amount receivable in respect thereof, THEN, in any
such case, after submission by such Class A Purchaser to the Class A Agent of a
written request therefor and the submission by the Class A Agent to the
Transferor and the Servicer of such written request therefor, the Transferor
(subject to subsection 9.11(a) hereof) shall pay to the Class A Agent for the
account of such Class A Purchaser any additional amounts necessary to compensate
such Class A Purchaser for such increased cost or reduced amount receivable,
together with interest on each such amount from the Distribution Date following
receipt by the Transferor of such request for compensation under this subsection
2.4(a), if such request is received by the Transferor at least five Business
Days prior to the Determination Date related to such Distribution Date, and
otherwise from the following Distribution Date, until payment in full thereof
(after as well as before judgment) at the Risk Rate in effect from time to time.
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(b) In the event that any Class A Purchaser shall have determined
that any Regulatory Change regarding capital adequacy has the effect of reducing
the rate of return on such Class A Purchaser's capital or on the capital of any
corporation controlling such Class A Purchaser as a consequence of its
obligations hereunder or its maintenance of its Commitment or its interest in
the Class A Certificates to a level below that which such Class A Purchaser or
such corporation could have achieved but for such Regulatory Change (taking into
consideration such Class A Purchaser's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Class A Purchaser to be
material, THEN, from time to time, after submission by such Class A Purchaser to
the Class A Agent of a written request therefor and submission by the Class A
Agent to the Transferor and the Servicer of such written request therefor, the
Transferor (subject to subsection 9.11(a) hereof) shall pay to the Class A Agent
for the account of such Class A Purchaser such additional amount or amounts as
will compensate such Class A Purchaser for such reduction, together with
interest on each such amount from the Distribution Date following receipt by the
Transferor of such request for compensation under this subsection 2.4(b), if
such request is received by the Transferor at least five Business Days prior to
the Determination Date related to such Distribution Date, and otherwise from the
following Distribution Date, until payment in full thereof (after as well as
before judgment) at the Risk Rate in effect from time to time.
(c) Each Class A Purchaser agrees that it shall use its
reasonable efforts to reduce or eliminate any claim for compensation pursuant to
subsections 2.4(a) and 2.4(b), including but not limited to designating a
different Investing Office for its Class A Certificates (or any interest
therein) if such designation will avoid the need for, or reduce the amount of,
any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not,
in the reasonable opinion of such Class A Purchaser, be unlawful or otherwise
disadvantageous to such Class A Purchaser or inconsistent with its policies or
result in an unreimbursed cost or expense to such Class A Purchaser or in an
increase in the aggregate amount payable under both subsections 2.4(a) and
2.4(b).
(d) Each Class A Purchaser claiming increased amounts described
in subsection 2.4(a) or 2.4(b) will furnish to the Class A Agent (together with
its request for compensation) a certificate prepared in good faith setting forth
the basis and the calculation of the amount (in reasonable detail) of each
request by such Class A Purchaser for any such increased amounts referred to in
subsection 2.4(a) or 2.4(b). Any such certificate shall be conclusive absent
manifest error, and the Class A Agent shall deliver a copy thereof to the
Transferor and the Servicer. Failure on the part of any Class A Purchaser to
demand compensation for any amount pursuant to subsection 2.4(a) or 2.4(b) with
respect to any period shall not constitute a waiver of such Class A Purchaser's
right to demand compensation with respect to such period.
2.5 TAXES. (a) All payments made to the Class A Purchasers, the
Facility Agent or the Class A Agent under this Agreement and the Pooling and
Servicing Agreement (including all amounts payable with respect to the Class A
Certificates) shall, to the extent allowed by law, be made free and clear of,
and without deduction 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 (collectively, "TAXES"), excluding (i)
income taxes (including branch profit taxes, minimum taxes and taxes computed
under alternative methods, at least one of which is based on or measured by net
income), franchise taxes (imposed in lieu of income taxes), or any other taxes
based on or measured by the net income of the Class A Purchaser, the Facility
Agent or the Class A Agent (as the case may be) or the gross receipts or income
of the Class A Purchaser, the Facility Agent or the Class A Agent (as the case
may be); (ii) any Taxes that would not have been imposed but for the failure of
such Class A Purchaser, the Facility Agent or the Class A Agent, as applicable,
to provide and keep current (to the extent legally able) any certification or
other documentation required to qualify for an exemption from, or reduced rate
of, any such Taxes or required by this Agreement to be furnished by such Class A
Purchaser, the Facility Agent or the Class A Agent, as applicable; and (iii) any
Taxes imposed as a result of a change by any Class A Purchaser of the Investing
Office (other than changes mandated by this Agreement, including subsection
2.4(c) hereof, or required by law) (all such excluded taxes being hereinafter
called "EXCLUDED TAXES"). If any Taxes, other than Excluded Taxes, are required
to be withheld from any amounts payable to a Class A Purchaser, the Facility
Agent or the Class A Agent hereunder or under the Pooling and Servicing
Agreement, THEN after submission by any Class A Purchaser to the Class A Agent
(in the case of an amount payable to a Class A Purchaser) and by the Facility
Agent or the Class A Agent to the Transferor and the Servicer of a written
request therefor, the amounts so payable to such Class A Purchaser, the Facility
Agent or the Class A Agent, as applicable, shall be increased and the Transferor
shall be liable to pay to the Class A Agent for the account of the Facility
Agent or such Class A Purchaser or for its own account, as applicable, the
amount of such increase) to the extent necessary to yield to such Class A
Purchaser, the Facility Agent or the Class A Agent, as applicable (after payment
of all such Taxes) interest or any such other amounts payable hereunder or
thereunder at the rates or in the amounts specified in this Agreement and the
Pooling and Servicing Agreement; PROVIDED, HOWEVER, that the amounts so payable
to such Class A Purchaser, the Facility Agent or the Class A Agent shall not be
increased pursuant to this subsection 2.5(a) if such requirement to withhold
results from the failure of such Person to comply with subsection 2.5(c) hereof.
Whenever any Taxes are payable on or with respect to amounts distributed to a
Class A Purchaser, the Facility Agent or the Class A Agent, as promptly as
possible thereafter the Servicer shall send to the Class A Agent, on behalf of
such Class A Purchaser (if applicable), a certified copy of an original official
receipt showing payment thereof. If the Trustee, upon the direction of the
Servicer, fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Class A Agent, on behalf of itself or the Facility Agent
or such Class A Purchaser (as applicable), the required receipts or other
required documentary evidence, subject to subsection 9.11(a), the Transferor
shall pay to the Class A Agent on behalf of such Class A Purchaser or the
Facility Agent or for its own account, as applicable, any incremental taxes,
interest or penalties that may become payable by such Class A Purchaser, the
Facility Agent or the Class A Agent, as applicable, as a result of any such
failure.
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(b) A Class A Purchaser or the Facility Agent claiming increased
amounts under subsection 2.5(a) for Taxes paid or payable by such Class A
Purchaser or the Facility Agent, as applicable, will furnish to the Class A
Agent a certificate prepared in good faith setting forth the basis and amount of
each request by such Class A Purchaser or the Facility Agent, as applicable, for
such Taxes, and the Class A Agent shall deliver a copy thereof to the Transferor
and the Servicer. The Class A Agent claiming increased amounts under subsection
2.5(a) for its own account for Taxes paid or payable by the Class A Agent will
furnish to the Transferor and the Servicer a certificate prepared in good faith
setting forth the basis and amount of each request by the Class A Agent for such
Taxes. Any such certificate of a Class A Purchaser, the Facility Agent or the
Class A Agent shall be conclusive absent manifest error. Failure on the part of
any Class A Purchaser, the Facility Agent or the Class A Agent to demand
additional amounts pursuant to subsection 2.5(a) with respect to any period
shall not constitute a waiver of the right of such Class A Purchaser, the
Facility Agent or the Class A Agent, as the case may be, to demand compensation
with respect to such period. All such amounts shall be due and payable to the
Class A Agent on behalf of the Facility Agent or such Class A Purchaser or for
its own account, as the case may be, on the Distribution Date following receipt
by the Transferor of such certificate, if such certificate is received by the
Transferor at least five Business Days prior to the Determination Date related
to such Distribution Date and otherwise shall be due and payable on the
following Distribution Date (or, if earlier, on the Series 1997-1 Termination
Date).
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<PAGE>
(c) Each Class A Purchaser and each Participant holding an
interest in Class A Certificates agrees that prior to the date on which the
first interest or fee payment hereunder is due thereto, it will deliver to the
Transferor, the Servicer, the Trustee and the Class A Agent (i) if such Class A
Purchaser or Participant is not incorporated under the laws of the United States
or any State thereof, two duly completed copies of the U.S. Internal Revenue
Service Form 4224 or successor applicable forms required to evidence that the
Class A Purchaser's or Participant's income from this Agreement or the Class A
Certificates is "effectively connected" with the conduct of a trade or business
in the United States, and (ii) a duly completed U.S. Internal Revenue Service
Form W-8 or W-9 or successor applicable or required forms. Each Class A
Purchaser or Participant holding an interest in Class A Certificates also agrees
to deliver to the Transferor, the Servicer, the Trustee and the Class A Agent
two further copies of such Form 4224 and Form W-8 or W-9, or such 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 hereunder, and such extensions or renewals thereof as may
reasonably be requested by the Servicer or the Class A Agent, unless in any such
case, solely as a result of a change in treaty, law or regulation occurring
prior to the date on which any such delivery would otherwise be required, and
assuming that Section 1446 of the Code does not apply, the Class A Purchaser is
no longer eligible to deliver the then-applicable form set forth above and so
advises the Servicer and the Class A Agent. Each Class A Purchaser which is a
party to a Joinder Supplement certifies, represents and warrants as of the
effective date of such Joinder Supplement, each Assignee and each Participant
(in either case other than a Support Party) shall certify, represent and warrant
as a condition of acquiring its Assignment or Participation as of the effect
date of the Transfer Supplement to which it is a party or of such Participation,
as the case may be, and each Support Party shall certify, represent and warrant
as of the effective date of its becoming a Support Party, that (x) in the case
of Form 4224 (if applicable), its income from this Agreement or the Class A
Certificates is effectively connected with a United States trade or business and
(y) that it is entitled to an exemption from United States backup withholding
tax. Further, each Class A Purchaser and each Participant acquiring an interest
in a Class A Certificate covenants that for so long as it shall own Class A
Certificates or such Participation, such Class A Certificates or Participation
shall be held in such manner that the income therefrom shall be effectively
connected with the conduct of a United States trade or business.
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2.6 INDEMNIFICATION. (a) SRI and SRPC (each such Person being
referred to as an "INDEMNITOR"), jointly and severally, agree to indemnify and
hold harmless the Class A Agent, the Facility Agent and each Class A Purchaser
and any directors, officers, employees, agents, attorneys, auditors or
accountants of the Class A Agent, the Facility Agent or Class A Purchaser (each
such Person being referred to as an "INDEMNITEE") from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever (including
reasonable fees and expenses of legal counsel) which such Indemnitee may incur
(or which may be claimed against such Indemnitee) arising out of, by reason of
or in connection with the execution and delivery of, or payment or other
performance under, or the failure to make payments or perform under, any Related
Document or the issuance of the Series 1997-1 Certificates (including in
connection with the preparation for defense of any investigation, litigation or
proceeding arising out of, related to or in connection with such execution,
delivery, payment, performance or issuance), except (i) to the extent that any
such claim, damage, loss, liability, cost or expense is shall be caused by the
willful misconduct, bad faith, recklessness or gross negligence of such
Indemnitee, (ii) to the extent that any such claim, damage, loss, liability,
cost or expense is covered by subsection 2.3(c) or Section 2.4 or 2.5 hereof or
relates to any Excluded Taxes, (iii) to the extent that any such claim, damage,
loss, liability, cost or expense relates to disclosure made by the Class A Agent
or a Class A Purchaser in connection with an Assignment or Participation
pursuant to Section 8.1 of this Agreement which disclosure is not based on
information given to the Class A Agent or such Class A Purchaser by or on behalf
of SRPC, SRI, the Transferor or the Servicer or any affiliate thereof or by or
on behalf of the Trustee or (iv) to the extent that such claim, damage, loss,
liability, cost or expense shall be caused by a charge off of Receivables. The
foregoing indemnity shall include any claims, damages, losses, liabilities,
costs or expenses to which any such Indemnitee may become subject under
Securities Act, the Securities Exchange Act of 1934, as amended, the Investment
Company Act of 1940, as amended, or other federal or state law or regulation
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact in any disclosure document relating to the Series 1997-1
Certificates or any amendments thereof or supplements thereto (other than
statements provided by the Indemnitee expressly for inclusion therein) or
arising out of, or based upon, the omission or the alleged omission to state a
material fact necessary to make the statements therein or any amendment thereof
or supplement thereto, in light of the circumstances in which they were made,
not misleading (other than with respect to statements provided by the Indemnitee
expressly for inclusion therein).
(b) Promptly after the receipt by an Indemnitee of a notice of
the commencement of any action against an Indemnitee, such Indemnitee will
notify the Agent and the Agent will, if a claim in respect thereof is to be made
against an Indemnitor pursuant to subsection 2.6(a), notify such Indemnitor in
writing of the commencement thereof; but the omission so to notify such party
will not relieve such party from any liability which it may have to such
Indemnitee pursuant to the preceding paragraph. If any such action is brought
against an Indemnitee and it notifies an Indemnitor of its commencement, such
Indemnitor will be entitled to participate in and, to the extent that it so
elects by delivering written notice to the Indemnitee promptly after receiving
notice of the commencement of the action from the Indemnitee to assume the
defense of any such action, with counsel mutually satisfactory to such
Indemnitor and each affected Indemnitee. After receipt of such notice by an
Indemnitor from an Indemnitee, such Indemnitor will not be liable to such
Indemnitee for any legal or other expenses except as provided below and except
for the reasonable costs of investigation subsequently incurred by the
Indemnitee in connection with the defense of such action. Each Indemnitee will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of the such
Indemnitee unless (i) the employment of such counsel by such Indemnitee has been
authorized in writing by such Indemnitor, (ii) such Indemnitor shall have failed
to assume the defense and employ counsel, (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both such
Indemnitee and either an Indemnitor or another person or entity that may be
entitled to indemnification from an Indemnitor (by virtue of this Section 2.6 or
otherwise) and such Indemnitee shall have been advised by counsel that there may
be one or more legal defenses available to such Indemnitee which are different
from or additional to those available to an Indemnitor or such other party or
shall otherwise have reasonably determined that the co-representation would
present such counsel with a conflict of interest (in which case the Indemnitor
will not have the right to direct the defense of such action on behalf of the
Indemnitee). In any such case, the reasonable fees, disbursements and other
charges of counsel will be at the expense of the Indemnitor; it being understood
that in no event shall the Companies be liable for the fees, disbursements and
other charges of more than two counsel (in addition to any local counsel) for
all Indemnitees in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. An Indemnitor shall not be liable for any
settlement of any such action, suit or proceeding effected without its written
consent, which shall not be unreasonably withheld, but if settled with the
written consent of an Indemnitor or if there shall be a final judgment for the
plaintiff in any such action, suit or proceeding, such Indemnitor agrees to
indemnify and hold harmless any Indemnitee to the extent set forth in this
letter from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgement. Notwithstanding the immediately preceding
sentence, if in any case where the fees and expenses of counsel are at the
expense of an Indemnitor and an Indemnitee shall have requested such Indemnitor
to reimburse such Indemnitee for such fees and expenses of counsel as incurred,
such Indemnitor 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 Indemnitor of the aforesaid
request and (ii) such Indemnitor shall have failed to reimburse the Indemnitee
in accordance with such request for reimbursement prior to the date of such
settlement. No Indemnitor shall, without the prior written consent of an
Indemnitee, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder, if such settlement, compromise or
consent includes an admission of culpability or wrong-doing on the part of such
Indemnitee or the entry or an order, injunction or other equitable or
nonmonetary relief (including any administrative or other sanctions or
disqualifications) against such Indemnitee or if such settlement, compromise or
consent does not includes an unconditional release of such Indemnitee from all
liability arising out of such claim, action, suit or proceeding.
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(c) Subject to the limitations on liability set forth in Section
8.3 of the Pooling and Servicing Agreement, the Servicer shall indemnify and
hold harmless each Indemnitee from and against any and all claims, damages,
losses, liabilities, costs or expenses whatsoever which such Indemnitee may
incur (or which may be claimed against such Indemnitee) by reason of any acts or
omissions or alleged acts or omissions of the Servicer hereunder or with respect
to activities of the Trust or the Trustee for which the Servicer is responsible
under the Pooling and Servicing Agreement or hereunder, subject, with respect to
the obligations of the Servicer in respect of activities of the Trust or the
Trustee for which the Servicer is responsible under the Pooling and Servicing
Agreement, to the provisos set forth in Section 8.4 of the Pooling and Servicing
Agreement. Subject to Section 9.5, any Successor Servicer, by accepting its
appointment pursuant to the Pooling and Servicing Agreement, (i) shall agree to
be bound by the terms, covenants and conditions contained herein applicable to
the Servicer and to be subject to the duties and obligations of the Servicer
hereunder, (ii) as of the date of its acceptance, shall be deemed to have made
with respect to itself the representations and warranties made by the SRI in
subsections 4.2(a) through (f) (in the case of subsection 4.2(a), with
appropriate factual changes) and (iii) shall agree to indemnify and hold
harmless any Indemnitee from and against any and all claims, damages, losses,
liabilities, costs or expenses (including reasonable fees and expenses of
counsel) whatsoever which any such Indemnitee may incur (or which may be claimed
against such Indemnitee) by reason of any acts or omissions or alleged acts or
omissions of the Servicer hereunder or with respect to activities of the Trust
or the Trustee for which the Servicer is responsible under the Pooling and
Servicing Agreement or hereunder.
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(d) Subject to the subsection 9.11(a) hereof in the case of the
Transferor, the obligations of SRPC, SRI, the Transferor and the Servicer under
this Agreement shall be absolute, unconditional and irrevocable and shall be
performed strictly in accordance with the terms of this Agreement. Without
limiting the foregoing, neither the lack of validity or enforceability of, or
any modification to, any Related Document nor the existence of any claim,
setoff, defense or other right which SRPC, SRI, the Trust, the Trustee, on
behalf of the Trust, the Transferor and the Servicer may have at any time
against each other, the Class A Agent, the Facility Agent, any Class A
Purchaser, any Support Party or any other Person, whether in connection with any
Related Document or any unrelated transactions, shall constitute a defense to
such obligations.
SECTION 3. CONDITIONS PRECEDENT
3.1 CONDITION TO INITIAL PURCHASE. The following shall be
conditions precedent to the initial purchase by any Class A Purchasers of the
Class A Certificates:
(a) the representations and warranties of SRPC and SRI set forth
or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all
material respects on Closing Date as though made on and as of the Closing Date,
and no event which of itself or with the giving of notice or lapse of time, or
both, would constitute a Termination Event shall have occurred and be continuing
on the Closing Date;
(b) the Supplement shall have been duly executed and delivered by
all parties thereto and shall be in form and substance satisfactory to the Class
A Purchasers;
(c) the Master Pooling and Servicing Agreement and the
Receivables Purchase Agreement shall not have been amended or otherwise
modified, other than as disclosed to the Class A Purchasers in writing prior to
the Closing Date;
(d) Class B Certificates and Class C Certificates shall have been
duly issued in accordance with the Pooling and Servicing Agreement which have a
Class B Initial Invested Amount and a Class C Initial Invested Amount which
aggregates at least 25% of the Initial Invested Amount;
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(e) [reserved];
(f) all up front fees and expenses agreed and specified in the
Class A Fee Letter shall have been paid by SRPC on the Closing Date, and
arrangements satisfactory to the initial Class A Purchasers and the Class A
Agent shall have been made for the payment of amounts required to be paid by
SRPC pursuant to Section 2.3(b) with respect to the preparation, execution,
delivery and initial syndication of this Agreement and each related Support
Facility and the other documents to be delivered hereunder or in connection
herewith;
(g) arrangements satisfactory to the initial Class A Purchasers
and the Class A Agent shall have been made for the repayment in full of the
Series 1993-2 Investor Certificates and termination of the related certificate
purchase agreement concurrently with the initial purchase of Class A
Certificates; and
(h) the Class A Agent on behalf of the Class A Purchasers shall
have received on the Closing Date the following items, each of which shall be in
form and substance satisfactory to the Class A Agent:
(i) an Officer's Certificate of SRPC or SRI, as
applicable, confirming the satisfaction of the conditions set forth in
clause (a) and clauses (c) through (e), inclusive, above;
(ii) a copy of (A) the certificates of incorporation and
by-laws of, and an incumbency certificate with respect to its officers
executing any of the Related Documents on the Closing Date on behalf of,
part of SRPC and SRI certified by its authorized officer, (B) good
standing certificates from the appropriate Governmental Authority as of
a recent date with respect to each of SRPC and SRI and (C) resolutions
of the Board of Directors (or an authorized committee thereof) of each
of SRPC and SRI with respect to the Related Documents to which it is
party, certified by its authorized officer;
(iii) the favorable written opinions of counsel for SRPC
and SRI addressed to the Class A Agent, the Facility Agent and the Class
A Purchasers, or accompanied by a letter providing that the Class A
Agent, the Facility Agent and the Class A Purchasers may rely on such
opinions as if they were addressed to them, and dated the Closing Date,
covering general corporate matters, the due execution and delivery of,
and the enforceability of, each of the Related Documents to which SRPC
and SRI (individually or as Transferor or Servicer) is party,
sale/security interest matters, tax matters and such other matters as
the Class A Agent may request;
(iv) an agreed procedures letter from the independent
certified public accountants of SRPC and a certificate of an authorized
officer of SRPC with respect to the accuracy in all material respects of
written factual data previously furnished to the Class A Agent with
respect to the Receivables in the Trust, in each case in form and scope
satisfactory to the Class A Agent;
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(v) evidence of the due execution and delivery by the
Trustee of the Related Documents to which it is party;
(vi) an executed copy of the Supplement and a conformed
copy of the Master Pooling and Servicing Agreement and the Receivables
Purchase Agreement;
(vii) executed copies of all opinions required by Article
VI of the Pooling and Servicing Agreement or by any Rating Agency in
connection with the issuance, sale or rating of the Series 1997-1 (each
such opinion, unless otherwise agreed to by the Class A Agent, to be
addressed to the Class A Agent on behalf of the Class A Purchasers and
the Facility Agent or accompanied by a letter providing that the Class A
Agent on behalf of the Class A Purchasers and the Facility Agent may
rely on such opinion as if it were addressed to it), and such additional
documents, instruments, certificates or letters as the Class A Agent may
reasonably request;
(viii) the duly executed Class A Certificate(s) registered
in the name of the Class A Agent as nominee on behalf of the Class A
Owners; and
(ix) evidence satisfactory to each Class A Purchaser that
is a Structured Purchaser that Moody's and Standard & Poor's has
confirmed in writing that the purchase by it of Class A Certificates
(including Additional Class A Invested Amounts thereunder) would not
result in a reduction or withdrawal of such Rating Agency's then
applicable rating of the commercial paper of such Structured Purchaser,
without giving effect to any increase in any letter of credit or other
enhancement provided to such Structured Purchaser (other than liquidity
support provided to such Structured Purchaser by Liquidity Providers).
3.2 CONDITION TO ADDITIONAL PURCHASES. The following shall be
conditions precedent to each purchase by any Class A Purchasers of Additional
Class A Invested Amounts hereunder:
(a) the Transferor shall have timely delivered a notice of
purchase pursuant to subsection 2.1(c) of this Agreement;
(b) the representations and warranties of SRPC and SRI set forth
or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all
material respects on the date of such purchase as though made on and as of such
date; no event which of itself or with the giving of notice or lapse of time, or
both, would constitute a Termination Event shall have occurred and be continuing
on such date, and there shall exist no unreimbursed Class C Investor
Charge-Offs;
(c) after giving effect to such purchase of Additional Class A
Invested Amount, the excess of the aggregate Class A Principal Balance over the
portion of such Class A Principal Balance owing to Nonextending Class A
Purchasers shall not exceed the aggregate Commitments of the Committed Class A
Purchasers;
(d) after giving effect to such purchase, (i) the sum of the
Class B Invested Amount and the Class C Invested Amount shall equal not less
than 25% of the Invested Amount on the applicable Purchase Date and (ii) the
Class C Invested Amount shall not be less than 5% of the highest Invested Amount
during the 180 days preceding such Purchase Date;
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(e) after giving effect to such purchase and the application of
the proceeds thereof as provided herein and in subsection 4.2(h) of the Pooling
and Servicing Agreement, the amount on deposit in the Spread Account, expressed
as a percentage of the Invested Amount, after giving effect to such purchase and
the application of the proceeds thereof as provided herein as in subsection
4.2(h) of the Pooling and Servicing Agreement, shall be not less than such
percentage determined prior to giving effect to such purchase and application;
(f) in the case of any Noncommitted Class A Purchaser, such
Noncommitted Class A Purchaser shall have determined in its judgment that the
Class A Certificates have a credit quality sufficient to obtain a rating of not
less than Aa2 from Moody's and not less than AA by Standard & Poor's; and
(g) the conditions set forth in Section 6.15 of the Pooling and
Servicing Agreement to the issuance of such Additional Class A Invested Amount
shall have been satisfied.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SRPC. SRPC repeats and
reaffirms to the Class A Purchasers and the Class A Agent the representations
and warranties of the Transferor set forth in Sections 2.3 of the Pooling and
Servicing Agreement, and represents and warrants that such representations and
warranties are true and correct as of the date hereof. SRPC further represents
and warrants to, and agrees with, the Class A Agent and each Class A Purchaser
that, as of the date hereof:
(a) SRPC is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and to transact the business
in which it is now engaged. SRPC is duly qualified to do business (or is exempt
from such qualification) and is in good standing in each State of the United
States where the nature of its business requires it to be so qualified.
(b) SRPC has the full corporate power, authority and legal
right to make, execute, deliver and perform the Related Documents to which it is
party (individually or as Transferor) and all of the transactions contemplated
thereby and to issue the Series 1997-1 Certificates from the Trust and has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Related Documents to which it is party and such issuance.
Each of the Related Documents to which SRPC is party (individually or as
Transferor) constitutes its legal, valid and binding agreement enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
the rights of creditors generally and except as such enforceability may be
limited by general principles of equity, whether considered in a proceeding at
law or in equity).
(c) SRPC is not required to obtain the consent of any
other party or any consent, license, approval or authorization of, or
registration with, any Governmental Authority in connection with the execution,
delivery or performance of each of the Related Documents to which it is party
(individually or as Transferor) that has not been duly obtained and which is not
and will not be in full force and effect on the Closing Date.
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<PAGE>
(d) SRPC's execution, delivery and performance of the
Related Documents to which it is party (individually or as Transferor) do not
violate or conflict with any provision of any existing law or regulation
applicable to SRPC or any order or decree of any court to which SRPC is subject
or the Certificate of Incorporation or Bylaws of SRPC, or any mortgage, security
agreement, indenture, contract or other agreement to which SRPC is a party or by
which SRPC or any significant portion of its properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of SRPC, threatened,
with respect to any of the Related Documents, the transactions contemplated
thereby, or the issuance of the Series 1997-1 Certificates and there is no such
litigation or proceeding against SRPC or any significant portion of its
properties which would, individually or in the aggregate, have a material
adverse effect on the transactions contemplated by any of the Related Documents
or the ability of SRPC to perform its obligations thereunder.
(f) SRPC is not insolvent or the subject of any
insolvency or liquidation proceeding. The financial statements of SRPC delivered
to the Class A Agent are complete and correct in all material respects and
fairly present the financial condition of SRPC as of date of such statements and
the results of operations of SRPC for the period then ended, all in accordance
with United States generally accepted accounting principles consistently
applied. Since the date of the most recent audited financial statements of SRPC
delivered to the Class A Agent, there has not been any material adverse change
in the condition (financial or otherwise) of SRPC.
(g) There are no outstanding comments from the most recent
report prepared by the independent public accountants for SRPC (individually or
in its capacity as Transferor) in connection with its credit card receivables.
(h) No Trust Pay Out Event, Series 1997-1 Pay Out Event,
Servicer Default or Termination Event has occurred and is continuing, and no
event, act or omission has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an event or default.
(i) The Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act of 1939, as amended, and neither the
Trust nor SRPC is required to be registered under the Investment Company Act of
1940, as amended.
(j) The Receivables conveyed by SRPC to the Trust under
the Pooling and Servicing Agreement are in an aggregate amount, determined as of
November 29, 1997, of $290,488,508, consisting of $280,813,892 of Principal
Receivables and $9,674,616 of Finance Charge Receivables. The Receivables
Purchase Agreement is in full force and effect on the date hereof and no
material default by any party exists thereunder.
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<PAGE>
(k) The Trust is duly created and existing under the laws
of the State of New York. Simultaneous with the closing hereunder, all
conditions to the issuance and sale of the Series 1997-1 Certificates set forth
in the Pooling and Servicing Agreement have been satisfied and the Series 1997-1
Certificates have been duly issued by the Trust.
(l) Neither SRPC nor any of its Affiliates has directly,
or through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as defined in the Securities
Act) that is or will be integrated with the sale of the any Series 1997-1
Certificates in a manner that would require the registration under the
Securities Act of the offering of the Series 1997-1 Certificates or (ii) engaged
in any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) in connection with the offering
of the Series 1997-1 Certificates or in any manner involving a public offering
thereof within the meaning of Section 4(2) of the Securities Act. Assuming the
accuracy of the representations and warranties of each Class A Purchaser in its
Investment Letter and of each purchaser of Class B Certificates in their
respective investment letters, the offer and sale of the Series 1997-1
Certificates are transactions which are exempt from the registration
requirements of the Securities Act.
(m) All written factual information heretofore furnished
by SRPC to, or for delivery to, the Class A Agent for purposes of or in
connection with this Agreement, including information relating to the Accounts,
the Receivables, and SRI's credit card business, was true and correct in all
material respects on the date as of which such information was stated or
certified and remains true and correct in all material respects (unless such
information specifically relates to an earlier date in which case such
information shall have been true and correct in all material respects on such
earlier date).
4.2 REPRESENTATIONS AND WARRANTIES OF SRI. SRI repeats and
reaffirms to the Class A Purchasers and the Class A Agent the representations
and warranties of the Servicer set forth in Sections 3.3 of the Pooling and
Servicing Agreement, and represents and warrants that such representations and
warranties are true and correct as of the date hereof. SRI further represents
and warrants to, and agree with, the Class A Agent and each Class A Purchaser
that, as of the date hereof:
(a) SRI is a duly organized and validly existing
corporation in good standing under the laws of the State of Texas, with
corporate power and authority to own its properties and to transact the business
in which it is now engaged. SRI is duly qualified to do business (or is exempt
from such qualification) and is in good standing in each State of the United
States where the nature of its business requires it to be so qualified.
(b) SRI has the full corporate power, authority and legal
right to make, execute, deliver and perform the Related Documents to which it is
party (individually or as Servicer) and all of the transactions contemplated
thereby and has taken all necessary corporate action to authorize the execution,
delivery and performance of the Related Documents to which it is party and such
issuance. Each of the Related Documents to which SRI is party (individually or
as Servicer) constitutes its legal, valid and binding agreement enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
the rights of creditors of national banking associations generally and except as
such enforceability may be limited by general principles of equity, whether
considered in a proceeding at law or in equity).
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<PAGE>
(c) SRI is not required to obtain the consent of any other
party or any consent, license, approval or authorization of, or registration
with, any Governmental Authority in connection with the execution, delivery or
performance of each of the Related Documents to which it is party (individually
or as Servicer) that has not been duly obtained and which is not and will not be
in full force and effect on the Closing Date.
(d) The execution, delivery and performance by SRI of the
Related Documents to which it is party (individually or as Servicer) do not
violate or conflict with any provision of any existing law or regulation
applicable to SRI or any order or decree of any court to which SRI is subject or
the Certificate of Incorporation or Bylaws of SRI, or any mortgage, security
agreement, indenture, contract or other agreement to which SRI is a party or by
which SRI or any significant portion of its properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of SRI, threatened,
with respect to any of the Related Documents, the transactions contemplated
thereby, or the issuance of the Series 1997-1 Certificates, and there is no such
litigation or proceeding against SRI or any significant portion of its
properties which would, individually or in the aggregate, have a material
adverse effect on the transactions contemplated by any of the Related Documents
or the ability of SRI to perform its obligations thereunder.
(f) SRI is not insolvent or the subject of any insolvency
or liquidation proceeding. The financial statements of SRI delivered to the
Class A Agent are complete and correct in all material respects and fairly
present the financial condition of SRI as of date of such statements and its
results of operations for the period then ended, all in accordance with United
States generally accepted accounting principles consistently applied. Since the
date of the most recent audited financial statements of SRI delivered to the
Class A Agent through the Closing Date, there has not been any material adverse
change in the condition (financial or otherwise) of SRI.
(g) There are no outstanding comments from the most recent
report prepared by the independent public accountants for SRI (individually or
in its capacity as Servicer) in connection with its credit card receivables.
(h) No Trust Pay Out Event, Series 1997-1 Pay Out Event,
Servicer Default, Termination Event has occurred and is continuing, and no
event, act or omission has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an event or default.
(i) The Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act of 1939, as amended, and neither the
Trust, SRPC nor SRI is required to be registered under the Investment Company
Act of 1940, as amended.
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<PAGE>
(j) The Receivables Purchase Agreement is in full force
and effect on the date hereof and no material default by any party exists
thereunder.
(k) The Trust is duly created and existing under the laws
of the State of New York. Simultaneous with the closing hereunder, all
conditions to the issuance and sale of the Series 1997-1 Certificates set forth
in the Pooling and Servicing Agreement have been satisfied and the Series 1997-1
Certificates have been duly issued by the Trust.
(l) To the knowledge of SRI, the representations and
warranties of SRPC set forth in Section 4.1 above are true and correct in all
material respects.
(m) All written factual information heretofore furnished
by SRPC, SRI or Stage to, or for delivery to, the Class A Agent for purposes of
or in connection with this Agreement, including information relating to the
Accounts, the Receivables and the credit card business of SRPC or SRI, was true
and correct in all material respects on the date as of which such information
was stated or certified and remains true and correct in all material respects
(unless such information specifically relates to an earlier date in which case
such information shall have been true and correct in all material respects on
such earlier date).
4.3 REPRESENTATIONS AND WARRANTIES OF THE CLASS A AGENT, THE
FACILITY AGENT AND THE CLASS A PURCHASERS. Each of the Class A Agent, the
Facility Agent and the Class A Purchasers severally (each with respect to itself
only) represents and warrants to, and agrees with, the Transferor and the
Servicer, that:
(a) It is duly authorized to enter into and perform this
Agreement and, in the case of the Class A Purchasers, to purchase its Commitment
Percentage (if any) of the Class A Certificates, and has duly executed and
delivered this Agreement; and the person signing this Agreement on behalf of the
Class A Agent, the Facility Agent or such Class A Purchaser, as the case may be,
has been duly authorized to do so.
(b) This Agreement constitutes the legal, valid and
binding obligation of the Class A Agent, the Facility Agent or such Class A
Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, conservatorship or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in general,
and except as such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(c) No registration with or consent or approval of or
other action by any state or local governmental authority or regulatory body
having jurisdiction over the Class A Agent, the Facility Agent or such Class A
Purchaser is required in connection with its execution, delivery or performance
of this Agreement, other than as may be required under the blue sky laws of any
state.
(d) The execution, delivery or performance by the Class A
Agent, the Facility Agent or such Class A Purchaser of this Agreement do not
violate or conflict with any provision of any existing law or regulation
applicable to it or any order or decree of any court to which it is subject, its
charter or bylaws, or any mortgage, security agreement, indenture, contract or
other agreement to which such it is a party or by which it or any significant
portion of its properties is bound, in any such case if such violation or
conflict would have an adverse affect on its right or ability to execute,
deliver or perform its obligations under this Agreement.
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SECTION 5. COVENANTS
5.1 COVENANTS OF SRPC. SRPC (individually or, as set forth below,
as the Transferor) and SRI (individually and, as set forth below, as the
Servicer), each as to itself in such capacity or capacities, and subject to
subsection 9.11(a) in the case of the Transferor, covenants and agrees, through
the Termination Date for all Class A Purchasers and thereafter so long as any
amount of the Class A Principal Balance shall remain outstanding or any monetary
obligation arising hereunder shall remain unpaid, unless the Required Class A
Owners and the Required Class A Purchasers shall otherwise consent in writing,
that:
(a) each of SRPC, SRI, the Transferor and the Servicer
shall perform in all material respects each of the respective agreements,
warranties and indemnities applicable to it and comply in all material respects
with each of the respective terms and provisions applicable to it under the
other Related Documents to which it is party, which agreements, warranties and
indemnities are hereby incorporated by reference into this Agreement as if set
forth herein in full; and each of SRPC, SRI, the Transferor and the Servicer
shall take all reasonable action to enforce the obligations of each of the other
parties to such Related Documents which are contained therein;
(b) the Transferor and the Servicer shall furnish to the
Class A Agent (i) a copy of each opinion, certificate, report, statement, notice
or other communication (other than investment instructions) relating to the
Series 1997-1 Certificates which is furnished by or on behalf of either of them
to Certificateholders, to any Rating Agency or to the Trustee and furnish to the
Class A Agent after receipt thereof, a copy of each notice, demand or other
communication relating to the Series 1997-1 Certificates, this Agreement or the
Pooling and Servicing Agreement received by the Transferor or the Servicer from
the Trustee, any Rating Agency or 10% or more of the Series 1997-1
Certificateholders (to the extent such notice, demand or communication relates
to the Accounts, the Receivables, any Servicer Default, any Trust Pay Out Event
or any Series 1997-1 Pay Out Event); and (ii) such other information, documents
records or reports respecting the Trust, the Accounts, the Receivables, the
Transferor or the Servicer as the Class A Agent may from time to time reasonably
request without unreasonable expense to the Transferor or the Servicer;
(c) the Servicer shall furnish to the Class A Agent on or
before the date such reports are due under the Pooling and Servicing Agreement
copies of each of the reports and certificates required by subsection 3.4(c) or
Section 3.5 or 3.6 of the Pooling and Servicing Agreement;
(d) the Servicer shall promptly furnish to the Class A
Agent a copy, addressed to the Class A Agent, of each opinion of counsel
delivered to the Trustee pursuant to subsection 13.2(d) of the Pooling and
Servicing Agreement;
(e) SRI shall furnish to the Class A Agent (i) promptly
when publicly available, the annual (audited) and quarterly (unaudited)
consolidated financial statements of each of Stage and SRPC and such other
publicly available financial information, if any, as to Stage, SRI or SRPC as
the Class A Agent may request, and (ii) promptly after known to SRI, information
with respect to any action, suit or proceeding involving SRI or any of its
Affiliates by or before any court or any Governmental Authority which, if
adversely determined, would materially adversely affect the business, results of
operation or financial condition of SRPC or SRI;
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(f) the Servicer shall furnish to the Class A Agent a
certificate concurrently with its delivery of its annual certificate pursuant to
Section 3.5 of the Pooling and Servicing Agreement stating that no Termination
Event or event or condition which with the passage of time or the giving of
notice, or both, would constitute a Termination Event has occurred or, if such a
Termination Event, event or condition has occurred, identifying the same in
reasonable detail;
(g) the Transferor shall not exercise its right to accept
optional reassignment of the Receivables or repurchase the Series 1997-1
Certificates pursuant to Section 12.2 of the Pooling and Servicing Agreement,
unless the Class A Purchasers and the Class A Agent have been paid, or will be
paid upon such repurchase or in connection with such optional reassignment, the
Class A Principal Balance, all interest thereon and all other amounts owing
hereunder in full;
(h) the Transferor and the Servicer shall at any time from
time to time during regular business hours, on reasonable notice to the
Transferor or the Servicer, as the case may be, permit the Class A Agent, or its
agents or representatives to:
(i) examine all books, records and documents
(including computer tapes and disks) in its possession or under its
control relating to the Receivables, and
(ii) visit its offices and property for the purpose of
examining such materials described in clause (i) above.
The information obtained by the Class A Agent or any Class A Purchaser pursuant
to this subsection shall be held in confidence in accordance with Section 6.2
hereof;
(i) the Transferor and the Servicer shall use reasonable
efforts to cooperate with the Class A Agent (including affording reasonable
inspection rights, assisting in the preparation of syndication material,
attending investor meetings and providing access to its officers) in its effort
to syndicate the Commitments;
(j) the Servicer shall furnish to the Class A Agent,
promptly after the occurrence of any Servicer Default, Termination Event, Trust
Pay Out Event or Series 1997-1 Pay Out Event, a certificate of an appropriate
officer of the Servicer setting forth the circumstances of such Servicer
Default, Termination Event, Trust Pay Out Event or Series 1997-1 Pay Out Event
and any action taken or proposed to be taken by the Servicer or the Transferor
with respect thereto;
(k) the Transferor and the Servicer shall timely make all
payments, deposits or transfers and give all instructions to transfer required
by this Agreement, the Pooling and Servicing Agreement and the Receivables
Purchase Agreement;
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(l) neither Transferor, the Servicer nor the Originator
shall terminate (except in accordance with the terms thereof), amend, waive or
otherwise modify the Master Pooling and Servicing Agreement or the Supplement,
unless (i) such amendment, waiver or modification shall not, as evidenced by an
Officer's Certificate of the Transferor delivered to the Class A Agent,
adversely affect in any material respect the interests of the Class A Agent, the
Facility Agent or the Class A Purchasers under any Related Document, and will
not result in a reduction or withdrawal of the then current rating by any Rating
Agency of any commercial paper notes issued by any Structured Purchaser without
giving effect to any increase in any letter of credit or other enhancement
provided to such Structured Purchaser; and (ii) all of the applicable provisions
of Section 13.1 of the Pooling and Servicing Agreement have been complied with;
(m) the Transferor and the Servicer shall execute and
deliver to the Class A Agent, the Facility Agent or the Trustee all such
documents and instruments and do all such other acts and things as may be
necessary or reasonably required by the Class A Agent, the Facility Agent or the
Trustee to enable any of them to exercise and enforce their respective rights
under the Related Documents and to realize thereon, and record and file and
rerecord and refile all such documents and instruments, at such time or times,
in such manner and at such place or places, all as may be necessary or required
by the Trustee, the Facility Agent or the Class A Agent to validate, preserve,
perfect and protect the position of the Trustee under the Pooling and Servicing
Agreement;
(n) neither the Transferor nor the Servicer will
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, except (i) in
accordance with Section 7.2 or 8.2 of the Pooling and Servicing Agreement, and
(ii) with the prior written consent of the Required Class A Owners and the
Required Class A Purchasers; PROVIDED that such consent shall not be required in
the case of the Servicer if, after giving effect to such consolidation, merger,
conveyance or transfer, the Class A Certificates are rated at least "BBB" by
Standard & Poor's or at least "Baa3" by Moody's Investors Services, Inc.;
(o) SRI will not (i) resign as Servicer, unless (A) the
performance of its duties under the Pooling and Servicing Agreement is no longer
permissible pursuant to Requirements of Law and there is no reasonable action
which it could take to make the performance of such duties permissible under
such Requirements of Law, or (B) the Required Class A Owners and the Required
Class A Purchasers shall have consented thereto, or (ii) assign the Pooling and
Servicing Agreement (unless such assignment is permitted pursuant to Section 8.2
of the Pooling and Servicing Agreement and subsection 5.1(n) hereof), (iii)
delegate any of its material duties under the Pooling and Servicing Agreement
except as permitted by Section 8.7 of the Pooling and Servicing Agreement and
unless the Person to which such delegation is made is a wholly owned subsidiary
(directly or indirectly) of Stage, is legally qualified and licensed (to the
extent required) to perform the duties delegated to it, owns or holds under
valid leases or (in the case of software) licenses all computer equipment and
software and other equipment and rights which are required for such Person to
perform such duties, and employs sufficient and adequately trained personnel to
perform such duties, or (iv) appoint or permit the appointment of a Successor
Servicer other than the Trustee under the provisions of the Pooling and
Servicing Agreement without consultation with the Facility Agent; and
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(p) the Transferor will not incur, permit or suffer to
exist any lien, charge or other adverse claim on any Class C Certificate.
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY
6.1 COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and the
Servicer shall hold in confidence, and not disclose to any Person, the terms of
any fees payable in connection with this Agreement except they may disclose such
information (i) to their officers, directors, employees, agents, counsel,
accountants, auditors, advisors or representatives, (ii) with the consent of the
Required Class A Purchasers and Class A Agent, or (iii) to the extent SRPC, SRI,
the Transferor or the Servicer or any Affiliate of either of them should be
required by any law or regulation applicable to it or requested by any
Governmental Authority to disclose such information; PROVIDED, that, in the case
of clause (iii), SRPC, the Transferor or the Servicer, as the case may be, will
use all reasonable efforts to maintain confidentiality and will (unless
otherwise prohibited by law) notify the Class A Agent of its intention to make
any such disclosure prior to making such disclosure.
6.2 COVENANTS OF CLASS A PURCHASERS. The Class A Agent, the
Facility Agent and each Class A Purchaser, severally and with respect to itself
only, covenants and agrees that any information obtained by the Class A Agent,
the Facility Agent or such Class A Purchaser pursuant to this Agreement shall be
held in confidence (it being understood that documents provided to the Class A
Agent hereunder may in all cases be distributed by the Class A Agent or the
Facility Agent to the Class A Purchasers) except that the Class A Agent, the
Facility Agent or such Class A Purchaser may disclose such information (i) to
its officers, directors, employees, agents, counsel, accountants, auditors,
advisors or representatives, (ii) to the extent such information has become
available to the public other than as a result of a disclosure by or through the
Class A Agent, the Facility Agent or such Class A Purchaser, (iii) to the extent
such information was available to the Class A Agent, the Facility Agent or such
Class A Purchaser on a nonconfidential basis prior to its disclosure to the
Class A Agent, the Facility Agent or such Class A Purchaser hereunder, (iv) with
the consent of the Transferor, (v) to the extent permitted by Section 8.1, (vi)
to the extent the Class A Agent, the Facility Agent or such Class A Purchaser
should be (A) required in connection with any legal or regulatory proceeding or
(B) requested by any Governmental Authority to disclose such information or
(vii) in the case of any Class A Purchaser that is a Structured Purchaser, to
rating agencies, placement agents and providers of liquidity and credit support
who agree to hold such information in confidence; PROVIDED, that, in the case of
clause (vi) above, the Class A Agent, the Facility Agent or such Class A
Purchaser, as applicable, will use all reasonable efforts to maintain
confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise
prohibited by law) notify the Transferor of its intention to make any such
disclosure prior to making any such disclosure.
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SECTION 7. THE AGENTS
7.1 APPOINTMENT. (a) Each Class A Purchaser hereby irrevocably
designates and appoints the Class A Agent as the agent of such Class A Purchaser
under this Agreement, and each such Class A Purchaser irrevocably authorizes the
Class A Agent, as the agent for such Class A Purchaser, to take such action on
its behalf under the provisions of the Related Documents and to exercise such
powers and perform such duties thereunder as are expressly delegated to the
Class A Agent by the terms of the Related Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Class A Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Class A Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Class A Agent.
(b) Each Class A Purchaser hereby irrevocably designates and
appoints the Facility Agent as the agent of such Class A Purchaser under the
Pooling and Servicing Agreement, and each such Class A Purchaser irrevocably
authorizes the Facility Agent, as the agent for such Class A Purchaser, to take
such action on its behalf under the provisions of the Pooling and Servicing
Agreement and to exercise such powers and perform such duties thereunder as are
expressly granted to the Facility Agent by the terms of the Pooling and
Servicing Agreement, subject to the terms and conditions of this Agreement,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Facility Agent shall not have any duties or responsibilities, except those
expressly set forth herein or in the Pooling and Servicing Agreement, or any
fiduciary relationship with any Class A Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Facility Agent.
7.2 DELEGATION OF DUTIES. The Class A Agent and the Facility
Agent may execute any of its duties under any of the Related Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither the Class A Agent nor
the Facility Agent shall be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
7.3 EXCULPATORY PROVISIONS. Neither the Class A Agent nor the
Facility Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class
A Purchasers for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with any of the other Related Documents (except
for its or such Person's own gross negligence or willful misconduct) or (b)
responsible in any manner to any of the Class A Purchasers for any recitals,
statements, representations or warranties made by SRPC, SRI, Stage, the
Transferor, the Servicer or the Trustee or any officer thereof contained in any
of the other Related Documents or in any certificate, report, statement or other
document referred to or provided for in, or received by the Class A Agent or the
Facility Agent under or in connection with, any of the other Related Documents
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any of the other Related Documents or for any
failure of SRPC, SRI, Stage, the Transferor, the Servicer or the Trustee to
perform its obligations thereunder. Neither the Class A Agent nor the Facility
Agent shall be under any obligation to any Class A Purchaser to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, any of the other Related Documents, or to inspect the
properties, books or records of SRPC, SRI, Stage, the Transferor, the Servicer,
the Trustee or the Trust.
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7.4 RELIANCE BY AGENT. The Class A Agent and the Facility Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, written 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 counsel to the Class A Agent or the
Facility Agent), independent accountants and other experts selected by the Class
A Agent or the Facility Agent. The Class A Agent and the Facility Agent shall be
fully justified in failing or refusing to take any action under any of the
Related Documents unless it shall first receive such advice or concurrence of
the Required Class A Owners and the Required Class A Purchasers as it deems
appropriate or it shall first be indemnified to its satisfaction by the Class A
Purchasers or by the Committed Class A Purchasers 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 Class A Agent and the Facility Agent shall in all
cases be fully protected in acting, or in refraining from acting, under any of
the Related Documents in accordance with a request of the Required Class A
Owners and the Required Class A Purchasers and such request and any action taken
or failure to act pursuant thereto shall be binding upon all present and future
Class A Purchasers.
7.5 NOTICES. The Class A Agent shall not be deemed to have
knowledge or notice of the occurrence of any breach of this Agreement or the
occurrence of any Pay Out Event or any Termination Event unless the Class A
Agent has received notice from the Transferor, the Servicer, the Trustee or any
Class A Purchaser referring to this Agreement, describing such event. In the
event that the Class A Agent receives such a notice, the Class A Agent promptly
shall give notice thereof to the Class A Purchasers. The Class A Agent shall
take such action with respect to such event as shall be reasonably directed by
the Required Class A Owners and the Required Class A Purchasers; PROVIDED that
unless and until the Class A Agent shall have received such directions, the
Class A Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such event as it shall deem advisable
in the best interests of the Class A Purchasers.
7.6 NON-RELIANCE ON AGENT AND OTHER CLASS A PURCHASERS. Each
Class A Purchaser expressly acknowledges that neither the Class A Agent nor the
Facility Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by the Class A Agent or the Facility Agent
hereafter taken, including any review of the affairs of SRPC, SRI, Stage, the
Transferor, the Servicer, the Trustee or the Trust shall be deemed to constitute
any representation or warranty by the Class A Agent or the Facility Agent to any
Class A Purchaser. Each Class A Purchaser represents to the Class A Agent and
the Facility Agent that it has, independently and without reliance upon the
Class A Agent, the Facility Agent or any other Class A Purchaser, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Trust, the Trustee,
SRPC, SRI, Stage, the Transferor and the Servicer and made its own decision to
purchase its interest in the Class A Certificates hereunder and enter into this
Agreement. Each Class A Purchaser also represents that it will, independently
and without reliance upon the Class A Agent or the Facility Agent or any other
Class A Purchaser, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis, appraisals and
decisions in taking or not taking action under any of the Related Documents, and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, the Transferor and
the Servicer. Except, in the case of the Class A Agent, for notices, reports and
other documents received by the Class A Agent under Section 5 hereof, neither
the Class A Agent nor the Facility Agent shall have any duty or responsibility
to provide any Class A Purchaser with any credit or other information concerning
the business, operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, the
Transferor or the Servicer which may come into the possession of the Class A
Agent or the Facility Agent or any of its respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
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7.7 INDEMNIFICATION. The Committed Class A Purchasers agree to
indemnify the Class A Agent and the Facility Agent in its capacity as such
(without limiting the obligation (if any) of SRPC, SRI, the Transferor, the
Trust or the Servicer to reimburse the Class A Agent or the Facility Agent for
any such amounts), ratably according to their respective Commitment Percentages
(or, if the Commitments have terminated, Percentage Interests), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including at any time following the payment of the obligations
under this Agreement, including the Class A Principal Balance) be imposed on,
incurred by or asserted against the Class A Agent or the Facility Agent in any
way relating to or arising out of this Agreement, or any documents contemplated
by or referred to herein or the transactions contemplated hereby or any action
taken or omitted by the Class A Agent or the Facility Agent under or in
connection with any of the foregoing; PROVIDED that no Class A Purchaser shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of the Class A Agent or the Facility Agent resulting from its own
gross negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the obligations under this Agreement, including the Class
A Principal Balance.
7.8 AGENTS IN THEIR INDIVIDUAL CAPACITIES. The Class A Agent, the
Facility Agent and their Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Trust, the Trustee, SRPC, SRI,
Stage, the Servicer and the Transferor as though the Class A Agent and the
Facility Agent were not the agents hereunder. Each Class A Purchaser
acknowledges that Credit Suisse First Boston may act (i) as administrator and
agent for one or more Structured Purchasers and in such capacity acts and may
continue to act on behalf of each such Structured Purchaser in connection with
its business, (ii) as the agent for certain financial institutions under the
liquidity and credit enhancement agreements relating to this Agreement to which
any such Structured Purchaser is party and in various other capacities relating
to the business of any such Structured Purchaser under various agreements, and
(iii) as agent for other Classes of Series 1997-1 Certificates. Credit Suisse
First Boston in its capacity as the Class A Agent or the Facility Agent shall
not, by virtue of its acting in any such other capacities, be deemed to have
duties or responsibilities hereunder or be held to a standard of care in
connection with the performance of its duties as the Class A Agent or the
Facility Agent other than as expressly provided in this Agreement. Credit Suisse
First Boston may act as the Class A Agent and the Facility Agent without regard
to and without additional duties or liabilities arising from its role as such
administrator or agent or arising from its acting in any such other capacity.
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7.9 SUCCESSOR AGENT. (a) The Class A Agent may resign as Class A
Agent upon ten days' notice to the Class A Purchasers, the Trustee, the
Transferor and the Servicer with such resignation becoming effective upon a
successor agent succeeding to the rights, powers and duties of the Class A Agent
pursuant to this subsection 7.9(a). If the Class A Agent shall resign as Class A
Agent under this Agreement, then the Required Class A Purchasers and the
Required Class A Owners shall appoint from among the Committed Class A
Purchasers a successor agent for the Class A Purchasers. The successor agent
shall succeed to the rights, powers and duties of the Class A Agent, and the
term "Class A Agent" shall mean such successor agent effective upon its
appointment, and the former Class A Agent's rights, powers and duties as Class A
Agent shall be terminated, without any other or further act or deed on the part
of such former Class A Agent or any of the parties to this Agreement. After the
retiring Class A Agent's resignation as Class A Agent, the provisions of this
Section 7 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Class A Agent under this Agreement.
(b) The Facility Agent may resign as Facility Agent upon ten
days' notice to the Class A Purchasers, the Class B Purchasers (as defined in
the Class B Certificate Purchase Agreement), the Trustee, the Transferor and the
Servicer with such resignation becoming effective upon a successor agent
succeeding to the rights, powers and duties of the Facility Agent pursuant to
this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent
under this Agreement, then the Required Class A Purchasers and the Required
Class A Owners shall appoint from among the Committed Class A Purchasers
hereunder or the Committed Class B Purchasers under the Class B Certificate
Purchase Agreement a successor Facility Agent of the Class A Certificateholders
and the Class B Certificateholders as provided in the Supplement; PROVIDED that
no such appointment shall be effective unless such successor is also appointed
as successor Facility Agent under the Class B Certificate Purchase Agreement.
The successor agent shall succeed to the rights, powers and duties of the
Facility Agent, and the term "Facility Agent" shall mean such successor agent
effective upon its appointment, and the former Facility Agent's rights, powers
and duties as Facility Agent shall be terminated, without any other or further
act or deed on the part of such former Facility Agent or any of the parties to
this Agreement. After the retiring Facility Agent's resignation as Facility
Agent, the provisions of this Section 7 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Facility Agent under
this Agreement.
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SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT
8.1 TRANSFERS OF CLASS A CERTIFICATES. (a) Each Class A Owner
agrees that the beneficial interest in the Class A Certificates purchased by it
will be acquired for investment only and not with a view to any public
distribution thereof, and that such Class A Owner will not offer to sell or
otherwise dispose of any Class A Certificate acquired by it (or any interest
therein) in violation of any of the registration requirements of the Securities
Act or any applicable state or other securities laws. Each Class A Owner
acknowledges that it has no right to require the Transferor to register, under
the Securities Act or any other securities law, the Class A Certificates (or the
beneficial interest therein) acquired by it pursuant to this Agreement or any
Transfer Supplement. Each Class A Owner hereby confirms and agrees that in
connection with any transfer or syndication by it of an interest in the Class A
Certificates, such Class A Owner has not engaged and will not engage in a
general solicitation or general advertising including advertisements, articles,
notices or other communications published in any newspaper, magazine or similar
media or broadcast over radio or television, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
Each Class A Purchaser which executes a Joinder Agreement agrees that it will
execute and deliver to the Transferor, the Servicer, the Trustee and the Class A
Agent on or before the effective date of its Joinder Agreement a letter in the
form attached hereto as EXHIBIT A (an "INVESTMENT LETTER") with respect to the
purchase by such Class A Purchaser of an interest in the Class A Certificates.
(b) Each initial purchaser of a Class A Certificate or any
interest therein and any Assignee thereof or Participant therein shall certify
to the Transferor, the Servicer, the Trustee and the Class A Agent that it is
either (A)(i) a citizen or resident of the United States, (ii) a corporation or
other entity organized in or under the laws of the United States or any
political subdivision thereof which, if such entity is a tax-exempt entity,
recognizes that payments with respect to the Class A Certificates may constitute
unrelated business taxable income or (iii) a person not described in (i) or (ii)
whose income from the Class A Certificates is and will be effectively connected
with the conduct of a trade or business within the United States (within the
meaning of the Code) and whose ownership of any interest in a Class A
Certificate will not result in any withholding obligation with respect to any
payments with respect to the Class A Certificates by any Person (other than
withholding, if any, under Section 1446 of the Code) and who will furnish to the
Class A Agent, the Servicer and the Trustee, and to the Class A Owner making the
Transfer a properly executed U.S. Internal Revenue Service Form 4224 (and to
agree (to the extent legally able) to provide a new Form 4224 upon the
expiration or obsolescence of any previously delivered form and comparable
statements in accordance with applicable United States laws) or (B) an estate or
trust the income of which is includible in gross income for United States
federal income tax purposes.
(c) Any sale, transfer, assignment, participation, pledge,
hypothecation or other disposition (a "TRANSFER") of a Class A Certificate or
any interest therein may be made only in accordance with this Section 8.1. Any
Transfer of an interest in a Class A Certificate, a Commitment or any
Noncommitted Purchaser Percentage shall be in respect of (i) in the case of a
Committed Class A Purchaser, at least $5,000,000 in the aggregate, which may be
composed of (A) Class A Principal Balance or (B) to the extent in excess of the
Class A Principal Balance subject to such Transfer, Commitment hereunder, or
(ii) in the case of a Noncommitted Class A Purchaser, at
least $5,000,000 in the aggregate, which may be composed of (A) Class A
Principal Balance, or (B) to the extent in excess of the Class A Principal
Balance subject to such Transfer, the product of the Noncommitted Purchaser
Percentage subject to such Transfer times the aggregate Commitments hereunder.
Any Transfer of an interest in a Class A Certificate otherwise permitted by this
Section 8.1 will be permitted only if it consists of a PRO RATA percentage
interest in all payments made with respect to the Class A Purchaser's beneficial
interest in such Class A Certificate. No Class A Certificate or any interest
therein may be Transferred by Assignment or Participation to any Person (each, a
"TRANSFEREE") unless prior to the transfer the Transferee shall have executed
and delivered to the Class A Agent and the Transferor an Investment Letter.
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Each of SRPC and SRI authorizes each Class A Purchaser to
disclose to any Transferee and Support Party and any prospective Transferee or
Support Party any and all financial information in the Class A Purchaser's
possession concerning the Trust, SRPC, SRI and Stage which has been delivered to
the Class A Agent, the Facility Agent or such Class A Purchaser pursuant to the
Related Documents (including information obtained pursuant to rights of
inspection granted hereunder) or which has been delivered to such Class A
Purchaser by or on behalf of the Trust, SRPC, SRI, Stage, the Transferor or the
Servicer in connection with such Class A Purchaser's credit evaluation of the
Trust, SRPC, SRI, Stage, the Transferor or the Servicer prior to becoming a
party to, or purchasing an interest in this Agreement or the Class A
Certificates; PROVIDED that prior to any such disclosure, such Transferee or
Support Party or prospective Transferee or Support Party shall have executed an
agreement agreeing to be bound by the provisions of Section 6.2 hereof.
(d) Each Class A Purchaser may, in accordance with
applicable law, at any time grant participations in all or part of its
Commitment or its interest in the Class A Certificates, including the payments
due to it under this Agreement and the Pooling and Servicing Agreement (each, a
"PARTICIPATION"), to any Person (each, a "PARTICIPANT"); PROVIDED, HOWEVER, that
no Participation shall be granted to any Person unless and until the Class A
Agent shall have consented thereto and the conditions to Transfer specified in
this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied
and that such Participation consists of a PRO RATA percentage interest in all
payments made with respect to such Class A Purchaser's beneficial interest (if
any) in the Class A Certificates. In connection with any such Participation, the
Class A Agent shall maintain a register of each Participant and the amount of
each Participation. Each Class A Purchaser hereby acknowledges and agrees that
(A) any such Participation will not alter or affect such Class A Purchaser's
direct obligations hereunder, and (B) neither the Trustee, the Transferor nor
the Servicer shall have any obligation to have any communication or relationship
with any Participant. Each Class A Purchaser and each Participant shall comply
with the provisions of subsection 2.5(c). No Participant shall be entitled to
Transfer all or any portion of its Participation, without the prior written
consent of the Class A Agent. Each Participant shall be entitled to receive
additional amounts and indemnification pursuant to Sections 2.4, 2.5 and 2.6 as
if such Participant were a Class A Purchaser and such Sections applied to its
Participation; PROVIDED, in the case of Section 2.5, that such Participant has
complied with the provisions of subsection 2.5(c) as if it were a Class A
Purchaser. Each Class A Purchaser shall give the Class A Agent notice of the
consummation of any sale by it of a Participation and the Class A Agent (upon
receipt of notice from the related Class A Purchaser) shall promptly notify the
Transferor, the Servicer and the Trustee.
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(e) Each Class A Purchaser may, with the consent of the
Class A Agent and SRPC and in accordance with applicable law, sell or assign
(each, an "ASSIGNMENT"), to any Person (each, an "ASSIGNEE") all or any part of
its Commitment or its interest in the Class A Certificates and its rights and
obligations under this Agreement and the Pooling and Servicing Agreement
pursuant to an agreement substantially in the form attached hereto as EXHIBIT C
hereto (a "TRANSFER SUPPLEMENT"), executed by such Assignee and the Class A
Purchaser and delivered to the Class A Agent for its acceptance and consent;
PROVIDED, HOWEVER, that no such assignment or sale shall be effective unless and
until the conditions to Transfer specified in this Agreement, including in
subsection 8.1(c) hereof, shall have been satisfied; and PROVIDED FURTHER,
HOWEVER, that the consent of SRPC (i) shall not be required in the case of an
assignment by a Noncommitted Class A Purchaser of its interest in the Class A
Certificates and its rights and obligations under this Agreement and the Pooling
and Servicing Agreement to any one or more of its Liquidity Providers and (ii)
shall not be unreasonably withheld in the case of an assignment by the initial
Noncommitted Class A Purchaser of its interest in the Class A Certificates and
its rights and obligations under this Agreement and the Pooling and Servicing
Agreement to any Structured Purchaser which is administered by the same Person
as such Noncommitted Class A Purchaser. From and after the effective date
determined pursuant to such Transfer Supplement, (x) the Assignee thereunder
shall be a party hereto and, to the extent provided in such Transfer Supplement,
have the rights and obligations of a Class A Purchaser hereunder as set forth
therein and (y) the transferor Class A Purchaser shall, to the extent provided
in such Transfer Supplement, be released from its Commitment and other
obligations under this Agreement; PROVIDED, HOWEVER, that after giving effect to
each such Assignment, the obligations released by any such Class A Purchaser
shall have been assumed by an Assignee or Assignees. 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 Assignee and the resulting adjustment
of Percentage Interests, Committed Purchaser Percentages, Noncommitted Purchaser
Percentages, Liquidity Percentages or Commitment Percentages arising from the
Assignment. Upon its receipt and acceptance of a duly executed Transfer
Supplement, the Class A Agent shall on the effective date determined pursuant
thereto give notice of such acceptance to the Transferor, the Servicer and the
Trustee and the Servicer will provide notice thereof to each Rating Agency (if
required).
Upon instruction to register a transfer of a Class A
Purchaser's beneficial interest in the Class A Certificates (or portion thereof)
and surrender for registration of transfer such Class A Purchaser's Class A
Certificate(s) (if applicable) and delivery to the Transferor and the Trustee of
an Investment Letter, executed by the registered owner (and the beneficial owner
if it is a Person other than the registered owner), and receipt by the Trustee
of a copy of the duly executed related Transfer Supplement and such other
documents as may be required under this Agreement, such beneficial interest in
the Class A Certificates (or portion thereof) shall be transferred in the
records of the Trustee and the Class A Agent and, if requested by the Assignee,
new Class A Certificates shall be issued to the Assignee and, if applicable, the
transferor Class A Purchaser in amounts reflecting such Transfer as provided in
the Pooling and Servicing Agreement. Such Transfers of Class A Certificates (and
interests therein) shall be subject to this Section 8.1 in lieu of any
regulations which may be prescribed under Section 6.3 of the Pooling and
Servicing Agreement. Successive registrations of Transfers as aforesaid may be
made from time to time as desired, and each such registration of a transfer to a
new registered owner shall be noted on the Certificate Register.
(f) Each Class A Purchaser may pledge its interest in the
Class A Certificates to any Federal Reserve Bank as collateral in accordance
with applicable law.
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(g) Any Class A Purchaser shall have the option to change
its Investing Office, PROVIDED that such Class A Purchaser shall have prior to
such change in office complied with the provisions of subsection 2.5(c) and
PROVIDED FURTHER that such Class A Purchaser shall not be entitled to any
amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such
change in office unless such change in office was mandated by applicable law or
by such Class A Purchaser's compliance with the provisions of this Agreement.
(h) Each Affected Party shall be entitled to receive
additional payments and indemnification pursuant to Sections 2.4, 2.5 and 2.6
hereof as though it were a Class A Purchaser and such Section applied to its
interest in or commitment to acquire an interest in the Class A Certificates;
PROVIDED that such Affected Party shall not be entitled to additional payments
pursuant to (i) Section 2.4 by reason of Regulatory Changes which occurred prior
to the date it became an Affected Party or (ii) Section 2.5 attributable to its
failure to satisfy the requirements of subsection 2.5(c) as if it were a Class A
Purchaser.
(i) Each Affected Party claiming increased amounts
described in Sections 2.4 or 2.5 shall furnish, through its related Structured
Purchaser, to the Trustee, the Class A Agent, the Servicer and the Transferor a
certificate setting forth the basis and amount of each request by such Affected
Party for any such amounts referred to in Sections 2.4 or 2.5, such certificate
to be conclusive with respect to the factual information set forth therein
absent manifest error.
(j) In the event that a Liquidity Provider is a Downgraded
Purchaser, the related Noncommitted Class A Purchaser shall have the right to
replace such Liquidity Provider with a replacement Liquidity Provider, which
replacement Purchaser shall succeed to the rights of such Liquidity Provider
under this Agreement in respect of its Commitment as a Liquidity Provider, and
such Liquidity Provider shall assign such Commitment and its interest in the
Class A Certificates to such replacement Liquidity Provider in accordance with
the provisions of this Section 8.1; PROVIDED, that (A) such Liquidity Provider
shall not be replaced hereunder with a new investor until such Liquidity
Provider has been paid in full its Percentage Interest of the Class A Principal
Balance and all accrued and unpaid interest thereon by such new investor and all
other amounts (including all amounts owing under Sections 2.4 and 2.5) owed to
it and to all Participants with respect to such Liquidity Provider pursuant to
this Agreement, and (ii) if the Liquidity Provider to be replaced is the Class A
Agent or the Facility Agent, a replacement Class A Agent or Facility Agent, as
the case may be, shall have been appointed in accordance with Section 7.9, and
the Class A Agent or Facility Agent, as the case may be, to be replaced shall
have been paid all amounts owing to it as Class A Agent or Facility Agent, as
the case may be, pursuant to this Agreement. For purposes of this subsection, a
Liquidity Provider shall be a "DOWNGRADED PURCHASER" if and so long as the
credit rating assigned to its short-term obligations by Moody's or Standard &
Poor's on the date on which it became a party to this Agreement shall have been
reduced or withdrawn.
(k) In the event that a Class A Purchaser has requested
payment of additional amounts referred to in subsection 2.4(a), 2.4(b) or 2.5
and payment thereof hereunder shall not be waived by such Class A Purchaser
within 30 days following a request for such waiver from the Transferor, the
Transferor shall have the right to replace such Class A Purchaser hereunder with
a replacement purchaser which shall succeed to the rights of such Class A
Purchaser under this Agreement. Any such replacement purchaser shall be (i)
reasonably acceptable to the Class A Agent and (ii) if such Class A Purchaser is
a Liquidity Provider, acceptable to the related Noncommitted Class A Purchaser
in its sole discretion. Such Class A Purchaser shall assign its Commitment
hereunder and its beneficial interest in the Class A Cer tificates to such
replacement purchaser in accordance with the provisions of Section 8.1,
PROVIDED, that (i) such Class A Purchaser shall not be replaced hereunder with a
replacement purchaser until such Class A Purchaser has been paid in full its
Percentage Interest of the Class A Principal Balance and all accrued and unpaid
interest thereon by such replacement purchaser and all other amounts (including
all amounts owing under Section 2.4 and 2.5) owed to it pursuant to this
Agreement and (ii) if the Class A Purchaser to be replaced is the Class A Agent
or the Facility Agent or, unless the Class A Agent and the Facility Agent
otherwise agree, a Structured Purchaser sponsored or administered by the Class A
Agent or the Facility Agent (in its individual capacity), a replacement Class A
Agent or the Facility Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Class A Agent or the Facility Agent, as the
case may be, to be replaced shall have been paid all amounts owing to it as
Class A Agent or the Facility Agent, as the case may be, pursuant to this
Agreement; PROVIDED, FURTHER, that such Class A Purchaser shall not be replaced
hereunder with a replacement purchaser unless the Transferor shall have provided
to such Class A Purchaser and the Class A Agent with an Officer's Certificate
stating that such replacement purchaser is not subject to, or has agreed not to
seek, the additional amounts which Class A Purchaser requested pursuant to
subsection 2.4(a), 2.4(b) or 2.5, as the case may be.
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<PAGE>
8.2 TAX CHARACTERIZATION. It is the intention of the parties
hereto that the Class A Certificates be treated for tax purposes as
indebtedness.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. This Agreement may not be amended,
supplemented or modified nor may any provision hereof be waived except in
accordance with the provisions of this Section 9.1. With the written consent of
the Required Class A Owners and the Required Class A Purchasers, the Class A
Agent, the Facility Agent, SRPC and SRI may, from time to time, enter into
written amendments, supplements, waivers or modifications hereto for the purpose
of adding any provisions to this Agreement or changing in any manner the rights
of any party hereto or waiving, on such terms and conditions as may be specified
in such instrument, any of the requirements of this Agreement; PROVIDED,
HOWEVER, that no such amendment, supplement, waiver or modification shall (i)
reduce the amount of or extend the maturity of any Class A Certificate or reduce
the rate or extend the time of payment of interest thereon, or reduce or alter
the timing of any other amount payable to any Class A Purchaser hereunder or
under the Supplement, in each case without the consent of the Class A Purchaser
affected thereby, (ii) amend, modify or waive any provision of this Section 9.1,
or, if such amendment would have a material adverse effect on the Class A
Purchasers, the definition of "Class A Invested Amount" or "Class A Principal
Balance", or reduce the percentage specified in the definition of Required Class
A Owners or Required Class A Purchasers, in each case without the written
consent of all Class A Purchasers or (iii) amend, modify or waive any provision
of Section 7 of this Agreement without the written consent of the Class A Agent,
the Facility Agent, the Required Class A Owners and Required Class A Purchasers.
Any waiver of any provision of this Agreement shall be limited to the provisions
specifically set forth therein for the period of time set forth therein and
shall not be construed to be a waiver of any other provision of this Agreement.
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<PAGE>
Each party hereto agrees that, on a one-time basis following the
initial review of the Related Documents by Moody's and Standard & Poor's on
behalf of Class A Purchasers which are Structured Purchasers, it will at the
request of the Class A Agent made prior to June 30,1998 enter into or to consent
to, as applicable, any amendments or other modifications to the Related
Documents, other than those requiring the consent of all Class A Purchasers as
provided above in this subsection, as shall reasonably be determined by the
Class A Agent to be required for any initial Class A Purchaser which is a
Structured Purchaser to obtain or maintain an informal rating of the Class A
Certificates which will permit such Structured Purchaser's commercial paper
notes to maintain at least the rating from Standard & Poor's and Moody's as in
effect immediately prior to such Structured Purchaser's becoming a Class A
Purchaser after giving effect to its initial purchase of the Class A
Certificates and to purchases from time to time by such Structured Purchaser of
Additional Class A Invested Amounts as contemplated by this Agreement, without
giving effect to any increase in any letter of credit or other enhancement
provided to such Structured Purchaser (other than the liquidity support provided
to such Structured Purchaser by Liquidity Providers).
The Facility Agent may cast any vote or give any direction under
the Pooling and Servicing Agreement on behalf of the Class A Certificateholders
if it has been directed to do so by (i) the Required Class A Owners, (ii) the
Required Class A Purchasers, and (iii) by the Class B Purchasers (as defined in
the Class B Certificate Purchase Agreement) required under the terms of Section
9.1 of the Class B Certificate Purchase Agreement.
9.2 NOTICES. (a) All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or, in the case of mail or
telecopy notice, when received, addressed as follows or, with respect to a Class
A Purchaser, as set forth in its respective Joinder Supplement or Transfer
Supplement, or to such other address as may be hereafter notified by the
respective parties hereto:
SRPC: SRI Receivables Purchase Co., Inc.
10201 Main Street
Houston, Texas 77025
Attention: Treasurer
Telephone: (713) 669-2601
Telecopy: (713) 669-2621
SRI Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Treasurer
Telephone: (713) 669-2601
Telecopy: (713) 669-2621
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<PAGE>
The Trustee: Bankers Trust (Delaware)
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Attention: Corporate Trust and Agency Group
Telephone: (302) 636-3300
Telefax: (302) 636-3222
Mailing Address:
P.O. Box 8795
Wilmington, Delaware 19899-8795
The Class A Credit Suisse First Boston, New York Branch
Agent or the Eleven Madison Avenue
Facility New York, New York 10010
Agent: Attention: Asset Finance Department
Telephone: (212) 325-9076
Telefax: (212) 325-6677
Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department, 4th Floor
Telephone: (212) 553-3607
Telefax: (212) 553-4773
Standard Standard & Poor's Ratings Services
& Poor's: 26 Broadway, 15th Floor
New York, New York 10004
Attention: Asset-Backed Surveillance Department
Telephone: (212) 208-1892
Telefax: (212) 412-0323
(b) All payments to be made to the Class A Agent or any Class A
Purchaser hereunder shall be made in United States dollars and in immediately
available funds not later than 2:30 p.m. New York City time on the date payment
is due, and, unless otherwise specifically provided herein, shall be made to the
Class A Agent, for the account of one or more of the Class A Purchasers or for
its own account, as the case may be. Unless otherwise directed by the Class A
Agent, all payments to it shall be made by federal wire (ABA #0260-0917-9) and
telegraph name (CR SUISSE NY), to account number 930539-12, reference SRI
Receivables Master Trust, Series 1997-1, with telephone notice (including
federal wire number) to the Asset Finance Department of Credit Suisse First
Boston (212-325-9076).
(c) Any notices permitted or required hereunder to be given by
SRPC shall be effective if given on behalf of SRPC by the Servicer.
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<PAGE>
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Class A Agent, the Facility Agent or any
Class A Purchaser, any right, remedy, power or privilege under any of the
Related Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege under any of the
Related Documents preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in the Related Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, the Class A
Agent, the Facility Agent, the Class A Purchasers, any Assignee and their
respective successors and assigns, except that SRPC, SRI, the Transferor and the
Servicer may not assign or transfer any of their respective rights or
obligations under this Agreement except as provided herein and in the Pooling
and Servicing Agreement, without the prior written consent of the Required Class
A Owners and the Required Class A Purchasers.
9.5 SUCCESSORS TO SERVICER. (a) In the event that a transfer of
servicing occurs under Article VIII or Article X of the Pooling and Servicing
Agreement, (i) from and after the effective date of such transfer, the Successor
Servicer shall be the successor in all respects to the Servicer and shall be
responsible for the performance of all functions to be performed by the Servicer
from and after such date, except as provided in the Pooling and Servicing
Agreement, and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Successor Servicer, and (ii) as of the date of such transfer, the
Successor Servicer shall be deemed to have made with respect to itself the
representations and warranties made in Section 4.2 (in the case of subsection
4.2(a) with appropriate factual changes); PROVIDED, HOWEVER, that the references
to the Servicer contained in Section 5.1 of this Agreement shall be deemed to
refer to the Servicer with respect to responsibilities, duties and liabilities
arising out of an act or acts, or omission, or an event or events giving rise to
such responsibilities, duties and liabilities and occurring during such time
that the Servicer was Servicer under this Agreement and shall be deemed to refer
to the Successor Servicer with respect to responsibilities, duties and
liabilities arising out of an act or acts, or omission, or an event or events
giving rise to such responsibilities, duties and liabilities and occurring
during such time that the Successor Servicer acts as Servicer under this
Agreement; PROVIDED, HOWEVER, to the extent that an obligation to indemnify the
Class A Purchasers under Section 2.6 arises as a result of any act or failure to
act of any Successor Servicer in the performance of servicing obligations under
the Pooling and Servicing Agreement or the Supplement, such indemnification
obligation shall be of the Successor Servicer and not its predecessor. Upon the
transfer of servicing to a Successor Servicer, such Successor Servicer shall
furnish to the Class A Agent copies of its audited annual financial statements
for each of the three preceding fiscal years or if the Trustee or any other
banking institution becomes the Successor Servicer, such Successor Servicer
shall provide, in lieu of the audited financial statements required in the
immediately preceding clause, complete and correct copies of the publicly
available portions of its Consolidated Reports of Condition and Income as
submitted to the FDIC for the two most recent year end periods.
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<PAGE>
(b) In the event that any Person becomes the successor to
the Transferor pursuant to Article VII of the Pooling and Servicing Agreement,
from and after the effective date of such transfer, such successor to the
Transferor shall be the successor in all respects to the Transferor and shall be
responsible for the performance of all functions to be performed by the
Transferor from and after such date, except as provided in the Pooling and
Servicing Agreement, and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Transferor by the terms and
provisions hereof, and all references in this Agreement to the Transferor shall
be deemed to refer to the successor to the Transferor; PROVIDED, HOWEVER, that
the references to the Transferor contained in Sections 2.5, 2.6 and 5.1 of this
Agreement shall be deemed to refer to SRPC with respect to responsibilities,
duties and liabilities arising out of an act or acts, or omission, or an event
or events giving rise to such responsibilities, duties and liabilities and
occurring during such time that SRPC was Transferor under this Agreement and
shall be deemed to refer to the successor to SRPC as Transferor with respect to
responsibilities, duties and liabilities arising out of an act or acts, or
omission, or an event or events giving rise to such responsibilities, duties and
liabilities and occurring during such time that the successor to SRPC acts as
Transferor under this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.
9.7 SEVERABILITY. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
9.8 INTEGRATION. This Agreement and the Class A Fee Letter
represent the agreement of the Class A Agent, the Facility Agent, SRPC, SRI, the
Transferor, the Servicer and the Class A Purchasers with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Class A Purchasers, the Class A Agent or the Facility Agent
relative to subject matter hereof not expressly set forth or referred to herein
or therein. Without limiting the generality of the foregoing, that certain
letter agreement, dated as of October 27, 1997, between Stage and Credit Suisse
First Boston, New York Branch, is superseded hereby and shall have no further
force or effect.
9.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.10 TERMINATION. This Agreement shall remain in full force and
effect until the earlier to occur of (a) payment in full of the Class A
Repayment Amount and all other amounts payable to the Class A Purchasers, the
Class A Agent and the Facility Agent hereunder and the termination of all
Commitments and (b) the Series Termination Date; PROVIDED, HOWEVER, that if the
Class A Repayment Amount and all other amounts payable to the Class A Purchasers
hereunder are paid in full and all Commitments have terminated prior to the
Series Termination Date, the Class A Agent shall notify the Trustee that
thereafter all amounts otherwise payable to the Class A Purchasers hereunder
shall be payable to the Transferor or any Person designated thereby; and
PROVIDED, FURTHER, that the provisions of Sections 2.4, 2.5, 2.6, 6.1, 6.2, 7.7,
8.2, 9.11, 9.13 and 9.14 shall survive termination of this Agreement and any
amounts payable to the Facility Agent, the Class A Agent, Class A Purchasers or
any Affected Party thereunder shall remain payable thereto.
-43-
<PAGE>
9.11 LIMITED RECOURSE; NO PROCEEDINGS. (a) The obligations of
SRPC, SRI, the Transferor and the Servicer under this Agreement are several
(except as specifically provided herein) and are solely the corporate
obligations of SRPC, SRI, the Transferor or the Servicer, as applicable. No
recourse shall be had for the payment of any fee or other obligation or claim
arising out of or relating to this Agreement or any other agreement, instrument,
document or certificate executed and delivered or issued by SRPC, SRI, the
Transferor and the Servicer or any officer of any of them in connection
therewith, against any stockholder, employee, officer, director or incorporator
of SRPC, SRI, the Transferor or the Servicer. With respect to obligations of the
Transferor, neither the Class A Agent, the Facility Agent nor any Class A
Purchaser shall look to any property or assets of the Transferor, other than to
(a) amounts payable to the Class A Agent, the Facility Agent or a Class A
Purchaser or to the Transferor under the Receivables Purchase Agreement, any
Supplement or the Pooling and Servicing Agreement and (b) any other assets of
the Transferor not pledged to third parties or otherwise encumbered in any
manner permitted by the Transferor's Certificate of Incorporation. Each Class A
Purchaser, the Facility Agent and the Class A Agent hereby agrees that to the
extent such funds are insufficient or unavailable to pay any amounts owing to it
by the Transferor pursuant to this Agreement, prior to the earlier of the Trust
Termination Date or the commencement of a bankruptcy or insolvency proceeding by
or against the Transferor, it shall not constitute a claim against the
Transferor. Nothing in this paragraph shall limit or otherwise affect the
liability of the Servicer with respect to any amounts owing by it hereunder or
the right of the Class A Agent, the Facility Agent or any Class A Purchaser to
enforce such liability against the Servicer or any of its assets.
(b) Each of SRPC, SRI, the Transferor, the Servicer, the
Class A Agent, the Facility Agent and each Class A Purchaser hereby agrees that
it shall not institute or join against any Structured Purchaser any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceeding under any federal or state bankruptcy or similar law, for one year
and a day after the latest maturing commercial paper note, medium term note or
other debt security issued by such Structured Purchaser is paid.
9.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement, the purchase of the Class A
Certificates hereunder and the termination of this Agreement.
9.13 SUBMISSION TO JURISDICTION; WAIVERS. EACH OF SRPC, SRI, THE
TRANSFEROR, THE SERVICER, THE FACILITY AGENT, THE CLASS A AGENT AND EACH CLASS A
PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
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<PAGE>
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY, OR
FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY
THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM
OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH
IN SECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION.
9.14 WAIVERS OF JURY TRIAL. EACH OF SRPC, SRI, THE TRANSFEROR,
THE SERVICER, THE FACILITY AGENT, THE CLASS A AGENT AND THE CLASS A PURCHASERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Certificate Purchase Agreement to be duly executed by their respective officers
as of the day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor
By:/s/ Mark A. Hess
Name: Mark A. Hess
Title: Treasurer
SPECIALTY RETAILERS, INC.,
individually and as Servicer
By:/s/ Mark A. Hess
Name: Mark A. Hess
Title: Treasurer
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Class A Agent and as Facility Agent
By:/s/ Dave E. Shrenzel
Name: Dave E. Shrenzel
Title: Director
By:/s/ Alberto Zonca
Name: Alberto Zonca
Title: Associate
-46-
EXHIBIT 4.9
EXECUTION COPY
- --------------------------------------------------------------------------------
CLASS B CERTIFICATE PURCHASE AGREEMENT
Dated as of December 3, 1997
among
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor,
SPECIALTY RETAILERS, INC.,
individually and as Originator and Servicer,
THE CLASS B PURCHASERS PARTIES HERETO,
and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
Class B Agent and Facility Agent
--------------------
Relating to
SRI Receivables Master Trust
Series 1997-1
--------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.................................................1
1.1 Definitions................................................1
1.2 Other Definitional Provisions..............................8
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.............................8
2.1 Purchases..................................................8
2.2 Reductions, Increases and Extensions
of Commitments...........................................10
2.3 Fees, Expenses, Payments, Etc.............................12
2.4 Requirements of Law.......................................13
2.5 Taxes.....................................................15
2.6 Indemnification...........................................17
SECTION 3. CONDITIONS PRECEDENT.......................................19
3.1 Condition to Initial Purchase.............................19
3.2 Condition to Additional Purchase..........................21
SECTION 4. REPRESENTATIONS AND WARRANTIES.............................22
4.1 Representations and Warranties of SRPC....................22
4.2 Representations and Warranties of SRI.....................24
4.3 Representations and Warranties of the Class B Agent,
the Facility Agent and the Class B Purchasers............26
SECTION 5. COVENANTS..................................................27
5.1 Covenants of SRPC.........................................27
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY..............30
6.1 Covenants of SRPC, Etc....................................30
6.2 Covenants of Class B Purchasers...........................30
SECTION 7. THE AGENTS.................................................31
7.1 Appointment...............................................31
7.2 Delegation of Duties......................................31
7.3 Exculpatory Provisions....................................31
7.4 Reliance by Agent.........................................32
7.5 Notices...................................................32
7.6 Non-Reliance on Agent and Other Class B Purchasers........32
7.7 Indemnification...........................................33
7.8 Agents in Their Individual Capacities.....................33
7.9 Successor Agent...........................................34
(i)
<PAGE>
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT...............35
8.1 Transfers of Class B Certificates.......................35
8.2 Tax Characterization....................................39
SECTION 9. MISCELLANEOUS..............................................39
9.1 Amendments and Waivers..................................39
9.2 Notices.................................................40
9.3 No Waiver; Cumulative Remedies..........................42
9.4 Successors and Assigns..................................42
9.5 Successors to Servicer..................................42
9.6 Counterparts............................................43
9.7 Severability............................................43
9.8 Integration.............................................43
9.9 Governing Law...........................................43
9.10 Termination..............................................43
9.11 Limited Recourse; No Proceedings.........................44
9.12 Survival of Representations and Warranties...............44
9.13 Submission to Jurisdiction; Waivers......................44
9.14 WAIVERS OF JURY TRIAL....................................45
LIST OF EXHIBITS
EXHIBIT A Form of Investment Letter
EXHIBIT B Form of Joinder Supplement
EXHIBIT C Form of Transfer Supplement
(ii)
<PAGE>
CLASS B CERTIFICATE PURCHASE AGREEMENT, dated as of December 3,
1997, by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation
("SRPC"), individually and as Transferor (as defined in the Master Pooling and
Servicing Agreement referred to below), SPECIALTY RETAILERS, INC., a Texas
corporation ("SRI"), individually and as Servicer (as defined in the Master
Pooling and Servicing Agreement referred to below), the CLASS B PURCHASERS from
time to time parties hereto (collectively, the "CLASS B PURCHASERS") and CREDIT
SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York
Branch, as agent for the Class B Purchasers (together with its successors in
such capacity, the "CLASS B AGENT") and as facility agent for the Class B
Purchasers and the Class A Purchasers, as defined below (together with its
successors in such capacity, the "FACILITY AGENT").
W I T N E S S E T H:
WHEREAS, SRPC, as Transferor, SRI, as Servicer, and Bankers Trust
(Delaware), a Delaware banking corporation, as trustee (together with its
successors in such capacity, the "TRUSTEE"), are parties to a certain Amended
and Restated Pooling and Servicing Agreement dated as of August 11, 1995,
amended as of May 30, 1996 (as the same may from time to time be further amended
or otherwise modified, the "MASTER POOLING AND SERVICING AGREEMENT"), pursuant
to which the Transferor has created the SRI Receivables Master Trust (the
"TRUST"), and to a Series 1997-1 Supplement thereto, dated as of December 3,
1997 (as the same may from time to time be amended or otherwise modified, the
"SUPPLEMENT" and, together with the Master Pooling and Servicing Agreement, the
"POOLING AND SERVICING AGREEMENT");
WHEREAS, the Trust proposes to issue its Class A-1 Variable
Funding Certificates, Series 1997-1 (the "CLASS A CERTIFICATES") and its Class
B-1 Variable Funding Certificates, Series 1997-1 (the "CLASS B CERTIFICATES"
and, together with the Class A Certificates, the "SENIOR CERTIFICATES") pursuant
to the Pooling and Servicing Agreement;
WHEREAS, the Trust also proposes to issue its Class C-1 Variable
Funding Certificates, Series 1997-1 (the "CLASS C CERTIFICATES" and, together
with the Senior Certificates, the "SERIES 1997-1 CERTIFICATES") pursuant to the
Pooling and Servicing Agreement; and
WHEREAS, the Class B Purchasers are willing to purchase the Class
B Certificates on the Closing Date and from time to time thereafter to purchase
Additional Class B Invested Amounts (as defined in the Supplement) thereunder on
the terms and conditions provided for herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby expressly acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS. All capitalized terms used herein as defined
terms and not defined herein shall have the meanings given to them in the
Pooling and Servicing Agreement. Each capitalized term defined herein shall
relate only to the Series 1997-1 and to no other Series of Investor Certificates
issued by the Trust.
-1-
<PAGE>
"AFFECTED PARTY" shall mean, with respect to any Structured
Purchaser, any Support Party of such Structured Purchaser.
"AGREEMENT" shall mean this Class B Certificate Purchase
Agreement, as amended, supplemented or otherwise modified from time to time.
"ASSIGNEE" and "ASSIGNMENT" have the respective meanings
specified in subsection 8.1(e) of this Agreement.
"AVAILABLE COMMITMENT" shall mean, on any day for a Committed
Class B Purchaser, such Class B Purchaser's Commitment in effect on such day
MINUS the sum of (i) such Class B Purchaser's Percentage Interest of the Class B
Principal Balance on such day PLUS (ii) if such Class B Purchaser is a Liquidity
Provider for a Noncommitted Class B Purchaser, such Class B Purchaser's
Liquidity Percentage, MULTIPLIED BY such Noncommitted Class B Purchaser's
Percentage Interest of the Class B Principal Balance on such day.
"CLASS A CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLASS A PURCHASE AGREEMENT" shall mean the Class A Certificate
Purchase Agreement, dated as of the date hereof, among SRPC, individually and as
Transferor, SRI, individually and as Servicer, the Class A Purchasers parties
thereto, the Class A Agent referred to therein and the Facility Agent, as
amended, modified or otherwise supplemented from time to time.
"CLASS A PURCHASERS" has the meaning specified in the Class A
Purchase Agreement.
"CLASS B AGENT" has the meaning specified in the preamble to this
Agreement.
"CLASS B CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLASS B FACILITY FEE" shall mean the ongoing facility fees
payable to the Class B Agent or the Class B Purchasers in the amounts and on the
dates set forth in the Class B Fee Letter.
"CLASS B FEE LETTER" shall mean that certain letter agreement,
designated therein as the Series 1997-1 Class B Fee Letter and dated as of the
date hereof, among the Class B Agent, SRPC and SRI, as such letter agreement may
be amended or otherwise modified from time to time.
"CLASS B OWNERS" shall mean the Class B Purchasers that are
owners of record of the Class B Certificates or, with respect to any Class B
Certificate held by the Class B Agent hereunder as nominee on behalf of Class B
Purchasers, the Class B Purchasers that are owners of the Class B Invested
Amount represented by such Class B Certificate as reflected on the books of the
Class B Agent in accordance with this Agreement.
"CLASS B PURCHASE LIMIT" shall mean for any date the aggregate
Commitments of the Class B Purchasers on such date.
"CLASS B PURCHASER" has the meaning specified in the preamble to
this Agreement.
-2-
<PAGE>
"CLASS B REPAYMENT AMOUNT" shall mean the sum of all amounts
payable with respect to (i) the Class B Invested Amount, (ii) Class B Interest
and (iii) all amounts payable pursuant to Section 2.4 or 2.5 hereof.
"CLASS C CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLOSING DATE" shall mean December 3, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITMENT" shall mean, for any Committed Class B Purchaser, the
maximum amount of such Committed Class B Purchaser's commitment to purchase a
portion of the Class B Invested Amount, as set forth in the Joinder Supplement
or the Transfer Supplement by which such Committed Class B Purchaser became a
party to this Agreement or assumed the Commitment (or a portion thereof) of
another Committed Class B Purchaser, as such amount may be adjusted from time to
time pursuant to Transfer Supplement(s) executed by such Committed Class B
Purchaser and its Assignee(s) and delivered pursuant to Section 8.1 of this
Agreement or pursuant to Section 2.2 of this Agreement. In the event that a
Committed Class B Purchaser maintains a portion of its Commitment hereunder in
its capacity as a Liquidity Provider for one or more Noncommitted Class B
Purchasers, such Committed Class B Purchaser shall be deemed to hold separate
Commitments hereunder (i) in each such capacity and (ii) if applicable, to the
extent its Commitment does not relate to any Noncommitted Class B Purchaser.
"COMMITMENT EXPIRATION DATE" shall mean, for a Committed Class B
Purchaser, the date set forth as the Commitment Expiration Date in the Joinder
Supplement or the Transfer Supplement by which such Committed Class B Purchaser
became a party to this Agreement or assumed the Commitment (or a portion
thereof) of another Committed Class B Purchaser, as such date may be extended
from time to time in accordance with subsection 2.2(e) hereof.
"COMMITMENT PERCENTAGE" shall mean, for a Committed Class B
Purchaser, such Class B Purchaser's Commitment as a percentage of the aggregate
Commitments of all Committed Class B Purchasers.
"COMMITTED CLASS B PURCHASER" shall mean any Class B Purchaser
which has a Commitment, as set forth in its respective Joinder Supplement, and
any Assignee of such Class B Purchaser to the extent of the portion of such
Commitment assumed by such Assignee pursuant to its respective Transfer
Supplement.
"COMMITTED PURCHASER PERCENTAGE" shall mean, with respect to a
Committed Class B Purchaser, its Commitment (exclusive of any portion thereof
held by it in its capacity as a Liquidity Provider), as a percentage of the
aggregate Commitments of all Committed Class B Purchasers.
"DISSENTING PURCHASER" has the meaning specified in subsection
2.2(e) of this Agreement.
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"DOWNGRADED PURCHASER" has the meaning specified in subsection
8.1(j) of this Agreement.
"EXCLUDED TAXES" has the meaning specified in subsection 2.5(a)
of this Agreement.
"EXTENSION NOTICE DEADLINE" has the meaning specified in
subsection 2.2(e) of this Agreement.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"INDEMNITEE" has the meaning specified in subsection 2.6(a) of
this Agreement.
"INDEMNITOR" has the meaning specified in subsection 2.6(a) of
this Agreement.
"INVESTING OFFICE" shall mean initially, the office of any Class
B Purchaser (if any) designated as such, in the case of any initial Class B
Purchaser, in its Joinder Supplement and, in the case of any Assignee, in the
related Transfer Supplement, and thereafter, such other office of such Class B
Purchaser or such Assignee as may be designated in writing to the Class B Agent,
the Transferor, the Servicer and the Trustee by such Class B Purchaser or
Assignee.
"INVESTMENT LETTER" has the meaning specified in subsection
8.1(a) of this Agreement.
"JOINDER SUPPLEMENT" has the meaning specified in subsection
2.2(d) of this Agreement.
"LIQUIDITY PERCENTAGE" shall mean, for a Committed Class B
Purchaser which is a Liquidity Provider for a Noncommitted Class B Purchaser,
such Class B Purchaser's Commitment held in such capacity as a percentage of the
aggregate Commitments of all Liquidity Providers (held in their capacities as
such) for such Noncommitted Class B Purchaser.
"LIQUIDITY PROVIDER" shall mean, with respect to a Noncommitted
Class B Purchaser, each Committed Class B Purchaser identified as a Liquidity
Provider for such Noncommitted Class B Purchaser in the Joinder Supplement or
Transfer Supplement pursuant to which such Noncommitted Class B Purchaser became
a party hereto, and any Assignee of such Committed Class B Purchaser to the
extent such Assignee has assumed, pursuant to a Transfer Supplement, the
Commitment of such Committed Class B Purchaser held in its capacity as a
Liquidity Provider. In the event that a Liquidity Provider acquires a portion of
the Class B Principal Balance from its Noncommitted Class B Purchaser by
Assignment, a corresponding portion of its Commitment shall thereupon cease to
be held by it in its capacity as a Liquidity Provider for such Noncommitted
Class B Purchaser (but shall otherwise remain in effect, subject to the terms
and conditions of this Agreement, as a portion of the Commitment of such
Committed Class B Purchaser).
"MASTER POOLING AND SERVICING AGREEMENT" has the meaning
specified in the recitals to this Agreement.
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"NONCOMMITTED CLASS B PURCHASER" shall mean a Class B Purchaser
which is not a Committed Class B Purchaser or a Nonextending Class B Purchaser.
"NONCOMMITTED PURCHASER PERCENTAGE" shall mean for each
Noncommitted Class B Purchaser, the aggregate Commitments of its Liquidity
Providers from time to time as a percentage of the aggregate Commitments of all
Committed Class B Purchasers.
"NONEXTENDING CLASS B PURCHASER" shall mean, after its respective
Commitment Expiration Date, each Committed Class B Purchaser which has declined
to extend such Commitment Expiration Date in accordance with subsection 2.2(e)
hereof.
"PARTICIPANT" has the meaning specified in subsection 8.1(d) of
this Agreement.
"PARTICIPATION" has the meaning specified in subsection 8.1(d) of
the Agreement.
"PERCENTAGE INTEREST" shall mean, for a Class B Purchaser on any
day, the percentage equivalent of (a) the sum of (i) the portion of the Class B
Initial Invested Amount (if any) purchased by such Class B Purchaser, PLUS (ii)
the aggregate Additional Class B Invested Amounts (if any) purchased by such
Class B Purchaser prior to such day pursuant to Section 6.15 of the Pooling and
Servicing Agreement, PLUS (iii) any portion of the Class B Principal Balance
acquired by such Class B Purchaser as an Assignee from another Class B Purchaser
pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1
of this Agreement, MINUS (iv) the aggregate amount of principal payments made to
such Class B Purchaser prior to such day, MINUS (v) any portion of the Class B
Principal Balance assigned by such Class B Purchaser to an Assignee pursuant to
a Transfer Supplement executed and delivered pursuant to Section 8.1 of this
Agreement, DIVIDED BY (b) the aggregate Class B Principal Balance on such day.
"POOLING AND SERVICING AGREEMENT" has the meaning specified in
the recitals to this Agreement.
"PURCHASE DATE" shall mean the Closing Date and each Business Day
on which the purchase of an Additional Class B Invested Amount is to occur in
accordance with Section 6.15 of the Pooling and Servicing Agreement and Section
2.1 hereof.
"REDUCTION AMOUNT" has the meaning specified in subsection 2.6(a)
of this Agreement.
"REGULATORY CHANGE" shall mean, as to each Class B Purchaser, any
change occurring after the date of the execution and delivery of the Joinder
Supplement or the Transfer Supplement by which it became party to this
Agreement; in the case of a Participant, any change occurring after the date on
which its Participation became effective, or in the case of an Affected Party,
any change occurring after the date it became such an Affected Party, in any (or
the adoption after such date of any new):
(i) United States Federal or state law or foreign law applicable
to such Class B Purchaser, Affected Party or Participant; or
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(ii) regulation, interpretation, directive, guideline or request
(whether or not having the force of law) applicable to such Class B
Purchaser, Affected Party or Participant of any court or other judicial
authority or any Governmental Authority charged with the interpretation
or administration of any law referred to in clause (i) or of any fiscal,
monetary or other Governmental Authority or central bank having
jurisdiction over such Class B Purchaser, Affected Party or Participant.
"RELATED DOCUMENTS" shall mean, collectively, this Agreement
(including the Class B Fee Letter and all Joinder Supplements and Transfer
Supplements), the Class A Purchase Agreement (including each fee letter, joinder
supplement and transfer supplement thereunder), the Master Pooling and Servicing
Agreement, the Supplement, the Series 1997-1 Certificates and the Receivables
Purchase Agreement.
"REQUIRED CLASS B OWNERS" shall mean, at any time, Class B Owners
having Percentage Interests aggregating greater than 66-2/3%.
"REQUIRED CLASS B PURCHASERS" shall mean, at any time, Committed
Class B Purchasers having Commitments aggregating greater than 66-2/3% of the
aggregate Commitments of all Committed Class B Purchasers.
"REQUIREMENT OF LAW" shall mean, as to any Person, any law,
treaty, rule or regulation, or determination of an arbitrator or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether federal, state or local (including usury laws,
the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board
of Governors of the Federal Reserve System).
"RISK RATE" shall mean, for any day, a rate per annum equal to
the sum of (i) the CSFB Corporate Base Rate in effect for such day, plus (ii)
2.00%.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SENIOR CERTIFICATES" has the meaning specified in the recitals
to this Agreement
"SERIES 1997-1 CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"SRI" has the meaning specified in the preamble to this Agreement
and, as used herein (except to the extent that the context otherwise requires),
shall mean SRI in its individual capacity (including its capacity as
Originator).
"STAGE" shall mean Stage Stores, Inc., a Delaware corporation
which is the parent of SRI.
"STRUCTURED PURCHASER" shall mean any Class B Purchaser which is
a special purpose corporation, the principal business of which consists of
issuing commercial paper, medium term notes or other securities to fund its
acquisition and maintenance of receivables, accounts, instruments, chattel
paper, general intangibles and other similar assets or interests therein, and
which is identified as a Structured Purchaser in the Joinder Agreement or
Transfer Supplement by which such Committed Class B Purchaser became a party to
this Agreement.
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"SUPPLEMENT" has the meaning specified in the recitals to this
Agreement.
"SUPPORT FACILITY" shall mean any liquidity or credit support
agreement with a Structured Purchaser which relates to this Agreement (including
any agreement to purchase an assignment of or participation in Class B
Certificates).
"SUPPORT PARTY" shall mean any bank or other financial
institution extending or having a commitment to extend funds to or for the
account of a Structured Purchaser (including by agreement to purchase an
assignment of or participation in Class B Certificates) under a Support
Facility. Each Liquidity Provider for a Noncommitted Class B Purchaser which is
a Structured Purchaser shall be deemed to be a Support Party for such Structured
Purchaser.
"TAXES" has the meaning specified in subsection 2.5(a) of this
Agreement.
"TERMINATION DATE" shall mean, (a) with respect to a Committed
Class B Purchaser, the first to occur of (i) the Commitment Expiration Date of
such Committed Class B Purchaser, or (ii) the Amortization Period Commencement
Date, and (b) with respect to a Noncommitted Class B Purchaser, the first to
occur of (i) the latest Commitment Expiration Date of its Liquidity Providers,
or (ii) the Amortization Period Commencement Date.
"TERMINATION EVENT" shall mean the occurrence of a Trust Pay Out
Event, a Series 1997-1 Pay Out Event or a Servicer Default, or the occurrence of
an event or condition which would be a Trust Pay Out Event, a Series 1997-1 Pay
Out Event or a Servicer Default but for a waiver of or failure to declare or
determine such event by the Certificateholders or the Trustee.
"TRANSFER" has the meaning specified in subsection 8.1(c) of this
Agreement.
"TRANSFEREE" has the meaning specified in subsection 8.1(c) of
this Agreement.
"TRANSFER SUPPLEMENT" has the meaning specified in subsection
8.1(e) of this Agreement.
"TRUST" has the meaning specified in the recitals to this
Agreement.
"TRUSTEE" has the meaning specified in the recitals to this
Agreement.
"UTILIZATION FEE" shall mean the ongoing utilization fees, if
any, payable to the Class B Agent or the Class B Purchasers in the amounts and
on the dates set forth in the Class B Fee Letter.
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"WRITTEN" or "IN WRITING" (and other variations thereof) shall
mean any form of written communication or a communication by means of telex,
telecopier device, telegraph or cable.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto.
(b) The words "hereof", "herein", and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and Section,
subsection and Exhibit references are to this Agreement, unless otherwise
specified. The words "including" and "include" shall be deemed to be followed by
the words "without limitation".
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 PURCHASES. (a) On and subject to the terms and conditions of
this Agreement, (i) each Noncommitted Class B Purchaser which is a party hereto
on the Closing Date may purchase its Noncommitted Purchaser Percentage of the
Class B Certificates on the Closing Date for a purchase price equal to its
Noncommitted Purchaser Percentage of the Class B Initial Invested Amount, (ii)
each Liquidity Provider which is a party hereto on the Closing Date, severally,
agrees to acquire its respective Liquidity Percentage of the Class B
Certificates not so acquired by its related Noncommitted Class B Purchaser on
the Closing Date, and (iii) each Committed Class B Purchaser which is a party
hereto on the Closing Date, severally, agrees to purchase its Committed
Purchaser Percentage of the Class B Certificates, in each case for a purchase
price equal to the portion of the Class B Initial Invested Amount represented
thereby on the Closing Date. Such purchase price shall be made available to the
Transferor, subject to the satisfaction of the conditions specified in Section
3.1 hereof, at or prior to 11:00 a.m. New York City time on the Closing Date, by
deposit of immediately available funds to an account of the Transferor specified
in writing by the Transferor to the Class B Agent. The Class B Purchasers hereby
direct that the Class B Certificates be registered in the name of the Class B
Agent, as nominee on behalf of the Class B Purchasers from time to time
hereunder.
(b) On and subject to the terms and conditions of this Agreement
and prior to its respective Termination Date, (i) each Noncommitted Class B
Purchaser may purchase its Noncommitted Purchaser Percentage of any Additional
Class B Invested Amount offered for purchase pursuant to Section 6.15 of the
Pooling and Servicing Agreement, (ii) each Liquidity Provider, severally, agrees
to acquire its respective Liquidity Percentage of the Class B Certificates not
so acquired by its related Noncommitted Class B Purchaser, and (iii) each
Committed Class B Purchaser, severally, agrees to purchase its Committed
Purchaser Percentage of the Additional Class B Invested Amount so offered for
purchase, in each case for a purchase price equal to the Additional Class B
Invested Amount so purchased; PROVIDED that in no event shall a Committed Class
B Purchaser be required on any date to purchase an Additional Class B Invested
Amount exceeding its aggregate Available Commitment, determined prior to giving
effect to such purchase. Such purchase price shall be made available to the
Transferor, subject to the satisfaction of the conditions specified in Section
3.2 hereof, at or prior to 11:00 a.m. New York City time on the applicable
Purchase Date by deposit of immediately available funds to an account or
accounts specified in writing by the Transferor to the Class B Agent.
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(c) The purchase of the Class B Initial Invested Amount shall be
made on prior notice from the Transferor to the Class B Agent received by the
Class B Agent not later than 9:00 a.m. New York City time on the Closing Date,
and each purchase of any Additional Class B Invested Amount on the applicable
Purchase Date shall be made on prior notice from the Transferor received by the
Class B Agent not later than 2:00 p.m. New York City time on the Business Day
immediately preceding such Purchase Date. Each such notice shall be irrevocable
and shall specify (i) the aggregate Class B Initial Invested Amount or
Additional Class B Invested Amount to be purchased, (ii) the applicable Purchase
Date (which shall be a Business Day), and (iii) instructions as to the deposit
of the proceeds of the purchase. The Class B Agent shall promptly forward a copy
of such notice to each Class B Purchaser. Each Noncommitted Class B Purchaser
shall notify the Class B Agent by 9:30 a.m., New York City time, on the
applicable Purchase Date whether it has determined to make the purchase offered
to it pursuant to subsection 2.1(a) or 2.1(b), as applicable. In the event that
a Noncommitted Class B Purchaser shall not have timely provided such notice such
Noncommitted Class B Purchaser shall be deemed to have determined not to make
such purchase. The Class B Agent shall notify the Transferor, the Servicer and
each Liquidity Provider for such Noncommitted Class B Purchaser on or prior to
10:00 a.m., New York City time, on the applicable Purchase Date of whether such
Noncommitted Class B Purchaser has so determined to purchase its share of the
Class B Initial Invested Amount or the Additional Class B Invested Amount, as
the case may be, and, in the event that Noncommitted Class B Purchasers have not
determined to purchase its entire share of the Class B Initial Invested Amount
or Additional Class B Invested Amount, as the case may be, the Class B Agent
shall specify in such notice (i) the portion of the Class B Initial Invested
Amount or the Additional Class B Invested Amount, as the case may be, to be
purchased by each Liquidity Provider, (ii) the applicable Purchase Date (which
shall be a Business Day), and (iii) instructions as to the deposit of the
proceeds of the purchase. The Class B Agent shall notify the Transferor, the
Servicer, the Trustee and each Class B Purchaser on the Closing Date (in the
case of the purchase of the Class B Initial Invested Amount) or not later than
the Business Day following the applicable Purchase Date (in the case of any
purchases of Additional Class B Invested Amounts) of the identity of each Class
B Purchaser which purchased any portion of the Class B Initial Invested Amount
or any Additional Class B Invested Amount on such day, whether such Class B
Purchaser was a Noncommitted Class B Purchaser or a Committed Class B Purchaser
and the portion of the Class B Initial Invested Amount or Additional Class B
Invested Amount purchased by such Class B Purchaser.
(d) In no event may any Additional Class B Invested Amount be
offered for purchase hereunder or under Section 6.15 of the Pooling and
Servicing Agreement, nor shall any Committed Class B Purchaser be obligated to
purchase any Additional Class B Invested Amount, to the extent that such
Additional Class B Invested Amount would exceed the aggregate Available
Commitments.
(e) The Class B Certificates shall be paid as provided in the
Pooling and Servicing Agreement, and the Class B Agent shall allocate to the
Class B Owners each payment in respect of the Class B Certificates received by
the Class B Agent in its capacity as Class B Certificateholder as provided
therein. Except as otherwise provided in the Pooling and Servicing Agreement,
payments in reduction of the Class B Principal Balance shall be applied (i)
prior to the Amortization Period Commencement Date, first to Class B Owners
which are Committed Class B Purchasers, pro rata based on their respective
Percentage Interests of the Class B Principal Balance, and the remainder, if
any, to Class B Owners which are Noncommitted Class B Purchasers, pro rata based
on their respective Percentage Interests of the Class B Principal Balance, and
(ii) from and after the Amortization Period Commencement Date, to Class B Owners
pro rata based on their respective Percentage Interests of the Class B Principal
Balance, or in any such case in such other proportions as each affected Class B
Purchsaer may agree upon in writing from time to time with the Facility Agent,
the Class B Agent, SRPC and SRI.
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2.2 REDUCTIONS, INCREASES AND EXTENSIONS OF COMMITMENTS. (a) At
any time the Transferor may, upon at least 10 Business Days' prior written
notice to the Class B Agent, reduce the aggregate Commitments. Each such partial
reduction shall be in an aggregate amount of $5,000,000 or integral multiples
thereof (or such other amount requested by the Transferor to which the Class B
Agent consents). Reductions of the aggregate Commitments pursuant to this
subsection 2.2(a) shall be allocated (i) to the Commitment of each Committed
Class B Purchaser, other than a Commitment held as a Liquidity Provider, PRO
RATA based on the Commitment Percentage represented by such Commitment, and (ii)
to the aggregate Commitments of Liquidity Providers for each Noncommitted Class
B Purchaser PRO RATA based on the Noncommitted Purchaser Percentage of such
Noncommitted Class B Purchaser, and the portion of such reduction which is so
allocated to the aggregate Commitments of Liquidity Providers for a Noncommitted
Class B Purchaser shall be allocated to the Commitment of each such Liquidity
Provider PRO RATA based on its respective Liquidity Percentage.
(b) On the Termination Date for a Committed Class B Purchaser,
the Commitment of such Committed Class B Purchaser shall be automatically
reduced to zero.
(c) The aggregate Commitments of the Committed Class B Purchasers
may be increased from time to time through the increase of the Commitment of one
or more Committed Class B Purchasers; PROVIDED, HOWEVER, that no such increase
shall have become effective unless (i) the Class B Agent and the Transferor
shall have given their written consent thereto, (ii) such increasing Committed
Class B Purchaser shall have entered into an appropriate amendment or supplement
to this Agreement (or its Joinder Supplement or Transfer Supplement) reflecting
such increased Commitment and (iii) such conditions, if any, as the Class B
Agent shall have required in connection with its consent (including the delivery
of legal opinions with respect to such Committed Class B Purchaser, the
agreement of such Committed Class B Purchaser to become a Liquidity Provider for
one or more Structured Purchasers hereunder and approvals from the Rating
Agency) shall have been satisfied. The Transferor may also increase the
aggregate Commitments of the Committed Class B Purchasers from time to time by
adding additional Committed Class B Purchasers in accordance with subsection
2.2(d).
(d) Subject to the provisions of subsections 8.1(a) and 8.1(b)
applicable to initial purchasers of Class B Certificates, any Person may from
time to time with the consent of the Class B Agent and the Transferor become a
party to this Agreement as an initial or an additional Noncommitted Class B
Purchaser or an initial or an additional Committed Class B Purchaser by (i)
delivering to the Transferor an Investment Letter and (ii) entering into an
agreement substantially in the form attached hereto as EXHIBIT B hereto (a
"JOINDER SUPPLEMENT"), with the Class B Agent and the Transferor, acknowledged
by the Servicer, which shall specify (A) the name and address of such Person for
purposes of Section 9.2 hereof, (B) whether such Person will be a Noncommitted
Class B Purchaser or Committed Class B Purchaser and, if such Person will be a
Committed Class B Purchaser, its Commitment and Commitment Expiration Date, (C)
if such Person is a Noncommitted Class B Purchaser, the identity of its
Liquidity Providers and their respective Liquidity Percentages, (D) if such
Person is a Liquidity Provider, the Noncommitted Class B Purchaser for which it
is acting as such and the portion of such Person's Commitment which is held by
it in its capacity as Liquidity Provider, and (E) the other information provided
for in such form of Joinder Supplement. Upon its receipt of a duly executed
Joinder Supplement, the Class B Agent shall on the effective date determined
pursuant thereto give notice of such effectiveness to the Transferor, the
Servicer and the Trustee, and the Servicer will provide notice thereof to each
Rating Agency (if required). If, at the time the effectiveness of the Joinder
Supplement for an additional Committed Class B Purchaser (other than solely as a
Liquidity Provider), the other Class B Purchasers are Class B Owners, it shall
be a condition to such effectiveness that such additional Committed Class B
Purchaser purchase from each other Class B Purchaser an interest in the Class B
Certificates in an amount equal to (i) such other Class B Purchaser's Percentage
Interest of the Class B Principal Balance, times (ii) a fraction, the numerator
of which equals the Commitment of such additional Class B Purchaser (excluding
any portion thereof held by such Committed Class B Purchaser as a Liquidity
Provider), and the denominator of which equals the aggregate Commitments of the
Class B Purchasers (determined after giving effect to the additional Commitment
of the additional Class B Purchaser as set forth in such Joinder Supplement),
for a purchase price equal to the portion of the Class B Principal Balance
purchased.
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(e) So long as no Termination Event has occurred and is
continuing, no more than 120 and no less than 90 days prior to the applicable
Commitment Expiration Date, the Transferor may request, through the Class B
Agent, that each Committed Class B Purchaser extend its Commitment Expiration
Date to the date which is 364 days after the Commitment Expiration Date then in
effect, which decision will be made by each Committed Class B Purchaser in its
sole discretion. Upon receipt of any such request, the Class B Agent shall
promptly notify each Committed Class B Purchaser thereof. At least 60 but not
more than 75 days prior to the applicable Commitment Expiration Date, each
Committed Class B Purchaser shall notify the Class B Agent of its willingness or
refusal to so extend its Commitment Expiration Date, and the Class B Agent shall
notify the Transferor of such willingness or refusal by the Committed Class B
Purchasers on such 60th day (such day, the "EXTENSION NOTICE DEADLINE"). Any
Committed Class B Purchaser which notifies the Class B Agent of its refusal to
extend or which does not expressly notify the Class B Agent that it is willing
to extend its Commitment Expiration Date by the applicable Extension Notice
Deadline shall be deemed to be (x) a Nonextending Class B Purchaser after its
Commitment Expiration Date and (y) a "DISSENTING PURCHASER" from the date of its
refusal notice or such 60th day (as applicable) through its Commitment
Expiration Date. The approval of the Class B Agent shall be required to extend
the Commitment Expiration Date of each of the consenting Committed Class B
Purchasers, such extension to be effective as of the applicable Commitment
Expiration Date so long as a Termination Event shall not have occurred on or
prior to such date.
(f) Promptly after the Extension Notice Deadline, the Class B
Agent shall promptly notify each other Class B Purchaser, the Transferor and the
Servicer of the identity of any Dissenting Purchaser and the amount of its
Commitment. Either the Class B Agent or the Transferor, with the consent of the
Class B Agent and, if the Dissenting Purchaser is a Liquidity Provider, each
affected Structured Purchaser, may (but neither shall be required to) request
one or more other Class B Purchasers, or seek another financial institution
acceptable to the Class B Agent in its reasonable discretion, and, if the
Dissenting Purchaser is a Liquidity Provider, each affected Structured Purchaser
in its sole discretion, to acquire all or a portion of the Commitment of the
Dissenting Purchaser and all amounts payable to it hereunder and under the
Pooling and Servicing Agreement in accordance with Section 8.1. Each Dissenting
Purchaser hereby agrees to assign all or a portion of its Commitment and the
amounts payable to it hereunder and under the Pooling and Servicing Agreement to
a replacement investor identified by the Class B Agent in accordance with the
preceding sentence, subject to ratable payment such Dissenting Purchaser's
Percentage Interest of the Class B Principal Balance, together with all accrued
and unpaid interest thereon, and a ratable portion of all fees and other amounts
due to it hereunder.
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2.3 FEES, EXPENSES, PAYMENTS, ETC. (a) SRPC agrees to pay to the
Class B Agent for the account of the Class B Purchasers the Class B Facility
Fee, the Utilization Fee and other amounts set forth in the Class B Fee Letter
at the times specified therein.
(b) SRPC further agrees to pay within 30 days following receipt
of an invoice therefor to the Class B Agent, the Facility Agent and the initial
Class B Purchasers all reasonable costs and expenses in connection with the
preparation, execution, delivery, initial syndication, administration (including
any requested amendments, waivers or consents of any of the Related Documents)
of this Agreement and each related Support Facility, and the other documents to
be delivered hereunder or in connection herewith, including the reasonable fees
and out-of-pocket expenses of counsel for the Class B Agent, the Facility Agent
and each of the initial Class B Purchasers with respect thereto.
(c) SRI agrees to pay to the Class B Agent, the Facility Agent
and each Class B Purchaser, promptly following presentation of an invoice
therefor, all reasonable costs and expenses (including reasonable fees and
expenses of counsel), if any, in connection with the enforcement of any of the
Related Documents, and the other documents delivered thereunder or in connection
therewith.
(d) SRI further agrees to pay on demand any and all stamp,
transfer and other taxes (other than Taxes covered by Section 2.5) and
governmental fees payable in connection with the execution, delivery, filing and
recording of any of the Related Documents and each related Support Facility or
the other documents and agreements to be delivered hereunder and thereunder or
otherwise in connection with the issuance of Series 1997-1, and agrees to save
each Class B Purchaser and the Class B Agent and the Facility Agent harmless
from and against any liabilities with respect to or resulting from any delay in
paying or any omission to pay such taxes and fees.
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(e) Periodic fees or other periodic amounts payable hereunder
shall be calculated, unless otherwise specified in the Class B Fee Letter, on
the basis of a 360-day year and for the actual days elapsed.
(f) All payments to be made hereunder or under the Supplement,
whether on account of principal, interest, fees or otherwise, shall be made
without setoff or counterclaim and shall be made prior to 2:30 p.m., New York
City time, on the due date thereof to the Class B Agent's account specified in
subsection 9.2(b) hereof, in United States dollars and in immediately available
funds. Payments received by the Class B Agent after 2:30 p.m. New York City time
shall be deemed to have been made on the next Business Day. Notwithstanding
anything herein to the contrary, if any payment due hereunder becomes due and
payable on a day other than a Business Day, the payment date thereof shall be
extended to the next succeeding Business Day and interest shall accrue thereon
at the applicable rate during such extension. To the extent that (i) the
Trustee, SRPC, SRI, the Transferor or the Servicer makes a payment to the Class
B Agent, the Facility Agent or a Class B Purchaser or (ii) the Class B Agent,
the Facility Agent or a Class B Purchaser receives or is deemed to have received
any payment or proceeds for application to an obligation, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy or insolvency law, state or
Federal law, common law, or for equitable cause, then, to the extent such
payment or proceeds are set aside, the obligation or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such
payment or proceeds had not been received or deemed received by the Class B
Agent, the Facility Agent or the Class B Purchaser, as the case may be.
(g) The obligations of SRPC under this Section 2.3 are subject to
subsection 9.11(a) hereof.
2.4 REQUIREMENTS OF LAW. (a) In the event that any Class B
Purchaser shall have reasonably determined that any Regulatory Change shall:
(i) subject such Class B Purchaser to any tax of any kind
whatsoever with respect to this Agreement, its Commitment or its
beneficial interest in the Class B Certificates, or change the basis of
taxation of payments in respect thereof (except for Taxes covered by
Section 2.5 and taxes included in the definition of Excluded Taxes in
subsection 2.5(a) and changes in the rate of tax on the overall net
income of such Class B Purchaser); or
(ii) impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, such Class B Purchaser;
and the result of any of the foregoing is to increase the cost to such Class B
Purchaser, by an amount which such Class B Purchaser deems to be material, of
maintaining its Commitment or its interest in the Class B Certificates or to
reduce any amount receivable in respect thereof, THEN, in any such case, after
submission by such Class B Purchaser to the Class B Agent of a written request
therefor and the submission by the Class B Agent to the Transferor and the
Servicer of such written request therefor, the Transferor (subject to subsection
9.11(a) hereof) shall pay to the Class B Agent for the account of such Class B
Purchaser any additional amounts necessary to compensate such Class B Purchaser
for such increased cost or reduced amount receivable, together with interest on
each such amount from the Distribution Date following receipt by the Transferor
of such request for compensation under this subsection 2.4(a), if such request
is received by the Transferor at least five Business Days prior to the
Determination Date related to such Distribution Date, and otherwise from the
following Distribution Date, until payment in full thereof (after as well as
before judgment) at the Risk Rate in effect from time to time.
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(b) In the event that any Class B Purchaser shall have determined
that any Regulatory Change regarding capital adequacy has the effect of reducing
the rate of return on such Class B Purchaser's capital or on the capital of any
corporation controlling such Class B Purchaser as a consequence of its
obligations hereunder or its maintenance of its Commitment or its interest in
the Class B Certificates to a level below that which such Class B Purchaser or
such corporation could have achieved but for such Regulatory Change (taking into
consideration such Class B Purchaser's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Class B Purchaser to be
material, THEN, from time to time, after submission by such Class B Purchaser to
the Class B Agent of a written request therefor and submission by the Class B
Agent to the Transferor and the Servicer of such written request therefor, the
Transferor (subject to subsection 9.11(a) hereof) shall pay to the Class B Agent
for the account of such Class B Purchaser such additional amount or amounts as
will compensate such Class B Purchaser for such reduction, together with
interest on each such amount from the Distribution Date following receipt by the
Transferor of such request for compensation under this subsection 2.4(b), if
such request is received by the Transferor at least five Business Days prior to
the Determination Date related to such Distribution Date, and otherwise from the
following Distribution Date, until payment in full thereof (after as well as
before judgment) at the Risk Rate in effect from time to time.
(c) Each Class B Purchaser agrees that it shall use its
reasonable efforts to reduce or eliminate any claim for compensation pursuant to
subsections 2.4(a) and 2.4(b), including but not limited to designating a
different Investing Office for its Class B Certificates (or any interest
therein) if such designation will avoid the need for, or reduce the amount of,
any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not,
in the reasonable opinion of such Class B Purchaser, be unlawful or otherwise
disadvantageous to such Class B Purchaser or inconsistent with its policies or
result in an unreimbursed cost or expense to such Class B Purchaser or in an
increase in the aggregate amount payable under both subsections 2.4(a) and
2.4(b).
(d) Each Class B Purchaser claiming increased amounts described
in subsection 2.4(a) or 2.4(b) will furnish to the Class B Agent (together with
its request for compensation) a certificate prepared in good faith setting forth
the basis and the calculation of the amount (in reasonable detail) of each
request by such Class B Purchaser for any such increased amounts referred to in
subsection 2.4(a) or 2.4(b). Any such certificate shall be conclusive absent
manifest error, and the Class B Agent shall deliver a copy thereof to the
Transferor and the Servicer. Failure on the part of any Class B Purchaser to
demand compensation for any amount pursuant to subsection 2.4(a) or 2.4(b) with
respect to any period shall not constitute a waiver of such Class B Purchaser's
right to demand compensation with respect to such period.
2.5 TAXES. (a) All payments made to the Class B Purchasers, the
Facility Agent or the Class B Agent under this Agreement and the Pooling and
Servicing Agreement (including all amounts payable with respect to the Class B
Certificates) shall, to the extent allowed by law, be made free and clear of,
and without deduction 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 (collectively, "TAXES"), excluding (i)
income taxes (including branch profit taxes, minimum taxes and taxes computed
under alternative methods, at least one of which is based on or measured by net
income), franchise taxes (imposed in lieu of income taxes), or any other taxes
based on or measured by the net income of the Class B Purchaser, the Facility
Agent or the Class B Agent (as the case may be) or the gross receipts or income
of the Class B Purchaser, the Facility Agent or the Class B Agent (as the case
may be); (ii) any Taxes that would not have been imposed but for the failure of
such Class B Purchaser, the Facility Agent or the Class B Agent, as applicable,
to provide and keep current (to the extent legally able) any certification or
other documentation required to qualify for an exemption from, or reduced rate
of, any such Taxes or required by this Agreement to be furnished by such Class B
Purchaser, the Facility Agent or the Class B Agent, as applicable; and (iii) any
Taxes imposed as a result of a change by any Class B Purchaser of the Investing
Office (other than changes mandated by this Agreement, including subsection
2.4(c) hereof, or required by law) (all such excluded taxes being hereinafter
called "EXCLUDED TAXES"). If any Taxes, other than Excluded Taxes, are required
to be withheld from any amounts payable to a Class B Purchaser, the Facility
Agent or the Class B Agent hereunder or under the Pooling and Servicing
Agreement, THEN after submission by any Class B Purchaser to the Class B Agent
(in the case of an amount payable to a Class B Purchaser) and by the Facility
Agent or the Class B Agent to the Transferor and the Servicer of a written
request therefor, the amounts so payable to such Class B Purchaser, the Facility
Agent or the Class B Agent, as applicable, shall be increased and the Transferor
shall be liable to pay to the Class B Agent for the account of the Facility
Agent or such Class B Purchaser or for its own account, as applicable, the
amount of such increase) to the extent necessary to yield to such Class B
Purchaser, the Facility Agent or the Class B Agent, as applicable (after payment
of all such Taxes) interest or any such other amounts payable hereunder or
thereunder at the rates or in the amounts specified in this Agreement and the
Pooling and Servicing Agreement; PROVIDED, HOWEVER, that the amounts so payable
to such Class B Purchaser, the Facility Agent or the Class B Agent shall not be
increased pursuant to this subsection 2.5(a) if such requirement to withhold
results from the failure of such Person to comply with subsection 2.5(c) hereof.
Whenever any Taxes are payable on or with respect to amounts distributed to a
Class B Purchaser, the Facility Agent or the Class B Agent, as promptly as
possible thereafter the Servicer shall send to the Class B Agent, on behalf of
such Class B Purchaser (if applicable), a certified copy of an original official
receipt showing payment thereof. If the Trustee, upon the direction of the
Servicer, fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Class B Agent, on behalf of itself or the Facility Agent
or such Class B Purchaser (as applicable), the required receipts or other
required documentary evidence, subject to subsection 9.11(a), the Transferor
shall pay to the Class B Agent on behalf of such Class B Purchaser or the
Facility Agent or for its own account, as applicable, any incremental taxes,
interest or penalties that may become payable by such Class B Purchaser, the
Facility Agent or the Class B Agent, as applicable, as a result of any such
failure.
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(b) A Class B Purchaser or the Facility Agent claiming increased
amounts under subsection 2.5(a) for Taxes paid or payable by such Class B
Purchaser or the Facility Agent, as applicable, will furnish to the Class B
Agent a certificate prepared in good faith setting forth the basis and amount of
each request by such Class B Purchaser or the Facility Agent, as applicable, for
such Taxes, and the Class B Agent shall deliver a copy thereof to the Transferor
and the Servicer. The Class B Agent claiming increased amounts under subsection
2.5(a) for its own account for Taxes paid or payable by the Class B Agent will
furnish to the Transferor and the Servicer a certificate prepared in good faith
setting forth the basis and amount of each request by the Class B Agent for such
Taxes. Any such certificate of a Class B Purchaser, the Facility Agent or the
Class B Agent shall be conclusive absent manifest error. Failure on the part of
any Class B Purchaser, the Facility Agent or the Class B Agent to demand
additional amounts pursuant to subsection 2.5(a) with respect to any period
shall not constitute a waiver of the right of such Class B Purchaser, the
Facility Agent or the Class B Agent, as the case may be, to demand compensation
with respect to such period. All such amounts shall be due and payable to the
Class B Agent on behalf of the Facility Agent or such Class B Purchaser or for
its own account, as the case may be, on the Distribution Date following receipt
by the Transferor of such certificate, if such certificate is received by the
Transferor at least five Business Days prior to the Determination Date related
to such Distribution Date and otherwise shall be due and payable on the
following Distribution Date (or, if earlier, on the Series 1997-1 Termination
Date).
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(c) Each Class B Purchaser and each Participant holding an
interest in Class B Certificates agrees that prior to the date on which the
first interest or fee payment hereunder is due thereto, it will deliver to the
Transferor, the Servicer, the Trustee and the Class B Agent (i) if such Class B
Purchaser or Participant is not incorporated under the laws of the United States
or any State thereof, two duly completed copies of the U.S. Internal Revenue
Service Form 4224 or successor applicable forms required to evidence that the
Class B Purchaser's or Participant's income from this Agreement or the Class B
Certificates is "effectively connected" with the conduct of a trade or business
in the United States, and (ii) a duly completed U.S. Internal Revenue Service
Form W-8 or W-9 or successor applicable or required forms. Each Class B
Purchaser or Participant holding an interest in Class B Certificates also agrees
to deliver to the Transferor, the Servicer, the Trustee and the Class B Agent
two further copies of such Form 4224 and Form W-8 or W-9, or such 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 hereunder, and such extensions or renewals thereof as may
reasonably be requested by the Servicer or the Class B Agent, unless in any such
case, solely as a result of a change in treaty, law or regulation occurring
prior to the date on which any such delivery would otherwise be required, and
assuming that Section 1446 of the Code does not apply, the Class B Purchaser is
no longer eligible to deliver the then-applicable form set forth above and so
advises the Servicer and the Class B Agent. Each Class B Purchaser which is a
party to a Joinder Supplement certifies, represents and warrants as of the
effective date of such Joinder Supplement, each Assignee and each Participant
(in either case other than a Support Party) shall certify, represent and warrant
as a condition of acquiring its Assignment or Participation as of the effect
date of the Transfer Supplement to which it is a party or of such Participation,
as the case may be, and each Support Party shall certify, represent and warrant
as of the effective date of its becoming a Support Party, that (x) in the case
of Form 4224 (if applicable), its income from this Agreement or the Class B
Certificates is effectively connected with a United States trade or business and
(y) that it is entitled to an exemption from United States backup withholding
tax. Further, each Class B Purchaser and each Participant acquiring an interest
in a Class B Certificate covenants that for so long as it shall own Class B
Certificates or such Participation, such Class B Certificates or Participation
shall be held in such manner that the income therefrom shall be effectively
connected with the conduct of a United States trade or business.
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2.6 INDEMNIFICATION. (a) SRI and SRPC (each such Person being
referred to as an "INDEMNITOR"), jointly and severally, agree to indemnify and
hold harmless the Class B Agent, the Facility Agent and each Class B Purchaser
and any directors, officers, employees, agents, attorneys, auditors or
accountants of the Class B Agent, the Facility Agent or Class B Purchaser (each
such Person being referred to as an "INDEMNITEE") from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever (including
reasonable fees and expenses of legal counsel) which such Indemnitee may incur
(or which may be claimed against such Indemnitee) arising out of, by reason of
or in connection with the execution and delivery of, or payment or other
performance under, or the failure to make payments or perform under, any Related
Document or the issuance of the Series 1997-1 Certificates (including in
connection with the preparation for defense of any investigation, litigation or
proceeding arising out of, related to or in connection with such execution,
delivery, payment, performance or issuance), except (i) to the extent that any
such claim, damage, loss, liability, cost or expense is shall be caused by the
willful misconduct, bad faith, recklessness or gross negligence of such
Indemnitee, (ii) to the extent that any such claim, damage, loss, liability,
cost or expense is covered by subsection 2.3(c) or Section 2.4 or 2.5 hereof or
relates to any Excluded Taxes, (iii) to the extent that any such claim, damage,
loss, liability, cost or expense relates to disclosure made by the Class B Agent
or a Class B Purchaser in connection with an Assignment or Participation
pursuant to Section 8.1 of this Agreement which disclosure is not based on
information given to the Class B Agent or such Class B Purchaser by or on behalf
of SRPC, SRI, the Transferor or the Servicer or any affiliate thereof or by or
on behalf of the Trustee or (iv) to the extent that such claim, damage, loss,
liability, cost or expense shall be caused by a charge off of Receivables. The
foregoing indemnity shall include any claims, damages, losses, liabilities,
costs or expenses to which any such Indemnitee may become subject under
Securities Act, the Securities Exchange Act of 1934, as amended, the Investment
Company Act of 1940, as amended, or other federal or state law or regulation
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact in any disclosure document relating to the Series 1997-1
Certificates or any amendments thereof or supplements thereto (other than
statements provided by the Indemnitee expressly for inclusion therein) or
arising out of, or based upon, the omission or the alleged omission to state a
material fact necessary to make the statements therein or any amendment thereof
or supplement thereto, in light of the circumstances in which they were made,
not misleading (other than with respect to statements provided by the Indemnitee
expressly for inclusion therein).
(b) Promptly after the receipt by an Indemnitee of a notice of
the commencement of any action against an Indemnitee, such Indemnitee will
notify the Agent and the Agent will, if a claim in respect thereof is to be made
against an Indemnitor pursuant to subsection 2.6(a), notify such Indemnitor in
writing of the commencement thereof; but the omission so to notify such party
will not relieve such party from any liability which it may have to such
Indemnitee pursuant to the preceding paragraph. If any such action is brought
against an Indemnitee and it notifies an Indemnitor of its commencement, such
Indemnitor will be entitled to participate in and, to the extent that it so
elects by delivering written notice to the Indemnitee promptly after receiving
notice of the commencement of the action from the Indemnitee to assume the
defense of any such action, with counsel mutually satisfactory to such
Indemnitor and each affected Indemnitee. After receipt of such notice by an
Indemnitor from an Indemnitee, such Indemnitor will not be liable to such
Indemnitee for any legal or other expenses except as provided below and except
for the reasonable costs of investigation subsequently incurred by the
Indemnitee in connection with the defense of such action. Each Indemnitee will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of the such
Indemnitee unless (i) the employment of such counsel by such Indemnitee has been
authorized in writing by such Indemnitor, (ii) such Indemnitor shall have failed
to assume the defense and employ counsel, (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both such
Indemnitee and either an Indemnitor or another person or entity that may be
entitled to indemnification from an Indemnitor (by virtue of this Section 2.6 or
otherwise) and such Indemnitee shall have been advised by counsel that there may
be one or more legal defenses available to such Indemnitee which are different
from or additional to those available to an Indemnitor or such other party or
shall otherwise have reasonably determined that the co-representation would
present such counsel with a conflict of interest (in which case the Indemnitor
will not have the right to direct the defense of such action on behalf of the
Indemnitee). In any such case, the reasonable fees, disbursements and other
charges of counsel will be at the expense of the Indemnitor; it being understood
that in no event shall the Companies be liable for the fees, disbursements and
other charges of more than two counsel (in addition to any local counsel) for
all Indemnitees in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. An Indemnitor shall not be liable for any
settlement of any such action, suit or proceeding effected without its written
consent, which shall not be unreasonably withheld, but if settled with the
written consent of an Indemnitor or if there shall be a final judgment for the
plaintiff in any such action, suit or proceeding, such Indemnitor agrees to
indemnify and hold harmless any Indemnitee to the extent set forth in this
letter from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgement. Notwithstanding the immediately preceding
sentence, if in any case where the fees and expenses of counsel are at the
expense of an Indemnitor and an Indemnitee shall have requested such Indemnitor
to reimburse such Indemnitee for such fees and expenses of counsel as incurred,
such Indemnitor 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 Indemnitor of the aforesaid
request and (ii) such Indemnitor shall have failed to reimburse the Indemnitee
in accordance with such request for reimbursement prior to the date of such
settlement. No Indemnitor shall, without the prior written consent of an
Indemnitee, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder, if such settlement, compromise or
consent includes an admission of culpability or wrong-doing on the part of such
Indemnitee or the entry or an order, injunction or other equitable or
nonmonetary relief (including any administrative or other sanctions or
disqualifications) against such Indemnitee or if such settlement, compromise or
consent does not includes an unconditional release of such Indemnitee from all
liability arising out of such claim, action, suit or proceeding.
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(c) Subject to the limitations on liability set forth in Section
8.3 of the Pooling and Servicing Agreement, the Servicer shall indemnify and
hold harmless each Indemnitee from and against any and all claims, damages,
losses, liabilities, costs or expenses whatsoever which such Indemnitee may
incur (or which may be claimed against such Indemnitee) by reason of any acts or
omissions or alleged acts or omissions of the Servicer hereunder or with respect
to activities of the Trust or the Trustee for which the Servicer is responsible
under the Pooling and Servicing Agreement or hereunder, subject, with respect to
the obligations of the Servicer in respect of activities of the Trust or the
Trustee for which the Servicer is responsible under the Pooling and Servicing
Agreement, to the provisos set forth in Section 8.4 of the Pooling and Servicing
Agreement. Subject to Section 9.5, any Successor Servicer, by accepting its
appointment pursuant to the Pooling and Servicing Agreement, (i) shall agree to
be bound by the terms, covenants and conditions contained herein applicable to
the Servicer and to be subject to the duties and obligations of the Servicer
hereunder, (ii) as of the date of its acceptance, shall be deemed to have made
with respect to itself the representations and warranties made by the SRI in
subsections 4.2(a) through (f) (in the case of subsection 4.2(a), with
appropriate factual changes) and (iii) shall agree to indemnify and hold
harmless any Indemnitee from and against any and all claims, damages, losses,
liabilities, costs or expenses (including reasonable fees and expenses of
counsel) whatsoever which any such Indemnitee may incur (or which may be claimed
against such Indemnitee) by reason of any acts or omissions or alleged acts or
omissions of the Servicer hereunder or with respect to activities of the Trust
or the Trustee for which the Servicer is responsible under the Pooling and
Servicing Agreement or hereunder.
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(d) Subject to the subsection 9.11(a) hereof in the case of the
Transferor, the obligations of SRPC, SRI, the Transferor and the Servicer under
this Agreement shall be absolute, unconditional and irrevocable and shall be
performed strictly in accordance with the terms of this Agreement. Without
limiting the foregoing, neither the lack of validity or enforceability of, or
any modification to, any Related Document nor the existence of any claim,
setoff, defense or other right which SRPC, SRI, the Trust, the Trustee, on
behalf of the Trust, the Transferor and the Servicer may have at any time
against each other, the Class B Agent, the Facility Agent, any Class B
Purchaser, any Support Party or any other Person, whether in connection with any
Related Document or any unrelated transactions, shall constitute a defense to
such obligations.
SECTION 3. CONDITIONS PRECEDENT
3.1 CONDITION TO INITIAL PURCHASE. The following shall be
conditions precedent to the initial purchase by any Class B Purchasers of the
Class B Certificates:
(a) the representations and warranties of SRPC and SRI set forth
or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all
material respects on Closing Date as though made on and as of the Closing Date,
and no event which of itself or with the giving of notice or lapse of time, or
both, would constitute a Termination Event shall have occurred and be continuing
on the Closing Date;
(b) the Supplement shall have been duly executed and delivered by
all parties thereto and shall be in form and substance satisfactory to the Class
B Purchasers;
(c) the Master Pooling and Servicing Agreement and the
Receivables Purchase Agreement shall not have been amended or otherwise
modified, other than as disclosed to the Class B Purchasers in writing prior to
the Closing Date;
(d) Class C Certificates shall have been duly issued in
accordance with the Pooling and Servicing Agreement which have a Class C Initial
Invested Amount equal to at least 17.5% of the Initial Invested Amount;
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(e) [reserved];
(f) all up front fees and expenses agreed and specified in the
Class B Fee Letter shall have been paid by SRPC on the Closing Date, and
arrangements satisfactory to the initial Class B Purchasers and the Class B
Agent shall have been made for the payment of amounts required to be paid by
SRPC pursuant to Section 2.3(b) with respect to the preparation, execution,
delivery and initial syndication of this Agreement and each related Support
Facility and the other documents to be delivered hereunder or in connection
herewith;
(g) arrangements satisfactory to the initial Class B Purchasers
and the Class B Agent shall have been made for the repayment in full of the
Series 1993-2 Investor Certificates and termination of the related certificate
purchase agreement concurrently with the initial purchase of Class B
Certificates; and
(h) the Class B Agent on behalf of the Class B Purchasers shall
have received on the Closing Date the following items, each of which shall be in
form and substance satisfactory to the Class B Agent:
(i) an Officer's Certificate of SRPC or SRI, as
applicable, confirming the satisfaction of the conditions set forth in
clause (a) and clauses (c) through (e), inclusive, above;
(ii) a copy of (A) the certificates of incorporation and
by-laws of, and an incumbency certificate with respect to its officers
executing any of the Related Documents on the Closing Date on behalf of,
part of SRPC and SRI certified by its authorized officer, (B) good
standing certificates from the appropriate Governmental Authority as of
a recent date with respect to each of SRPC and SRI and (C) resolutions
of the Board of Directors (or an authorized committee thereof) of each
of SRPC and SRI with respect to the Related Documents to which it is
party, certified by its authorized officer;
(iii) the favorable written opinions of counsel for SRPC
and SRI addressed to the Class B Agent, the Facility Agent and the Class
B Purchasers, or accompanied by a letter providing that the Class B
Agent, the Facility Agent and the Class B Purchasers may rely on such
opinions as if they were addressed to them, and dated the Closing Date,
covering general corporate matters, the due execution and delivery of,
and the enforceability of, each of the Related Documents to which SRPC
and SRI (individually or as Transferor or Servicer) is party,
sale/security interest matters, tax matters and such other matters as
the Class B Agent may request;
(iv) an agreed procedures letter from the independent
certified public accountants of SRPC and a certificate of an authorized
officer of SRPC with respect to the accuracy in all material respects of
written factual data previously furnished to the Class B Agent with
respect to the Receivables in the Trust, in each case in form and scope
satisfactory to the Class B Agent;
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(v) evidence of the due execution and delivery by the
Trustee of the Related Documents to which it is party;
(vi) an executed copy of the Supplement and a conformed
copy of the Master Pooling and Servicing Agreement and the Receivables
Purchase Agreement;
(vii) executed copies of all opinions required by Article
VI of the Pooling and Servicing Agreement or by any Rating Agency in
connection with the issuance, sale or rating of the Series 1997-1 (each
such opinion, unless otherwise agreed to by the Class B Agent, to be
addressed to the Class B Agent on behalf of the Class B Purchasers and
the Facility Agent or accompanied by a letter providing that the Class B
Agent on behalf of the Class B Purchasers and the Facility Agent may
rely on such opinion as if it were addressed to it), and such additional
documents, instruments, certificates or letters as the Class B Agent may
reasonably request;
(viii) the duly executed Class B Certificate(s) registered
in the name of the Class B Agent as nominee on behalf of the Class B
Owners; and
(ix) evidence satisfactory to each Class B Purchaser that
is a Structured Purchaser that Moody's and Standard & Poor's has
confirmed in writing that the purchase by it of Class B Certificates
(including Additional Class B Invested Amounts thereunder) would not
result in a reduction or withdrawal of such Rating Agency's then
applicable rating of the commercial paper of such Structured Purchaser,
without giving effect to any increase in any letter of credit or other
enhancement provided to such Structured Purchaser (other than liquidity
support provided to such Structured Purchaser by Liquidity Providers).
3.2 CONDITION TO ADDITIONAL PURCHASES. The following shall be
conditions precedent to each purchase by any Class B Purchasers of Additional
Class B Invested Amounts hereunder:
(a) the Transferor shall have timely delivered a notice of
purchase pursuant to subsection 2.1(c) of this Agreement;
(b) the representations and warranties of SRPC and SRI set forth
or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all
material respects on the date of such purchase as though made on and as of such
date; no event which of itself or with the giving of notice or lapse of time, or
both, would constitute a Termination Event shall have occurred and be continuing
on such date, and there shall exist no unreimbursed Class C Investor
Charge-Offs;
(c) after giving effect to such purchase of Additional Class B
Invested Amount, the excess of the aggregate Class B Principal Balance over the
portion of such Class B Principal Balance owing to Nonextending Class B
Purchasers shall not exceed the aggregate Commitments of the Committed Class B
Purchasers;
(d) after giving effect to such purchase, the Class C Invested
Amount shall equal not less than the greater of (i) 17.5% of the Invested Amount
on the applicable Purchase Date and (ii) 5% of the highest Invested Amount
during the 180 days preceding such Purchase Date;
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(e) after giving effect to such purchase and the application of
the proceeds thereof as provided herein and in subsection 4.2(h) of the Pooling
and Servicing Agreement, the amount on deposit in the Spread Account, expressed
as a percentage of the Invested Amount, after giving effect to such purchase and
the application of the proceeds thereof as provided herein as in subsection
4.2(h) of the Pooling and Servicing Agreement, shall be not less than such
percentage determined prior to giving effect to such purchase and application;
(f) in the case of any Noncommitted Class B Purchaser, such
Noncommitted Class B Purchaser shall have determined in its judgment that the
Class B Certificates have a credit quality sufficient to obtain a rating of not
less than Aa2 from Moody's and not less than AA by Standard & Poor's; and
(g) the conditions set forth in Section 6.15 of the Pooling and
Servicing Agreement to the issuance of such Additional Class B Invested Amount
shall have been satisfied.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF SRPC. SRPC repeats and
reaffirms to the Class B Purchasers and the Class B Agent the representations
and warranties of the Transferor set forth in Sections 2.3 of the Pooling and
Servicing Agreement, and represents and warrants that such representations and
warranties are true and correct as of the date hereof. SRPC further represents
and warrants to, and agrees with, the Class B Agent and each Class B Purchaser
that, as of the date hereof:
(a) SRPC is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and to transact the business
in which it is now engaged. SRPC is duly qualified to do business (or is exempt
from such qualification) and is in good standing in each State of the United
States where the nature of its business requires it to be so qualified.
(b) SRPC has the full corporate power, authority and legal
right to make, execute, deliver and perform the Related Documents to which it is
party (individually or as Transferor) and all of the transactions contemplated
thereby and to issue the Series 1997-1 Certificates from the Trust and has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Related Documents to which it is party and such issuance.
Each of the Related Documents to which SRPC is party (individually or as
Transferor) constitutes its legal, valid and binding agreement enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
the rights of creditors generally and except as such enforceability may be
limited by general principles of equity, whether considered in a proceeding at
law or in equity).
(c) SRPC is not required to obtain the consent of any
other party or any consent, license, approval or authorization of, or
registration with, any Governmental Authority in connection with the execution,
delivery or performance of each of the Related Documents to which it is party
(individually or as Transferor) that has not been duly obtained and which is not
and will not be in full force and effect on the Closing Date.
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(d) SRPC's execution, delivery and performance of the
Related Documents to which it is party (individually or as Transferor) do not
violate or conflict with any provision of any existing law or regulation
applicable to SRPC or any order or decree of any court to which SRPC is subject
or the Certificate of Incorporation or Bylaws of SRPC, or any mortgage, security
agreement, indenture, contract or other agreement to which SRPC is a party or by
which SRPC or any significant portion of its properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of SRPC, threatened,
with respect to any of the Related Documents, the transactions contemplated
thereby, or the issuance of the Series 1997-1 Certificates and there is no such
litigation or proceeding against SRPC or any significant portion of its
properties which would, individually or in the aggregate, have a material
adverse effect on the transactions contemplated by any of the Related Documents
or the ability of SRPC to perform its obligations thereunder.
(f) SRPC is not insolvent or the subject of any insolvency
or liquidation proceeding. The financial statements of SRPC delivered to the
Class B Agent are complete and correct in all material respects and fairly
present the financial condition of SRPC as of date of such statements and the
results of operations of SRPC for the period then ended, all in accordance with
United States generally accepted accounting principles consistently applied.
Since the date of the most recent audited financial statements of SRPC delivered
to the Class B Agent, there has not been any material adverse change in the
condition (financial or otherwise) of SRPC.
(g) There are no outstanding comments from the most recent
report prepared by the independent public accountants for SRPC (individually or
in its capacity as Transferor) in connection with its credit card receivables.
(h) No Trust Pay Out Event, Series 1997-1 Pay Out Event,
Servicer Default or Termination Event has occurred and is continuing, and no
event, act or omission has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an event or default.
(i) The Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act of 1939, as amended, and neither the
Trust nor SRPC is required to be registered under the Investment Company Act of
1940, as amended.
(j) The Receivables conveyed by SRPC to the Trust under
the Pooling and Servicing Agreement are in an aggregate amount, determined as of
November 29, 1997, of $290,488,508, consisting of $280,813,892 of Principal
Receivables and $9,674,616 of Finance Charge Receivables. The Receivables
Purchase Agreement is in full force and effect on the date hereof and no
material default by any party exists thereunder.
(k) The Trust is duly created and existing under the laws
of the State of New York. Simultaneous with the closing hereunder, all
conditions to the issuance and sale of the Series 1997-1 Certificates set forth
in the Pooling and Servicing Agreement have been satisfied and the Series 1997-1
Certificates have been duly issued by the Trust.
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(l) Neither SRPC nor any of its Affiliates has directly,
or through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as defined in the Securities
Act) that is or will be integrated with the sale of the any Series 1997-1
Certificates in a manner that would require the registration under the
Securities Act of the offering of the Series 1997-1 Certificates or (ii) engaged
in any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) in connection with the offering
of the Series 1997-1 Certificates or in any manner involving a public offering
thereof within the meaning of Section 4(2) of the Securities Act. Assuming the
accuracy of the representations and warranties of each Class B Purchaser in its
Investment Letter and of each purchaser of Class A Certificates in their
respective investment letters, the offer and sale of the Series 1997-1
Certificates are transactions which are exempt from the registration
requirements of the Securities Act.
(m) All written factual information heretofore furnished
by SRPC to, or for delivery to, the Class B Agent for purposes of or in
connection with this Agreement, including information relating to the Accounts,
the Receivables, and SRI's credit card business, was true and correct in all
material respects on the date as of which such information was stated or
certified and remains true and correct in all material respects (unless such
information specifically relates to an earlier date in which case such
information shall have been true and correct in all material respects on such
earlier date).
4.2 REPRESENTATIONS AND WARRANTIES OF SRI. SRI repeats and
reaffirms to the Class B Purchasers and the Class B Agent the representations
and warranties of the Servicer set forth in Sections 3.3 of the Pooling and
Servicing Agreement, and represents and warrants that such representations and
warranties are true and correct as of the date hereof. SRI further represents
and warrants to, and agree with, the Class B Agent and each Class B Purchaser
that, as of the date hereof:
(a) SRI is a duly organized and validly existing
corporation in good standing under the laws of the State of Texas, with
corporate power and authority to own its properties and to transact the business
in which it is now engaged. SRI is duly qualified to do business (or is exempt
from such qualification) and is in good standing in each State of the United
States where the nature of its business requires it to be so qualified.
(b) SRI has the full corporate power, authority and legal
right to make, execute, deliver and perform the Related Documents to which it is
party (individually or as Servicer) and all of the transactions contemplated
thereby and has taken all necessary corporate action to authorize the execution,
delivery and performance of the Related Documents to which it is party and such
issuance. Each of the Related Documents to which SRI is party (individually or
as Servicer) constitutes its legal, valid and binding agreement enforceable in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
the rights of creditors of national banking associations generally and except as
such enforceability may be limited by general principles of equity, whether
considered in a proceeding at law or in equity).
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(c) SRI is not required to obtain the consent of any other
party or any consent, license, approval or authorization of, or registration
with, any Governmental Authority in connection with the execution, delivery or
performance of each of the Related Documents to which it is party (individually
or as Servicer) that has not been duly obtained and which is not and will not be
in full force and effect on the Closing Date.
(d) The execution, delivery and performance by SRI of the
Related Documents to which it is party (individually or as Servicer) do not
violate or conflict with any provision of any existing law or regulation
applicable to SRI or any order or decree of any court to which SRI is subject or
the Certificate of Incorporation or Bylaws of SRI, or any mortgage, security
agreement, indenture, contract or other agreement to which SRI is a party or by
which SRI or any significant portion of its properties is bound.
(e) There is no litigation, investigation or
administrative proceeding before any court, tribunal, regulatory body or
governmental body presently pending, or, to the knowledge of SRI, threatened,
with respect to any of the Related Documents, the transactions contemplated
thereby, or the issuance of the Series 1997-1 Certificates, and there is no such
litigation or proceeding against SRI or any significant portion of its
properties which would, individually or in the aggregate, have a material
adverse effect on the transactions contemplated by any of the Related Documents
or the ability of SRI to perform its obligations thereunder.
(f) SRI is not insolvent or the subject of any insolvency
or liquidation proceeding. The financial statements of SRI delivered to the
Class B Agent are complete and correct in all material respects and fairly
present the financial condition of SRI as of date of such statements and its
results of operations for the period then ended, all in accordance with United
States generally accepted accounting principles consistently applied. Since the
date of the most recent audited financial statements of SRI delivered to the
Class B Agent through the Closing Date, there has not been any material adverse
change in the condition (financial or otherwise) of SRI.
(g) There are no outstanding comments from the most recent
report prepared by the independent public accountants for SRI (individually or
in its capacity as Servicer) in connection with its credit card receivables.
(h) No Trust Pay Out Event, Series 1997-1 Pay Out Event,
Servicer Default, Termination Event has occurred and is continuing, and no
event, act or omission has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an event or default.
(i) The Pooling and Servicing Agreement is not required to
be qualified under the Trust Indenture Act of 1939, as amended, and neither the
Trust, SRPC nor SRI is required to be registered under the Investment Company
Act of 1940, as amended.
(j) The Receivables Purchase Agreement is in full force
and effect on the date hereof and no material default by any party exists
thereunder.
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(k) The Trust is duly created and existing under the laws
of the State of New York. Simultaneous with the closing hereunder, all
conditions to the issuance and sale of the Series 1997-1 Certificates set forth
in the Pooling and Servicing Agreement have been satisfied and the Series 1997-1
Certificates have been duly issued by the Trust.
(l) To the knowledge of SRI, the representations and
warranties of SRPC set forth in Section 4.1 above are true and correct in all
material respects.
(m) All written factual information heretofore furnished
by SRPC, SRI or Stage to, or for delivery to, the Class B Agent for purposes of
or in connection with this Agreement, including information relating to the
Accounts, the Receivables and the credit card business of SRPC or SRI, was true
and correct in all material respects on the date as of which such information
was stated or certified and remains true and correct in all material respects
(unless such information specifically relates to an earlier date in which case
such information shall have been true and correct in all material respects on
such earlier date).
4.3 REPRESENTATIONS AND WARRANTIES OF THE CLASS B AGENT, THE
FACILITY AGENT AND THE CLASS B PURCHASERS. Each of the Class B Agent, the
Facility Agent and the Class B Purchasers severally (each with respect to itself
only) represents and warrants to, and agrees with, the Transferor and the
Servicer, that:
(a) It is duly authorized to enter into and perform this
Agreement and, in the case of the Class B Purchasers, to purchase its Commitment
Percentage (if any) of the Class B Certificates, and has duly executed and
delivered this Agreement; and the person signing this Agreement on behalf of the
Class B Agent, the Facility Agent or such Class B Purchaser, as the case may be,
has been duly authorized to do so.
(b) This Agreement constitutes the legal, valid and
binding obligation of the Class B Agent, the Facility Agent or such Class B
Purchaser, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, conservatorship or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in general,
and except as such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(c) No registration with or consent or approval of or
other action by any state or local governmental authority or regulatory body
having jurisdiction over the Class B Agent, the Facility Agent or such Class B
Purchaser is required in connection with its execution, delivery or performance
of this Agreement, other than as may be required under the blue sky laws of any
state.
(d) The execution, delivery or performance by the Class B
Agent, the Facility Agent or such Class B Purchaser of this Agreement do not
violate or conflict with any provision of any existing law or regulation
applicable to it or any order or decree of any court to which it is subject, its
charter or bylaws, or any mortgage, security agreement, indenture, contract or
other agreement to which such it is a party or by which it or any significant
portion of its properties is bound, in any such case if such violation or
conflict would have an adverse affect on its right or ability to execute,
deliver or perform its obligations under this Agreement.
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SECTION 5. COVENANTS
5.1 COVENANTS OF SRPC. SRPC (individually or, as set forth below,
as the Transferor) and SRI (individually and, as set forth below, as the
Servicer), each as to itself in such capacity or capacities, and subject to
subsection 9.11(a) in the case of the Transferor, covenants and agrees, through
the Termination Date for all Class B Purchasers and thereafter so long as any
amount of the Class B Principal Balance shall remain outstanding or any monetary
obligation arising hereunder shall remain unpaid, unless the Required Class B
Owners and the Required Class B Purchasers shall otherwise consent in writing,
that:
(a) each of SRPC, SRI, the Transferor and the Servicer
shall perform in all material respects each of the respective agreements,
warranties and indemnities applicable to it and comply in all material respects
with each of the respective terms and provisions applicable to it under the
other Related Documents to which it is party, which agreements, warranties and
indemnities are hereby incorporated by reference into this Agreement as if set
forth herein in full; and each of SRPC, SRI, the Transferor and the Servicer
shall take all reasonable action to enforce the obligations of each of the other
parties to such Related Documents which are contained therein;
(b) the Transferor and the Servicer shall furnish to the
Class B Agent (i) a copy of each opinion, certificate, report, statement, notice
or other communication (other than investment instructions) relating to the
Series 1997-1 Certificates which is furnished by or on behalf of either of them
to Certificateholders, to any Rating Agency or to the Trustee and furnish to the
Class B Agent after receipt thereof, a copy of each notice, demand or other
communication relating to the Series 1997-1 Certificates, this Agreement or the
Pooling and Servicing Agreement received by the Transferor or the Servicer from
the Trustee, any Rating Agency or 10% or more of the Series 1997-1
Certificateholders (to the extent such notice, demand or communication relates
to the Accounts, the Receivables, any Servicer Default, any Trust Pay Out Event
or any Series 1997-1 Pay Out Event); and (ii) such other information, documents
records or reports respecting the Trust, the Accounts, the Receivables, the
Transferor or the Servicer as the Class B Agent may from time to time reasonably
request without unreasonable expense to the Transferor or the Servicer;
(c) the Servicer shall furnish to the Class B Agent on or
before the date such reports are due under the Pooling and Servicing Agreement
copies of each of the reports and certificates required by subsection 3.4(c) or
Section 3.5 or 3.6 of the Pooling and Servicing Agreement;
(d) the Servicer shall promptly furnish to the Class B
Agent a copy, addressed to the Class B Agent, of each opinion of counsel
delivered to the Trustee pursuant to subsection 13.2(d) of the Pooling and
Servicing Agreement;
(e) SRI shall furnish to the Class B Agent (i) promptly
when publicly available, the annual (audited) and quarterly (unaudited)
consolidated and consolidating financial statements of each of Stage and SRPC
and such other publicly available financial information, if any, as to Stage,
SRI or SRPC as the Class B Agent may request, and (ii) promptly after known to
SRI, information with respect to any action, suit or proceeding involving SRI or
any of its Affiliates by or before any court or any Governmental Authority
which, if adversely determined, would materially adversely affect the business,
results of operation or financial condition of SRPC or SRI;
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(f) the Servicer shall furnish to the Class B Agent a
certificate concurrently with its delivery of its annual certificate pursuant to
Section 3.5 of the Pooling and Servicing Agreement stating that no Termination
Event or event or condition which with the passage of time or the giving of
notice, or both, would constitute a Termination Event has occurred or, if such a
Termination Event, event or condition has occurred, identifying the same in
reasonable detail;
(g) the Transferor shall not exercise its right to accept
optional reassignment of the Receivables or repurchase the Series 1997-1
Certificates pursuant to Section 12.2 of the Pooling and Servicing Agreement,
unless the Class B Purchasers and the Class B Agent have been paid, or will be
paid upon such repurchase or in connection with such optional reassignment, the
Class B Principal Balance, all interest thereon and all other amounts owing
hereunder in full;
(h) the Transferor and the Servicer shall at any time from
time to time during regular business hours, on reasonable notice to the
Transferor or the Servicer, as the case may be, permit the Class B Agent, or its
agents or representatives to:
(i) examine all books, records and documents (including
computer tapes and disks) in its possession or under its control
relating to the Receivables, and
(ii) visit its offices and property for the purpose of
examining such materials described in clause (i) above.
The information obtained by the Class B Agent or any Class B Purchaser pursuant
to this subsection shall be held in confidence in accordance with Section 6.2
hereof;
(i) the Transferor and the Servicer shall use reasonable
efforts to cooperate with the Class B Agent (including affording reasonable
inspection rights, assisting in the preparation of syndication material,
attending investor meetings and providing access to its officers) in its effort
to syndicate the Commitments;
(j) the Servicer shall furnish to the Class B Agent,
promptly after the occurrence of any Servicer Default, Termination Event, Trust
Pay Out Event or Series 1997-1 Pay Out Event, a certificate of an appropriate
officer of the Servicer setting forth the circumstances of such Servicer
Default, Termination Event, Trust Pay Out Event or Series 1997-1 Pay Out Event
and any action taken or proposed to be taken by the Servicer or the Transferor
with respect thereto;
(k) the Transferor and the Servicer shall timely make all
payments, deposits or transfers and give all instructions to transfer required
by this Agreement, the Pooling and Servicing Agreement and the Receivables
Purchase Agreement;
(l) neither Transferor, the Servicer nor the Originator
shall terminate (except in accordance with the terms thereof), amend, waive or
otherwise modify the Master Pooling and Servicing Agreement or the Supplement,
unless (i) such amendment, waiver or modification shall not, as evidenced by an
Officer's Certificate of the Transferor delivered to the Class B Agent,
adversely affect in any material respect the interests of the Class B Agent, the
Facility Agent or the Class B Purchasers under any Related Document, and will
not result in a reduction or withdrawal of the then current rating by any Rating
Agency of any commercial paper notes issued by any Structured Purchaser without
giving effect to any increase in any letter of credit or other enhancement
provided to such Structured Purchaser; and (ii) all of the applicable provisions
of Section 13.1 of the Pooling and Servicing Agreement have been complied with;
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(m) the Transferor and the Servicer shall execute and
deliver to the Class B Agent, the Facility Agent or the Trustee all such
documents and instruments and do all such other acts and things as may be
necessary or reasonably required by the Class B Agent, the Facility Agent or the
Trustee to enable any of them to exercise and enforce their respective rights
under the Related Documents and to realize thereon, and record and file and
rerecord and refile all such documents and instruments, at such time or times,
in such manner and at such place or places, all as may be necessary or required
by the Trustee, the Facility Agent or the Class B Agent to validate, preserve,
perfect and protect the position of the Trustee under the Pooling and Servicing
Agreement;
(n) neither the Transferor nor the Servicer will
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, except (i) in
accordance with Section 7.2 or 8.2 of the Pooling and Servicing Agreement, and
(ii) with the prior written consent of the Required Class B Owners and the
Required Class B Purchasers; PROVIDED that such consent shall not be required in
the case of the Servicer if, after giving effect to such consolidation, merger,
conveyance or transfer, the Class B Certificates are rated at least "BBB" by
Standard & Poor's or at least "Baa3" by Moody's Investors Services, Inc.;
(o) SRI will not (i) resign as Servicer, unless (A) the
performance of its duties under the Pooling and Servicing Agreement is no longer
permissible pursuant to Requirements of Law and there is no reasonable action
which it could take to make the performance of such duties permissible under
such Requirements of Law, or (B) the Required Class B Owners and the Required
Class B Purchasers shall have consented thereto, or (ii) assign the Pooling and
Servicing Agreement (unless such assignment is permitted pursuant to Section 8.2
of the Pooling and Servicing Agreement and subsection 5.1(n) hereof), (iii)
delegate any of its material duties under the Pooling and Servicing Agreement
except as permitted by Section 8.7 of the Pooling and Servicing Agreement and
unless the Person to which such delegation is made is a wholly owned subsidiary
(directly or indirectly) of Stage, is legally qualified and licensed (to the
extent required) to perform the duties delegated to it, owns or holds under
valid leases or (in the case of software) licenses all computer equipment and
software and other equipment and rights which are required for such Person to
perform such duties, and employs sufficient and adequately trained personnel to
perform such duties, or (iv) appoint or permit the appointment of a Successor
Servicer other than the Trustee under the provisions of the Pooling and
Servicing Agreement without consultation with the Facility Agent; and
(p) the Transferor will not incur, permit or suffer to
exist any lien, charge or other adverse claim on any Class C Certificate.
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SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY
6.1 COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and the
Servicer shall hold in confidence, and not disclose to any Person, the terms of
any fees payable in connection with this Agreement except they may disclose such
information (i) to their officers, directors, employees, agents, counsel,
accountants, auditors, advisors or representatives, (ii) with the consent of the
Required Class B Purchasers and Class B Agent, or (iii) to the extent SRPC, SRI,
the Transferor or the Servicer or any Affiliate of either of them should be
required by any law or regulation applicable to it or requested by any
Governmental Authority to disclose such information; PROVIDED, that, in the case
of clause (iii), SRPC, the Transferor or the Servicer, as the case may be, will
use all reasonable efforts to maintain confidentiality and will (unless
otherwise prohibited by law) notify the Class B Agent of its intention to make
any such disclosure prior to making such disclosure.
6.2 COVENANTS OF CLASS B PURCHASERS. The Class B Agent, the
Facility Agent and each Class B Purchaser, severally and with respect to itself
only, covenants and agrees that any information obtained by the Class B Agent,
the Facility Agent or such Class B Purchaser pursuant to this Agreement shall be
held in confidence (it being understood that documents provided to the Class B
Agent hereunder may in all cases be distributed by the Class B Agent or the
Facility Agent to the Class B Purchasers) except that the Class B Agent, the
Facility Agent or such Class B Purchaser may disclose such information (i) to
its officers, directors, employees, agents, counsel, accountants, auditors,
advisors or representatives, (ii) to the extent such information has become
available to the public other than as a result of a disclosure by or through the
Class B Agent, the Facility Agent or such Class B Purchaser, (iii) to the extent
such information was available to the Class B Agent, the Facility Agent or such
Class B Purchaser on a nonconfidential basis prior to its disclosure to the
Class B Agent, the Facility Agent or such Class B Purchaser hereunder, (iv) with
the consent of the Transferor, (v) to the extent permitted by Section 8.1, (vi)
to the extent the Class B Agent, the Facility Agent or such Class B Purchaser
should be (A) required in connection with any legal or regulatory proceeding or
(B) requested by any Governmental Authority to disclose such information or
(vii) in the case of any Class B Purchaser that is a Structured Purchaser, to
rating agencies, placement agents and providers of liquidity and credit support
who agree to hold such information in confidence; PROVIDED, that, in the case of
clause (vi) above, the Class B Agent, the Facility Agent or such Class B
Purchaser, as applicable, will use all reasonable efforts to maintain
confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise
prohibited by law) notify the Transferor of its intention to make any such
disclosure prior to making any such disclosure.
SECTION 7. THE AGENTS
7.1 APPOINTMENT. (a) Each Class B Purchaser hereby irrevocably
designates and appoints the Class B Agent as the agent of such Class B Purchaser
under this Agreement, and each such Class B Purchaser irrevocably authorizes the
Class B Agent, as the agent for such Class B Purchaser, to take such action on
its behalf under the provisions of the Related Documents and to exercise such
powers and perform such duties thereunder as are expressly delegated to the
Class B Agent by the terms of the Related Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Class B Agent shall not have any
duties or responsibilities, except those expressly set forth herein,
or any fiduciary relationship with any Class B Purchaser, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Class B Agent.
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(b) Each Class B Purchaser hereby irrevocably designates and
appoints the Facility Agent as the agent of such Class B Purchaser under the
Pooling and Servicing Agreement, and each such Class B Purchaser irrevocably
authorizes the Facility Agent, as the agent for such Class B Purchaser, to take
such action on its behalf under the provisions of the Pooling and Servicing
Agreement and to exercise such powers and perform such duties thereunder as are
expressly granted to the Facility Agent by the terms of the Pooling and
Servicing Agreement, subject to the terms and conditions of this Agreement,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Facility Agent shall not have any duties or responsibilities, except those
expressly set forth herein or in the Pooling and Servicing Agreement, or any
fiduciary relationship with any Class B Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Facility Agent.
7.2 DELEGATION OF DUTIES. The Class B Agent and the Facility
Agent may execute any of its duties under any of the Related Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither the Class B Agent nor
the Facility Agent shall be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
7.3 EXCULPATORY PROVISIONS. Neither the Class B Agent nor the
Facility Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class
B Purchasers for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with any of the other Related Documents (except
for its or such Person's own gross negligence or willful misconduct) or (b)
responsible in any manner to any of the Class B Purchasers for any recitals,
statements, representations or warranties made by SRPC, SRI, Stage, the
Transferor, the Servicer or the Trustee or any officer thereof contained in any
of the other Related Documents or in any certificate, report, statement or other
document referred to or provided for in, or received by the Class B Agent or the
Facility Agent under or in connection with, any of the other Related Documents
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any of the other Related Documents or for any
failure of SRPC, SRI, Stage, the Transferor, the Servicer or the Trustee to
perform its obligations thereunder. Neither the Class B Agent nor the Facility
Agent shall be under any obligation to any Class B Purchaser to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, any of the other Related Documents, or to inspect the
properties, books or records of SRPC, SRI, Stage, the Transferor, the Servicer,
the Trustee or the Trust.
7.4 RELIANCE BY AGENT. The Class B Agent and the Facility Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, written 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 counsel to the Class B Agent or the
Facility Agent), independent accountants and other experts selected by the Class
B Agent or the Facility Agent. The Class B Agent and the Facility Agent shall be
fully justified in failing or refusing to take any action under any of the
Related Documents unless it shall first receive such advice or concurrence of
the Required Class B Owners and the Required Class B Purchasers as it deems
appropriate or it shall first be indemnified to its satisfaction by the Class B
Purchasers or by the Committed Class B Purchasers 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 Class B Agent and the Facility Agent shall in all
cases be fully protected in acting, or in refraining from acting, under any of
the Related Documents in accordance with a request of the Required Class B
Owners and the Required Class B Purchasers and such request and any action taken
or failure to act pursuant thereto shall be binding upon all present and future
Class B Purchasers.
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7.5 NOTICES. The Class B Agent shall not be deemed to have
knowledge or notice of the occurrence of any breach of this Agreement or the
occurrence of any Pay Out Event or any Termination Event unless the Class B
Agent has received notice from the Transferor, the Servicer, the Trustee or any
Class B Purchaser referring to this Agreement, describing such event. In the
event that the Class B Agent receives such a notice, the Class B Agent promptly
shall give notice thereof to the Class B Purchasers. The Class B Agent shall
take such action with respect to such event as shall be reasonably directed by
the Required Class B Owners and the Required Class B Purchasers; PROVIDED that
unless and until the Class B Agent shall have received such directions, the
Class B Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such event as it shall deem advisable
in the best interests of the Class B Purchasers.
7.6 NON-RELIANCE ON AGENT AND OTHER CLASS B PURCHASERS. Each
Class B Purchaser expressly acknowledges that neither the Class B Agent nor the
Facility Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by the Class B Agent or the Facility Agent
hereafter taken, including any review of the affairs of SRPC, SRI, Stage, the
Transferor, the Servicer, the Trustee or the Trust shall be deemed to constitute
any representation or warranty by the Class B Agent or the Facility Agent to any
Class B Purchaser. Each Class B Purchaser represents to the Class B Agent and
the Facility Agent that it has, independently and without reliance upon the
Class B Agent, the Facility Agent or any other Class B Purchaser, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Trust, the Trustee,
SRPC, SRI, Stage, the Transferor and the Servicer and made its own decision to
purchase its interest in the Class B Certificates hereunder and enter into this
Agreement. Each Class B Purchaser also represents that it will, independently
and without reliance upon the Class B Agent or the Facility Agent or any other
Class B Purchaser, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis, appraisals and
decisions in taking or not taking action under any of the Related Documents, and
to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, the Transferor and
the Servicer. Except, in the case of the Class B Agent, for notices, reports and
other documents received by the Class B Agent under Section 5 hereof, neither
the Class B Agent nor the Facility Agent shall have any duty or responsibility
to provide any Class B Purchaser with any credit or other information concerning
the business, operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, the
Transferor or the Servicer which may come into the possession of the Class B
Agent or the Facility Agent or any of its respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
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7.7 INDEMNIFICATION. The Committed Class B Purchasers agree to
indemnify the Class B Agent and the Facility Agent in its capacity as such
(without limiting the obligation (if any) of SRPC, SRI, the Transferor, the
Trust or the Servicer to reimburse the Class B Agent or the Facility Agent for
any such amounts), ratably according to their respective Commitment Percentages
(or, if the Commitments have terminated, Percentage Interests), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including at any time following the payment of the obligations
under this Agreement, including the Class B Principal Balance) be imposed on,
incurred by or asserted against the Class B Agent or the Facility Agent in any
way relating to or arising out of this Agreement, or any documents contemplated
by or referred to herein or the transactions contemplated hereby or any action
taken or omitted by the Class B Agent or the Facility Agent under or in
connection with any of the foregoing; PROVIDED that no Class B Purchaser shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of the Class B Agent or the Facility Agent resulting from its own
gross negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the obligations under this Agreement, including the Class
B Principal Balance.
7.8 AGENTS IN THEIR INDIVIDUAL CAPACITIES. The Class B Agent, the
Facility Agent and their Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Trust, the Trustee, SRPC, SRI,
Stage, the Servicer and the Transferor as though the Class B Agent and the
Facility Agent were not the agents hereunder. Each Class B Purchaser
acknowledges that Credit Suisse First Boston may act (i) as administrator and
agent for one or more Structured Purchasers and in such capacity acts and may
continue to act on behalf of each such Structured Purchaser in connection with
its business, (ii) as the agent for certain financial institutions under the
liquidity and credit enhancement agreements relating to this Agreement to which
any such Structured Purchaser is party and in various other capacities relating
to the business of any such Structured Purchaser under various agreements, and
(iii) as agent for other Classes of Series 1997-1 Certificates. Credit Suisse
First Boston in its capacity as the Class B Agent or the Facility Agent shall
not, by virtue of its acting in any such other capacities, be deemed to have
duties or responsibilities hereunder or be held to a standard of care in
connection with the performance of its duties as the Class B Agent or the
Facility Agent other than as expressly provided in this Agreement. Credit Suisse
First Boston may act as the Class B Agent and the Facility Agent without regard
to and without additional duties or liabilities arising from its role as such
administrator or agent or arising from its acting in any such other capacity.
7.9 SUCCESSOR AGENT. (a) The Class B Agent may resign as Class B
Agent upon ten days' notice to the Class B Purchasers, the Trustee, the
Transferor and the Servicer with such resignation becoming effective upon a
successor agent succeeding to the rights, powers and duties of the Class B Agent
pursuant to this subsection 7.9(a). If the Class B Agent shall resign as Class B
Agent under this Agreement, then the Required Class B Purchasers and the
Required Class B Owners shall appoint from among the Committed Class B
Purchasers a successor agent for the Class B Purchasers. The successor agent
shall succeed to the rights, powers and duties of the Class B Agent, and the
term "Class B Agent" shall mean such successor agent effective upon its
appointment, and the former Class B Agent's rights, powers and duties as Class B
Agent shall be terminated, without any other or further act or deed on the part
of such former Class B Agent or any of the parties to this Agreement. After the
retiring Class B Agent's resignation as Class B Agent, the provisions of this
Section 7 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Class B Agent under this Agreement.
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(b) The Facility Agent may resign as Facility Agent upon ten
days' notice to the Class B Purchasers, the Class A Purchasers (as defined in
the Class A Certificate Purchase Agreement), the Trustee, the Transferor and the
Servicer with such resignation becoming effective upon a successor agent
succeeding to the rights, powers and duties of the Facility Agent pursuant to
this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent
under this Agreement, then the Required Class B Purchasers and the Required
Class B Owners shall appoint from among the Committed Class B Purchasers
hereunder or the Committed Class A Purchasers under the Class A Certificate
Purchase Agreement a successor Facility Agent of the Class B Certificateholders
and the Class A Certificateholders as provided in the Supplement; PROVIDED that
no such appointment shall be effective unless such successor is also appointed
as successor Facility Agent under the Class A Certificate Purchase Agreement.
The successor agent shall succeed to the rights, powers and duties of the
Facility Agent, and the term "Facility Agent" shall mean such successor agent
effective upon its appointment, and the former Facility Agent's rights, powers
and duties as Facility Agent shall be terminated, without any other or further
act or deed on the part of such former Facility Agent or any of the parties to
this Agreement. After the retiring Facility Agent's resignation as Facility
Agent, the provisions of this Section 7 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Facility Agent under
this Agreement.
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT
8.1 TRANSFERS OF CLASS B CERTIFICATES. (a) Each Class B Owner
agrees that the beneficial interest in the Class B Certificates purchased by it
will be acquired for investment only and not with a view to any public
distribution thereof, and that such Class B Owner will not offer to sell or
otherwise dispose of any Class B Certificate acquired by it (or any interest
therein) in violation of any of the registration requirements of the Securities
Act or any applicable state or other securities laws. Each Class B Owner
acknowledges that it has no right to require the Transferor to register, under
the Securities Act or any other securities law, the Class B Certificates (or the
beneficial interest therein) acquired by it pursuant to this Agreement or any
Transfer Supplement. Each Class B Owner hereby confirms and agrees that in
connection with any transfer or syndication by it of an interest in the Class B
Certificates, such Class B Owner has not engaged and will not engage in a
general solicitation or general advertising including advertisements, articles,
notices or other communications published in any newspaper, magazine or similar
media or broadcast over radio or television, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
Each Class B Purchaser which executes a Joinder Agreement agrees that it will
execute and deliver to the Transferor, the Servicer, the Trustee and the Class B
Agent on or before the effective date of its Joinder Agreement a letter in the
form attached hereto as EXHIBIT A (an "INVESTMENT LETTER") with respect to the
purchase by such Class B Purchaser of an interest in the Class B Certificates.
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(b) Each initial purchaser of a Class B Certificate or any
interest therein and any Assignee thereof or Participant therein shall certify
to the Transferor, the Servicer, the Trustee and the Class B Agent that it is
either (A)(i) a citizen or resident of the United States, (ii) a corporation or
other entity organized in or under the laws of the United States or any
political subdivision thereof which, if such entity is a tax-exempt entity,
recognizes that payments with respect to the Class B Certificates may constitute
unrelated business taxable income or (iii) a person not described in (i) or (ii)
whose income from the Class B Certificates is and will be effectively connected
with the conduct of a trade or business within the United States (within the
meaning of the Code) and whose ownership of any interest in a Class B
Certificate will not result in any withholding obligation with respect to any
payments with respect to the Class B Certificates by any Person (other than
withholding, if any, under Section 1446 of the Code) and who will furnish to the
Class B Agent, the Servicer and the Trustee, and to the Class B Owner making the
Transfer a properly executed U.S. Internal Revenue Service Form 4224 (and to
agree (to the extent legally able) to provide a new Form 4224 upon the
expiration or obsolescence of any previously delivered form and comparable
statements in accordance with applicable United States laws) or (B) an estate or
trust the income of which is includible in gross income for United States
federal income tax purposes.
(c) Any sale, transfer, assignment, participation, pledge,
hypothecation or other disposition (a "TRANSFER") of a Class B Certificate or
any interest therein may be made only in accordance with this Section 8.1. Any
Transfer of an interest in a Class B Certificate, a Commitment or any
Noncommitted Purchaser Percentage shall be in respect of (i) in the case of a
Committed Class B Purchaser, at least $5,000,000 in the aggregate, which may be
composed of (A) Class B Principal Balance or (B) to the extent in excess of the
Class B Principal Balance subject to such Transfer, Commitment hereunder, or
(ii) in the case of a Noncommitted Class B Purchaser, at least $5,000,000 in the
aggregate, which may be composed of (A) Class B Principal Balance, or (B) to the
extent in excess of the Class B Principal Balance subject to such Transfer, the
product of the Noncommitted Purchaser Percentage subject to such Transfer times
the aggregate Commitments hereunder. Any Transfer of an interest in a Class B
Certificate otherwise permitted by this Section 8.1 will be permitted only if it
consists of a PRO RATA percentage interest in all payments made with respect to
the Class B Purchaser's beneficial interest in such Class B Certificate. No
Class B Certificate or any interest therein may be Transferred by Assignment or
Participation to any Person (each, a "TRANSFEREE") unless prior to the transfer
the Transferee shall have executed and delivered to the Class B Agent and the
Transferor an Investment Letter.
Each of SRPC and SRI authorizes each Class B Purchaser to
disclose to any Transferee and Support Party and any prospective Transferee or
Support Party any and all financial information in the Class B Purchaser's
possession concerning the Trust, SRPC, SRI and Stage which has been delivered to
the Class B Agent, the Facility Agent or such Class B Purchaser pursuant to the
Related Documents (including information obtained pursuant to rights of
inspection granted hereunder) or which has been delivered to such Class B
Purchaser by or on behalf of the Trust, SRPC, SRI, Stage, the Transferor or the
Servicer in connection with such Class B Purchaser's credit evaluation of the
Trust, SRPC, SRI, Stage, the Transferor or the Servicer prior to becoming a
party to, or purchasing an interest in this Agreement or the Class B
Certificates; PROVIDED that prior to any such disclosure, such Transferee or
Support Party or prospective Transferee or Support Party shall have executed an
agreement agreeing to be bound by the provisions of Section 6.2 hereof.
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(d) Each Class B Purchaser may, in accordance with
applicable law, at any time grant participations in all or part of its
Commitment or its interest in the Class B Certificates, including the payments
due to it under this Agreement and the Pooling and Servicing Agreement (each, a
"PARTICIPATION"), to any Person (each, a "PARTICIPANT"); PROVIDED, HOWEVER, that
no Participation shall be granted to any Person unless and until the Class B
Agent shall have consented thereto and the conditions to Transfer specified in
this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied
and that such Participation consists of a PRO RATA percentage interest in all
payments made with respect to such Class B Purchaser's beneficial interest (if
any) in the Class B Certificates. In connection with any such Participation, the
Class B Agent shall maintain a register of each Participant and the amount of
each Participation. Each Class B Purchaser hereby acknowledges and agrees that
(A) any such Participation will not alter or affect such Class B Purchaser's
direct obligations hereunder, and (B) neither the Trustee, the Transferor nor
the Servicer shall have any obligation to have any communication or relationship
with any Participant. Each Class B Purchaser and each Participant shall comply
with the provisions of subsection 2.5(c). No Participant shall be entitled to
Transfer all or any portion of its Participation, without the prior written
consent of the Class B Agent. Each Participant shall be entitled to receive
additional amounts and indemnification pursuant to Sections 2.4, 2.5 and 2.6 as
if such Participant were a Class B Purchaser and such Sections applied to its
Participation; PROVIDED, in the case of Section 2.5, that such Participant has
complied with the provisions of subsection 2.5(c) as if it were a Class B
Purchaser. Each Class B Purchaser shall give the Class B Agent notice of the
consummation of any sale by it of a Participation and the Class B Agent (upon
receipt of notice from the related Class B Purchaser) shall promptly notify the
Transferor, the Servicer and the Trustee.
(e) Each Class B Purchaser may, with the consent of the
Class B Agent and SRPC and in accordance with applicable law, sell or assign
(each, an "ASSIGNMENT"), to any Person (each, an "ASSIGNEE") all or any part of
its Commitment or its interest in the Class B Certificates and its rights and
obligations under this Agreement and the Pooling and Servicing Agreement
pursuant to an agreement substantially in the form attached hereto as EXHIBIT C
hereto (a "TRANSFER SUPPLEMENT"), executed by such Assignee and the Class B
Purchaser and delivered to the Class B Agent for its acceptance and consent;
PROVIDED, HOWEVER, that no such assignment or sale shall be effective unless and
until the conditions to Transfer specified in this Agreement, including in
subsection 8.1(c) hereof, shall have been satisfied; and PROVIDED FURTHER,
HOWEVER, that the consent of SRPC (i) shall not be required in the case of an
assignment by a Noncommitted Class B Purchaser of its interest in the Class B
Certificates and its rights and obligations under this Agreement and the Pooling
and Servicing Agreement to any one or more of its Liquidity Providers and (ii)
shall not be unreasonably withheld in the case of an assignment by the initial
Noncommitted Class B Purchaser of its interest in the Class B Certificates and
its rights and obligations under this Agreement and the Pooling and Servicing
Agreement to any Structured Purchaser which is administered by the same Person
as such Noncommitted Class B Purchaser. From and after the effective date
determined pursuant to such Transfer Supplement, (x) the Assignee thereunder
shall be a party hereto and, to the extent provided in such Transfer Supplement,
have the rights and obligations of a Class B Purchaser hereunder as set forth
therein and (y) the transferor Class B Purchaser shall, to the extent provided
in such Transfer Supplement, be released from its Commitment and other
obligations under this Agreement; PROVIDED, HOWEVER, that after giving effect to
each such Assignment, the obligations released by any such Class B Purchaser
shall have been assumed by an Assignee or Assignees. 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 Assignee and the resulting adjustment
of Percentage Interests, Committed Purchaser Percentages, Noncommitted Purchaser
Percentages, Liquidity Percentages or Commitment Percentages arising from the
Assignment. Upon its receipt and acceptance of a duly executed Transfer
Supplement, the Class B Agent shall on the effective date determined pursuant
thereto give notice of such acceptance to the Transferor, the Servicer and the
Trustee and the Servicer will provide notice thereof to each Rating Agency (if
required).
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Upon instruction to register a transfer of a Class B
Purchaser's beneficial interest in the Class B Certificates (or portion thereof)
and surrender for registration of transfer such Class B Purchaser's Class B
Certificate(s) (if applicable) and delivery to the Transferor and the Trustee of
an Investment Letter, executed by the registered owner (and the beneficial owner
if it is a Person other than the registered owner), and receipt by the Trustee
of a copy of the duly executed related Transfer Supplement and such other
documents as may be required under this Agreement, such beneficial interest in
the Class B Certificates (or portion thereof) shall be transferred in the
records of the Trustee and the Class B Agent and, if requested by the Assignee,
new Class B Certificates shall be issued to the Assignee and, if applicable, the
transferor Class B Purchaser in amounts reflecting such Transfer as provided in
the Pooling and Servicing Agreement. Such Transfers of Class B Certificates (and
interests therein) shall be subject to this Section 8.1 in lieu of any
regulations which may be prescribed under Section 6.3 of the Pooling and
Servicing Agreement. Successive registrations of Transfers as aforesaid may be
made from time to time as desired, and each such registration of a transfer to a
new registered owner shall be noted on the Certificate Register.
(f) Each Class B Purchaser may pledge its interest in the
Class B Certificates to any Federal Reserve Bank as collateral in accordance
with applicable law.
(g) Any Class B Purchaser shall have the option to change
its Investing Office, PROVIDED that such Class B Purchaser shall have prior to
such change in office complied with the provisions of subsection 2.5(c) and
PROVIDED FURTHER that such Class B Purchaser shall not be entitled to any
amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such
change in office unless such change in office was mandated by applicable law or
by such Class B Purchaser's compliance with the provisions of this Agreement.
(h) Each Affected Party shall be entitled to receive
additional payments and indemnification pursuant to Sections 2.4, 2.5 and 2.6
hereof as though it were a Class B Purchaser and such Section applied to its
interest in or commitment to acquire an interest in the Class B Certificates;
PROVIDED that such Affected Party shall not be entitled to additional payments
pursuant to (i) Section 2.4 by reason of Regulatory Changes which occurred prior
to the date it became an Affected Party or (ii) Section 2.5 attributable to its
failure to satisfy the requirements of subsection 2.5(c) as if it were a Class B
Purchaser.
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(i) Each Affected Party claiming increased amounts
described in Sections 2.4 or 2.5 shall furnish, through its related Structured
Purchaser, to the Trustee, the Class B Agent, the Servicer and the Transferor a
certificate setting forth the basis and amount of each request by such Affected
Party for any such amounts referred to in Sections 2.4 or 2.5, such certificate
to be conclusive with respect to the factual information set forth therein
absent manifest error.
(j) In the event that a Liquidity Provider is a Downgraded
Purchaser, the related Noncommitted Class B Purchaser shall have the right to
replace such Liquidity Provider with a replacement Liquidity Provider, which
replacement Purchaser shall succeed to the rights of such Liquidity Provider
under this Agreement in respect of its Commitment as a Liquidity Provider, and
such Liquidity Provider shall assign such Commitment and its interest in the
Class B Certificates to such replacement Liquidity Provider in accordance with
the provisions of this Section 8.1; PROVIDED, that (A) such Liquidity Provider
shall not be replaced hereunder with a new investor until such Liquidity
Provider has been paid in full its Percentage Interest of the Class B Principal
Balance and all accrued and unpaid interest thereon by such new investor and all
other amounts (including all amounts owing under Sections 2.4 and 2.5) owed to
it and to all Participants with respect to such Liquidity Provider pursuant to
this Agreement, and (ii) if the Liquidity Provider to be replaced is the Class B
Agent or the Facility Agent, a replacement Class B Agent or Facility Agent, as
the case may be, shall have been appointed in accordance with Section 7.9, and
the Class B Agent or Facility Agent, as the case may be, to be replaced shall
have been paid all amounts owing to it as Class B Agent or Facility Agent, as
the case may be, pursuant to this Agreement. For purposes of this subsection, a
Liquidity Provider shall be a "DOWNGRADED PURCHASER" if and so long as the
credit rating assigned to its short-term obligations by Moody's or Standard &
Poor's on the date on which it became a party to this Agreement shall have been
reduced or withdrawn.
(k) In the event that a Class B Purchaser has requested
payment of additional amounts referred to in subsection 2.4(a), 2.4(b) or 2.5
and payment thereof hereunder shall not be waived by such Class B Purchaser
within 30 days following a request for such waiver from the Transferor, the
Transferor shall have the right to replace such Class B Purchaser hereunder with
a replacement purchaser which shall succeed to the rights of such Class B
Purchaser under this Agreement. Any such replacement purchaser shall be (i)
reasonably acceptable to the Class B Agent and (ii) if such Class B Purchaser is
a Liquidity Provider, acceptable to the related Noncommitted Class B Purchaser
in its sole discretion. Such Class B Purchaser shall assign its Commitment
hereunder and its beneficial interest in the Class B Certificates to such
replacement purchaser in accordance with the provisions of Section 8.1,
PROVIDED, that (i) such Class B Purchaser shall not be replaced hereunder with a
replacement purchaser until such Class B Purchaser has been paid in full its
Percentage Interest of the Class B Principal Balance and all accrued and unpaid
interest thereon by such replacement purchaser and all other amounts (including
all amounts owing under Section 2.4 and 2.5) owed to it pursuant to this
Agreement and (ii) if the Class B Purchaser to be replaced is the Class B Agent
or the Facility Agent or, unless the Class B Agent and the Facility Agent
otherwise agree, a Structured Purchaser sponsored or administered by the Class B
Agent or the Facility Agent (in its individual capacity), a replacement Class B
Agent or the Facility Agent, as the case may be, shall have been appointed in
accordance with Section 7.9 and the Class B Agent or the Facility Agent, as the
case may be, to be replaced shall have been paid all amounts owing to it as
Class B Agent or the Facility Agent, as the case may be, pursuant to this
Agreement; PROVIDED, FURTHER, that such Class B Purchaser shall not be replaced
hereunder with a replacement purchaser unless the Transferor shall have provided
to such Class B Purchaser and the Class B Agent with an Officer's Certificate
stating that such replacement purchaser is not subject to, or has agreed not to
seek, the additional amounts which Class B Purchaser requested pursuant to
subsection 2.4(a), 2.4(b) or 2.5, as the case may be.
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8.2 TAX CHARACTERIZATION. It is the intention of the parties
hereto that the Class B Certificates be treated for tax purposes as
indebtedness.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. This Agreement may not be amended,
supplemented or modified nor may any provision hereof be waived except in
accordance with the provisions of this Section 9.1. With the written consent of
the Required Class B Owners and the Required Class B Purchasers, the Class B
Agent, the Facility Agent, SRPC and SRI may, from time to time, enter into
written amendments, supplements, waivers or modifications hereto for the purpose
of adding any provisions to this Agreement or changing in any manner the rights
of any party hereto or waiving, on such terms and conditions as may be specified
in such instrument, any of the requirements of this Agreement; PROVIDED,
HOWEVER, that no such amendment, supplement, waiver or modification shall (i)
reduce the amount of or extend the maturity of any Class B Certificate or reduce
the rate or extend the time of payment of interest thereon, or reduce or alter
the timing of any other amount payable to any Class B Purchaser hereunder or
under the Supplement, in each case without the consent of the Class B Purchaser
affected thereby, (ii) amend, modify or waive any provision of this Section 9.1,
or, if such amendment would have a material adverse effect on the Class B
Purchasers, the definition of "Class B Invested Amount" or "Class B Principal
Balance", or reduce the percentage specified in the definition of Required Class
B Owners or Required Class B Purchasers, in each case without the written
consent of all Class B Purchasers or (iii) amend, modify or waive any provision
of Section 7 of this Agreement without the written consent of the Class B Agent,
the Facility Agent, the Required Class B Owners and Required Class B Purchasers.
Any waiver of any provision of this Agreement shall be limited to the provisions
specifically set forth therein for the period of time set forth therein and
shall not be construed to be a waiver of any other provision of this Agreement.
Each party hereto agrees that, on a one-time basis following the
initial review of the Related Documents by Moody's and Standard & Poor's on
behalf of Class B Purchasers which are Structured Purchasers, it will at the
request of the Class B Agent made prior to June 30,1998 enter into or to consent
to, as applicable, any amendments or other modifications to the Related
Documents, other than those requiring the consent of all Class B Purchasers as
provided above in this subsection, as shall reasonably be determined by the
Class B Agent to be required for any initial Class B Purchaser which is a
Structured Purchaser to obtain or maintain an informal rating of the Class B
Certificates which will permit such Structured Purchaser's commercial paper
notes to maintain at least the rating from Standard & Poor's and Moody's as in
effect immediately prior to such Structured Purchaser's becoming a Class B
Purchaser after giving effect to its initial purchase of the Class B
Certificates and to purchases from time to time by such Structured Purchaser of
Additional Class B Invested Amounts as contemplated by this Agreement, without
giving effect to any increase in any letter of credit or other enhancement
provided to such Structured Purchaser (other than the liquidity support provided
to such Structured Purchaser by Liquidity Providers).
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<PAGE>
The Facility Agent may cast any vote or give any direction under
the Pooling and Servicing Agreement on behalf of the Class B Certificateholders
if it has been directed to do so by (i) the Required Class B Owners, (ii) the
Required Class B Purchasers, and (iii) by the Class A Purchasers (as defined in
the Class A Certificate Purchase Agreement) required under the terms of Section
9.1 of the Class A Certificate Purchase Agreement.
9.2 NOTICES. (a) All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or, in the case of mail or
telecopy notice, when received, addressed as follows or, with respect to a Class
B Purchaser, as set forth in its respective Joinder Supplement or Transfer
Supplement, or to such other address as may be hereafter notified by the
respective parties hereto:
SRPC: SRI Receivables Purchase Co., Inc.
10201 Main Street
Houston, Texas 77025
Attention: Treasurer
Telephone: (713) 669-2601
Telecopy: (713) 669-2621
SRI Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Treasurer
Telephone: (713) 669-2601
Telecopy: (713) 669-2621
The Trustee: Bankers Trust (Delaware)
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Attention: Corporate Trust and Agency Group
Telephone: (302) 636-3300
Telefax: (302) 636-3222
Mailing Address:
P.O. Box 8795
Wilmington, Delaware 19899-8795
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<PAGE>
The Class B Credit Suisse First Boston, New York Branch
Agent or the Eleven Madison Avenue
Facility New York, New York 10010
Agent: Attention: Asset Finance Department
Telephone: (212) 325-9076
Telefax: (212) 325-6677
Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department, 4th Floor
Telephone: (212) 553-3607
Telefax: (212) 553-4773
Standard Standard & Poor's Ratings Services
& Poor's: 26 Broadway, 15th Floor
New York, New York 10004
Attention: Asset-Backed Surveillance Department
Telephone: (212) 208-1892
Telefax: (212) 412-0323
(b) All payments to be made to the Class B Agent or any Class B
Purchaser hereunder shall be made in United States dollars and in immediately
available funds not later than 2:30 p.m. New York City time on the date payment
is due, and, unless otherwise specifically provided herein, shall be made to the
Class B Agent, for the account of one or more of the Class B Purchasers or for
its own account, as the case may be. Unless otherwise directed by the Class B
Agent, all payments to it shall be made by federal wire (ABA #0260-0917-9) and
telegraph name (CR SUISSE NY), to account number 930539-12, reference SRI
Receivables Master Trust, Series 1997-1, with telephone notice (including
federal wire number) to the Asset Finance Department of Credit Suisse First
Boston (212-325-9076).
(c) Any notices permitted or required hereunder to be given by
SRPC shall be effective if given on behalf of SRPC by the Servicer.
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Class B Agent, the Facility Agent or any
Class B Purchaser, any right, remedy, power or privilege under any of the
Related Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege under any of the
Related Documents preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in the Related Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, the Class B
Agent, the Facility Agent, the Class B Purchasers, any Assignee and their
respective successors and assigns, except that SRPC, SRI, the Transferor and the
Servicer may not assign or transfer any of their respective rights or
obligations under this Agreement except as provided herein and in the Pooling
and Servicing Agreement, without the prior written consent of the Required Class
B Owners and the Required Class B Purchasers.
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<PAGE>
9.5 SUCCESSORS TO SERVICER. (a) In the event that a transfer of
servicing occurs under Article VIII or Article X of the Pooling and Servicing
Agreement, (i) from and after the effective date of such transfer, the Successor
Servicer shall be the successor in all respects to the Servicer and shall be
responsible for the performance of all functions to be performed by the Servicer
from and after such date, except as provided in the Pooling and Servicing
Agreement, and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Successor Servicer, and (ii) as of the date of such transfer, the
Successor Servicer shall be deemed to have made with respect to itself the
representations and warranties made in Section 4.2 (in the case of subsection
4.2(a) with appropriate factual changes); PROVIDED, HOWEVER, that the references
to the Servicer contained in Section 5.1 of this Agreement shall be deemed to
refer to the Servicer with respect to responsibilities, duties and liabilities
arising out of an act or acts, or omission, or an event or events giving rise to
such responsibilities, duties and liabilities and occurring during such time
that the Servicer was Servicer under this Agreement and shall be deemed to refer
to the Successor Servicer with respect to responsibilities, duties and
liabilities arising out of an act or acts, or omission, or an event or events
giving rise to such responsibilities, duties and liabilities and occurring
during such time that the Successor Servicer acts as Servicer under this
Agreement; PROVIDED, HOWEVER, to the extent that an obligation to indemnify the
Class B Purchasers under Section 2.6 arises as a result of any act or failure to
act of any Successor Servicer in the performance of servicing obligations under
the Pooling and Servicing Agreement or the Supplement, such indemnification
obligation shall be of the Successor Servicer and not its predecessor. Upon the
transfer of servicing to a Successor Servicer, such Successor Servicer shall
furnish to the Class B Agent copies of its audited annual financial statements
for each of the three preceding fiscal years or if the Trustee or any other
banking institution becomes the Successor Servicer, such Successor Servicer
shall provide, in lieu of the audited financial statements required in the
immediately preceding clause, complete and correct copies of the publicly
available portions of its Consolidated Reports of Condition and Income as
submitted to the FDIC for the two most recent year end periods.
(b) In the event that any Person becomes the successor to
the Transferor pursuant to Article VII of the Pooling and Servicing Agreement,
from and after the effective date of such transfer, such successor to the
Transferor shall be the successor in all respects to the Transferor and shall be
responsible for the performance of all functions to be performed by the
Transferor from and after such date, except as provided in the Pooling and
Servicing Agreement, and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Transferor by the terms and
provisions hereof, and all references in this Agreement to the Transferor shall
be deemed to refer to the successor to the Transferor; PROVIDED, HOWEVER, that
the references to the Transferor contained in Sections 2.5, 2.6 and 5.1 of this
Agreement shall be deemed to refer to SRPC with respect to responsibilities,
duties and liabilities arising out of an act or acts, or omission, or an event
or events giving rise to such responsibilities, duties and liabilities and
occurring during such time that SRPC was Transferor under this Agreement and
shall be deemed to refer to the successor to SRPC as Transferor with respect to
responsibilities, duties and liabilities arising out of an act or acts, or
omission, or an event or events giving rise to such responsibilities, duties and
liabilities and occurring during such time that the successor to SRPC acts as
Transferor under this Agreement.
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<PAGE>
9.6 COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.
9.7 SEVERABILITY. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
9.8 INTEGRATION. This Agreement and the Class B Fee Letter
represent the agreement of the Class B Agent, the Facility Agent, SRPC, SRI, the
Transferor, the Servicer and the Class B Purchasers with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Class B Purchasers, the Class B Agent or the Facility Agent
relative to subject matter hereof not expressly set forth or referred to herein
or therein. Without limiting the generality of the foregoing, that certain
letter agreement, dated as of October 27, 1997, between Stage and Credit Suisse
First Boston, New York Branch, is superseded hereby and shall have no further
force or effect.
9.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.10 TERMINATION. This Agreement shall remain in full force and
effect until the earlier to occur of (a) payment in full of the Class B
Repayment Amount and all other amounts payable to the Class B Purchasers, the
Class B Agent and the Facility Agent hereunder and the termination of all
Commitments and (b) the Series Termination Date; PROVIDED, HOWEVER, that if the
Class B Repayment Amount and all other amounts payable to the Class B Purchasers
hereunder are paid in full and all Commitments have terminated prior to the
Series Termination Date, the Class B Agent shall notify the Trustee that
thereafter all amounts otherwise payable to the Class B Purchasers hereunder
shall be payable to the Transferor or any Person designated thereby; and
PROVIDED, FURTHER, that the provisions of Sections 2.4, 2.5, 2.6, 6.1, 6.2, 7.7,
8.2, 9.11, 9.13 and 9.14 shall survive termination of this Agreement and any
amounts payable to the Facility Agent, the Class B Agent, Class B Purchasers or
any Affected Party thereunder shall remain payable thereto.
9.11 LIMITED RECOURSE; NO PROCEEDINGS. (a) The obligations of
SRPC, SRI, the Transferor and the Servicer under this Agreement are several
(except as specifically provided herein) and are solely the corporate
obligations of SRPC, SRI, the Transferor or the Servicer, as applicable. No
recourse shall be had for the payment of any fee or other obligation or claim
arising out of or relating to this Agreement or any other agreement, instrument,
document or certificate executed and delivered or issued by SRPC, SRI, the
Transferor and the Servicer or any officer of any of them in connection
therewith, against any stockholder, employee, officer, director or incorporator
of SRPC, SRI, the Transferor or the Servicer. With respect to obligations of the
Transferor, neither the Class B Agent, the Facility Agent nor any Class B
Purchaser shall look to any property or assets of the Transferor, other than to
(a) amounts payable to the Class B Agent, the Facility Agent or a Class B
Purchaser or to the Transferor under the Receivables Purchase Agreement, any
Supplement or the Pooling and Servicing Agreement and (b) any other assets of
the Transferor not pledged to third parties or otherwise encumbered in any
manner permitted by the Transferor's Certificate of Incorporation. Each Class B
Purchaser, the Facility Agent and the Class B Agent hereby agrees that to the
extent such funds are insufficient or unavailable to pay any amounts owing to it
by the Transferor pursuant to this Agreement, prior to the earlier of the Trust
Termination Date or the commencement of a bankruptcy or insolvency proceeding by
or against the Transferor, it shall not constitute a claim against the
Transferor. Nothing in this paragraph shall limit or otherwise affect the
liability of the Servicer with respect to any amounts owing by it hereunder or
the right of the Class B Agent, the Facility Agent or any Class B Purchaser to
enforce such liability against the Servicer or any of its assets.
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<PAGE>
(b) Each of SRPC, SRI, the Transferor, the Servicer, the
Class B Agent, the Facility Agent and each Class B Purchaser hereby agrees that
it shall not institute or join against any Structured Purchaser any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceeding under any federal or state bankruptcy or similar law, for one year
and a day after the latest maturing commercial paper note, medium term note or
other debt security issued by such Structured Purchaser is paid.
9.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement, the purchase of the Class B
Certificates hereunder and the termination of this Agreement.
9.13 SUBMISSION TO JURISDICTION; WAIVERS. EACH OF SRPC, SRI, THE
TRANSFEROR, THE SERVICER, THE FACILITY AGENT, THE CLASS B AGENT AND EACH CLASS B
PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
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<PAGE>
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM
OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH
IN SECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL
HAVE BEEN NOTIFIED PURSUANT THERETO; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION.
9.14 WAIVERS OF JURY TRIAL. EACH OF SRPC, SRI, THE TRANSFEROR,
THE SERVICER, THE FACILITY AGENT, THE CLASS B AGENT AND THE CLASS B PURCHASERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER
DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Certificate Purchase Agreement to be duly executed by their respective officers
as of the day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor
By:/s/ Mark A. Hess
Name: Mark A. Hess
Title: Treasurer
SPECIALTY RETAILERS, INC.,
individually and as Servicer
By:/s/ Mark A. Hess
Name: Mark A. Hess
Title: Treasurer
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Class B Agent and as Facility Agent
By:/s/ Dave E. Shrenzel
Name: Dave E. Shrenzel
Title: Director
By:/s/ Alberto Zonca
Name: Alberto Zonca
Title: Associate
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EXHIBIT 10.3
STAGE STORES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 1, 1998, between Stage Stores, Inc. a
Delaware corporation (the "COMPANY"), and Carl E. Tooker ("EXECUTIVE").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall continue to employ Executive, and
Executive hereby accepts continued employment with the Company, upon the terms
and conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 4 hereof (the EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the
President, Chairman and Chief Executive Officer of the Company and shall have
the normal duties, responsibilities and authority of the President, Chairman and
Chief Executive Officer, subject to the power of the Board to expand such
duties, responsibilities and authority and to override action of the President,
Chairman and Chief Executive Officer.
(b) Executive shall report to the Board, and Executive shall devote his
best efforts and his full business time and attention (expect for permitted
vacation periods and reasonable periods of illness or other incapacity) to the
business and affaires of the Company and its Subsidiaries. Executive shall
preform his duties and responsibilities to the best of his abilities in a
diligent, trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "SUBSIDIARIES" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
(d) Whenever this Agreement calls for action on the part of the Board,
the Board may delegate responsibility for such action to a duly appointed
committee of the Board, including the Compensation Committee of the board.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, Executive's base salary shall be
$770,000 per annum or such other rate as the Board may designate from time to
time (the "BASE SALARY"), which salary shall be payable in regular installments
in accordance with the Company's general payroll practices and shall be subject
to customary withholding. Executive shall also receive an auto allowance of
$1,000.00 per month or such other rate as the Board of Directors may designate
and be reimbursed for actual and necessary tax planning and financial planning
expenses up to a maximum of $5,000 per year or such other annual amount
designated by the Board of Directors. In addition, during the Employment Period,
Executive shall be entitled to participate in all of the Company's employment
benefit programs for which senior executive employees of the Company and its
Subsidiaries are generally eligible, including all supplemental benefits such
as; supplemental retirement plans, supplemental medical plans, supplemental
disability plans, deferred compensation plans, supplemental life insurance plans
and any other approved plans made available by the company to the Executive.
Also, the Executive shall be entitled to four (4) weeks of paid vacation each
year, which if not taken may not be carried forward to any subsequent year.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing such duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, the Board may award a bonus to
Executive following the end of each fiscal year during the Employment Period
based upon Executive's performance and the Company's operating results during
such year in relation to performance targets established by the Board. The
target level of such bonus is 60% of base salary, or such higher rate as
designated by the Board. Determination of the bonus amount shall take into
account such unusual or non-recurring items as the Board deems appropriate.
4. TERM AND TERMINATION.
(a) The initial employment period shall end on April 1, 1999 and the
Employment Period shall be automatically renewed for consecutive additional
periods of one year each commencing at the end of the initial Employment Period
hereof or any subsequent renewal term, on the same terms and conditions as
herein set forth; however (i) the Employment Period shall terminate prior to the
expiration of the initial or subsequent Employment Period upon Executive's
resignation, (other than for Good Reason as defined below), death or permanent
disability or incapacity (as determined by the Board in its good faith
judgement) and (ii) the Employment Period may be terminated by the Company at
any time prior to such a date for Good Cause (as defined below) or without Good
Cause. In the event the Company chooses not to continue automatic renewal of
this contract at the conclusion of any one year employment period, or the
Company lowers the benefit or compensation level in this Agreement, the Company
must notify Executive in writing 30 days prior to the end of the employment
period that the employment agreement will not be renewed for an additional one
year period. Such notification by the Company will be deemed appropriate grounds
for the Executives resignation and termination for Good Reason making Executive
eligible for benefits and payments under section 5. of this agreement.
(b) In addition to termination of the Employment Period as provided
above, Executive may terminate the Employment Period for Good Reason. If
Executive deems Good Reason to exist Executive shall deliver a written notice to
the Company specifying the violation. If the Company shall fail, within (10)
days, to respond to such notice in writing, or shall respond but shall fail to
specify action taken to correct the event or condition which gave or is giving
rise to such Good Reason, Executive may, at his option,
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<PAGE>
resign his employment by giving a further written notice which shall state an
effective date of such resignation no earlier than ten (10) days and no later
than twenty (20) days thereafter. Such resignation shall be deemed a termination
by the Executive for Good Reason.
(c) If the Employment Period is terminated by the Company without Good
Cause or by Executive for Good Reason, Executive shall be entitled to receive a
amount equal to three times his annual Base Salary and annual targeted bonus
amount in effect on the date of termination of Executive's employment (the
"TERMINATION DATE") together with any accrued and unpaid benefits, vacation and
bonus, if and only if Executive has not breached the provisions of paragraphs 7
and 8 hereof and is not entitled to receive payments pursuant to paragraph 5
hereof. The amounts payable pursuant to this paragraph 4(c) may be payable, at
Executive's discretion, in one lump sum payment within 30 days following
termination of the Employment Period and will not be reduced by any other
compensation he has earned from any other source nor by any other benefits due
him.
Also, if the Employment Period is terminated without Good Cause, Executives
Stock Option Awards and Restricted Stock Grant Awards will continue to vest
during the three year time period following termination without Good Cause.
During this three year period of vesting Executive will be able to exercise of
Stock Options and distribution of Restricted Grant shares as though Executive
had continued to work and vest normally for thirty six (36) months after the
date of termination.
(d) If the Employment Period is terminated by the Company for Good Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(e) Prior to the occurrence of a Change in Control (as defined), "GOOD
REASON" is defined as (a) non-payment of compensation which shall persist more
than ten days after written notice of such non-payment is given by Executive to
the Company; (b) removal of Executive from the offership position of President,
Chairman and Chief Executive Officer or as a Director of Specialty Retailers,
Inc.; (c) Executive shall be assigned any duties which are not appropriate to
the position assigned to him pursuant to this Agreement or shall be deprived of
any of the authority previously exercised by him; (d) Executive's
responsibilities as Chief Executive Officer are substantially diminished, or any
other person shall be appointed to a position of equal or superior authority to
Executive; or (e) the Company shall comment a substantial breach of any other
material provision of this Agreement.
(f) All of Executive's rights to fringe benefits and bonuses hereunder
(if any) which accrue after the termination of the Employment Period shall cease
upon such termination.
(g) Prior to receipt of any severance benefits hereunder including any
amounts payable pursuant to sections 4(b), 4(c) or 5(a), Executive shall execute
a release of claims against the Company and its affiliates in form and substance
reasonably satisfactory to the Company.
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<PAGE>
5. CHANGE IN CONTROL.
(a) If at any time after the date hereof a Change in Control of the
Company occurs and within three years thereafter (i) Executive involuntarily
ceases to be an employee of the Company for any reason other than termination
for Good Cause, disability or death or (ii) Executive terminates his employment
with the Company for Good Reason, then Executive shall be entitled to benefits
under this Section 5. The amount of such benefits (which benefits shall be in
addition to any other benefits to which Executive is entitled other than by
reason of this Agreement) shall be equal to the sum of (i) unpaid salary with
respect to any vacation days accrued but not taken as of the Termination Date,
(ii) accrued but unpaid salary and targeted bonus through the Termination Date;
and (iii) an amount equal to three times the Base Salary and benefits in effect
on the Termination Date plus an amount equal to three times the Executives
target bonus amount in effect at that time. In addition, Executive shall receive
an amount equal to the additional tax due defined as excise tax computed on the
severance payment of three times base and bonus which amount shall be grossed up
for tax purposes. Executive shall not be required to mitigate the amount of any
payment or benefit provided for in this Section 5 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section be reduced by any compensation earned by him as a result of employment
by another employer or by retirement benefits after the Termination Date, or
otherwise.
(b) Executive is the holder of various stock option agreements and also
is entitled to receive various restricted stock grant awards which are approved
by the Board. Each of these "option" and "grant" agreements specify individual
vesting schedules which determine the dates upon which Executive can take
ownership of the stipulated shares. At any time after the date hereof a Change
in Control (as defined) of the Company occurs, then effective on that date (the
"TRIGGER Date") all of Executives stock option agreements and restricted stock
grant awards will automatically become fully vested and Executive will be
enabled to purchase and/or take possession of all otherwise unvested shares.
Executive will also be entitled to receive from the Company an amount equal to
the federal taxes due (including any excise tax due) on the gain of these shares
which were received due to the accelerated vesting plus additional "tax" on the
tax computed by the companies traditional "tax grossing-up method". The amount
of this tax payment will be made to the Executives tax withholding account
within 30 days following the Trigger Date of said Change in Control.
(c) For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to have occurred if (i) any "person" or "group" (as such terms are used
in Section 13(b) of the Securities Exchange Act of 1937, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities and, following such "person" or "group" acquiring 50% or
more of the combined voting power of the Company (the "TRIGGER DATE") the
members of the Board immediately prior to the Trigger Date cease to constitute a
majority of the Board, (ii) there shall be consummated any consolidation or
merger of the Company in which the Company is not the surviving or continuing
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have (directly or indirectly) at least a 51% ownership interest in
the outstanding Common Stock of the surviving corporation immediately after
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the merger, (iii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (iv) the stockholders of the Company approve
any plan or proposal for the liquidation or dissolution of the Company.
6. CERTAIN DEFINITIONS. For purposes of this Agreement, "GOOD CAUSE"
means (a) Executive's conviction of any criminal violation involving dishonesty
or fraud, (b) Executive's gross negligence or willful and serious misconduct in
the performance of his duties, or (c) Executive's willful failure to comply with
reasonable directives of the Board; Executive shall be "DISABLED" if, by any
reason of physical or mental disability, he becomes unable to preform his normal
duties for more than 6 months in aggregate (excluding infrequent and temporary
absence due to ordinary transitory illness) during any twelve-month period; and
("GOOD REASON") shall exist, following a Change in Control, if, without
Executive's express written consent, (a) Executive is assigned duties
inconsistent with his position, duties, responsibilities and status with the
Company as of the time of a Change of Control, (b) the Company reduces
Executive's Base Salary as in effect on the effective date hereof, or (c) the
Company requires Executive regularly to perform his duties of employment beyond
a fifty-mile radius from the location of his employment as of the time of a
Change of Control.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any
Subsidiary ("CONFIDENTIAL INFORMATION") are the property of the Company or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own purposes any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions. Executive
shall deliver to the Company at the termination of the Employment Period, or at
any time the Company may request, all memoranda, notes, plans, records, reports,
computer tapes, printouts and software and other documents and data (and copies
thereof) relating to the Confidential Information, or the business of the
Company or any Subsidiary which he may then posses or have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive hereby agrees that during the Noncompete Period (as
defined below), he will not directly or indirectly either for himself or for any
other person or entity (whether as an owner, stockholder, consultant, agent,
advisor, partner (general or limited) or otherwise), individually or as a part
of a group, own, operate, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with any part of
the business presently engaged in by the Company within any geographical area in
which the Company engages or has proposed to engage in such business (or solicit
any person to engage in any of the foregoing activities). For purposes of the
foregoing, a business shall be deemed to be competing with the business of the
Company if such business (a) operates apparel stores in small markets (i.e.,
with populations of less than 50,000) and (b) operates a significant number of
its apparel stores (25% or more of its total apparel stores) in 10,000 - 30,000
square foot formats and (c) has sales in excess of $10 million per annum.
"NONCOMPETE PERIOD" shall mean the term of Executive's employment
5
<PAGE>
and a period of time following his termination of 36 months. Nothing herein
shall prohibit Executive from being a passive owner of not more than 5% in the
aggregate, of the outstanding stock of any class of a corporation which is
publicly traded and which competes with the business of the Company so long as
Executive has no direct or indirect participation in the management of such
corporation. Executive acknowledged that there is no general geographical
restriction (other than in small markets with populations less than 100,000)
contained in this paragraph due to the Company-wide nature of his job
responsibilities and that no lesser scope of the restriction would adequately
protect the Company's assets and other legitimate business interests.
(b) During this same period of time which applies as specified in 8(a)
above, Executive agrees not to directly or indirectly, on his own behalf or for
any other person or entity, induce or attempt to induce any employee of the
Company to leave the employ of the Company, hire any person who is an employee
of the Company as of or immediately prior to the time of such hiring, or induce
or attempt to induce any manufacturers' representative, customer, supplier,
licensee, agent or other business relation of the Company to cease doing
business with the Company.
9. SURVIVAL. Paragraphs 7 and 8 and paragraphs 11 through 18 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
10. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
NOTICES TO EXECUTIVE:
Carl Tooker
8826 Stablecrest Blvd.
Houston, Texas 77024
NOTICES TO THE COMPANY :
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Chief Financial Officer
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this agreement shall be deemed to have been given when so delivered
or mailed.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement if held
6
<PAGE>
to be invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or any other jurisdiction, but this
Agreement shall be reformed, constructed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
12. COMPETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of every date herewith embody the
complete agreement and understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
14. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. CHOICE OF LAW. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Texas, without giving effect to any choice of law or
conflict of law rules or provision (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas. In furtherance of the foregoing, the internal law
of the State of Texas shall control the interpretation and construction of this
Agreement (and all schedules and exhibits hereto), even though under the
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily apply.
17. AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity binding effect or
enforceability of this Agreement.
* * * * *
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written above.
STAGE STORES, INC.
By __________________________
Its __________________________
-----------------------------
Carl Tooker
8
EXHIBIT 10.5
STAGE STORES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 1, 1998, between Stage Stores, Inc. A
Delaware Corporation (the "COMPANY"), and Harry Brown ("EXECUTIVE").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall continue to employ Executive, and
Executive hereby accepts continued employment with the Company, upon the terms
and conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 4 hereof (the EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the Vice
Chairman - Chief Merchandising Officer of the Company and shall have the normal
duties, responsibilities and authority of the Vice Chairman - Chief
Merchandising Officer, subject to the power of the Board to expand such duties,
responsibilities and authority and to override actions of Vice Chairman Chief
Merchandising Officer.
(b) Executive shall report to the Board or to the Chief Executive
Officer, as designated by this Board, and Executive shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company and its Subsidiaries. Executive shall perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "SUBSIDIARIES" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
(d) Whenever this Agreement calls for action on the part of the Board,
the Board may delegate responsibility for such action to a duly appointed
committee of the Board, including the Compensation Committee of the Board.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, Executive's base salary shall be
$425,000 per annum or such other higher rate as the Board may designate from
time to time (the "BASE SALARY"), which salary shall be payable in regular
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding. Executive shall also receive an auto
allowance of $1,000.00 per month or such other rate as the Board of Directors
may designate and be reimbursed for actual and necessary tax
<PAGE>
planning and financial planning expenses up to a maximum of $5,000 per year or
such other annual amount designated by the Board of Directors. In addition,
during the Employment Period, Executive shall be entitled to participate in all
of the Company's employment benefit programs for which senior executive
employees of the Company and its Subsidiaries are generally eligible, including
all supplemental benefit programs such as; supplemental retirement plans,
supplemental medical plans, supplemental disability plans, deferred compensation
plans, supplemental life insurance plans and any other approved plans made
available by the Company to the Executive. Also, the Executive shall be entitled
to four (4) weeks of paid vacation each year, which if not taken may not be
carried forward to any subsequent year.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing such duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, the Board may award a bonus to
Executive following the end of each fiscal year during the Employment Period
based upon Executive's performance and the Company's operating results during
such year in relation to performance targets established by the Board. The
target level of such bonus is 50% of base salary, or such higher rate as
designated by the Board. Determination of the bonus amount shall take into
account such unusual or non-recurring items as Board deems appropriate.
4. TERM AND TERMINATION.
(a) The initial employment period shall end on April 1, 1999 and the
Employment Period shall be automatically renewed for consecutive additional
periods of one year each commencing at the end of the initial Employment Period
hereof or any subsequent renewal term, on the same terms and conditions as
herein set forth; however (i) the Employment Period shall terminate prior to the
expiration of the initial or subsequent Employment Period upon Executive's
resignation, (other than for Good Reason as defined below), death or permanent
disability or incapacity (as determined by the Board in its good faith
judgement) and (ii) the Employment Period may be terminated by the Company at
any time prior to such a date for Good Cause (as defined below) or without Good
Cause. In the event the Company chooses not to continue automatic renewal of
this contract at the conclusion of any one year employment period, or the
Company lowers the benefit or compensation level in this Agreement, the Company
must notify Executive in writing 30 days prior to the end of the employment
period that the employment agreement will not be renewed for an additional one
year period. Such notification by the Company will be deemed appropriate grounds
for the Executives resignation and termination for Good Reason making Executive
eligible for benefits and payments under section 5. of this agreement.
(b) If the Employment Period is terminated by the Company without Good
Cause, Executive shall be entitled to receive an amount equal to two times his
annual Base Salary and benefits plus an amount equal to two times the
Executive's annual targeted bonus amount in effect on the date of termination of
Executive's employment (the "TERMINATION DATE") together with any accrued and
unpaid benefits and bonus, if and only if Executive has not breached the
provisions of paragraphs 7 and 8 hereof
2
<PAGE>
and is not entitled to receive payments pursuant to paragraph 5 hereof. The
amounts payable pursuant to this paragraph 4(b) may be payable, at the
Executives discretion, in one lump sum within thirty (30) days following
termination of the Employment period and will not be reduced by any other
compensation he has earned from any other source nor by any benefits due to him.
Also, if the Employment Period is terminated without Good Cause, Executives
Stock Option Awards and Restricted Stock Grant Awards will continue to vest
during the two year time period following termination without Good Cause. During
this two year period of vesting, Executive will be able to exercise Stock
Options and receive distribution of Restricted Grant shares as though Executive
had continued to work and vest normally for twenty four (24) months after the
date of termination.
(c) If the Employment Period is terminated by the Company for Good Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses hereunder
(if any) which otherwise would accrue after the termination of the Employment
Period shall cease upon such termination.
(e) Prior to receipt of any severance benefits hereunder including any
amounts payable pursuant to sections 4(b), 4(c) or 5(a), Executive shall execute
a release of claims against the Company and its affiliates in form and substance
reasonably satisfactory to the Company.
5. CHANGE IN CONTROL.
(a) If at any time after the date hereof a Change in Control (as
defined) of the Company occurs and within two years thereafter (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
termination for Good Cause, disability or death or (ii) Executive terminates his
employment with the Company for Good Reason (as defined), then Executive shall
be entitled to benefits under this Section 5. The amount of such benefits (which
benefits shall be in addition to any other benefits to which Executive is
entitled other than by reason of this Agreement) shall be equal to the sum of
(i) unpaid salary with respect to any vacation days accrued but not taken as of
the Termination Date; (ii) accrued but unpaid salary and targeted bonus through
the Termination Date; and (iii) an amount equal to three times the Base Salary
and benefits in effect at the time plus an amount equal to three times the
Executives annual targeted bonus amount in effect on the Termination Date; In
addition, Executive shall receive an amount equal to the additional tax due
defined as excise tax computed on the severance payment of three times base and
bonus which amount shall be grossed up for tax purposes. The amount of any
payment or benefit provided for in clause 5(a)(iii) above shall be payable at
Executives discretion in one lump sum payment within 30 days following the
termination of Executive and shall not be reduced by any compensation earned by
him from any other source.
3
<PAGE>
(b) Executive is the holder of various stock option agreements and also
is entitled to receive various restricted stock grant awards which are approved
by the Board. Each of these "option" and "grant" agreements specify individual
vesting schedules which determine the dates upon which Executive can take
ownership of the stipulated shares. At any time after the date hereof a Change
in Control (as defined) of the Company occurs, then effective on that date (the
"TRIGGER Date") all of Executives stock option agreements and restricted stock
grant awards will automatically become fully vested and Executive will be
enabled to purchase and/or take possession of all otherwise unvested shares.
Executive will also be entitled to receive from the Company an amount equal to
the federal taxes due (including any excise taxes due) on the gain of these
shares which were received due to the accelerated vesting plus additional "tax"
on the tax computed by the companies traditional "tax grossing-up method". The
amount of this tax payment will be made to the Executives tax withholding
account within 30 days following the Trigger Date of said Change in Control.
(c) For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to have occurred if (i) any "person" or "group" (as such terms are used
in Section 13(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities and, following such "person" or "group" acquiring 50% or
more of the combined voting power of the Company (the "TRIGGER DATE") the
members of the Board immediately prior to the Trigger Date cease to constitute a
majority of the Board, (ii) there shall be consummated any consolidation or
merger of the Company in which the Company is not the surviving or continuing
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have (directly or indirectly) at least a 51% ownership interest in
the outstanding Common Stock of the surviving corporation immediately after the
merger, (iii) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the assets of
the Company, or (iv) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company.
6. CERTAIN DEFINITIONS. For purposes of this Agreement, "GOOD CAUSE"
means (a) Executive's conviction of any criminal violation involving dishonesty
or fraud, (b) Executive's gross negligence or willful and serious misconduct in
the performance of his duties, or (c) Executive's willful failure to comply with
reasonable directives of the Board or the Chief Executive Officer; and "GOOD
REASON" shall exist if, without Executive's express written consent, (a)
Executive is assigned duties inconsistent with his position, duties,
responsibilities and status with the Company as of the time of a Change of
Control, (b) the Company reduces Executive's Base Salary as in effect on the
effective date hereof, or (c) the Company requires Executive regularly to
perform his duties of employment beyond a fifty-mile radius from the location of
his employment as of the time of a Change in Control.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any
Subsidiary ("CONFIDENTIAL INFORMATION") are the property of the Company or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his
4
<PAGE>
own purposes any Confidential Information without the prior written consent of
the Board, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions. Executive shall deliver to the Company at the
termination of the Employment Period, or at any time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, or the business of the Company or any Subsidiary which
he may then posses or have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive hereby agrees that during the Noncompete Period (as
defined below), he will not directly or indirectly either for himself or for any
other person or entity (whether as an owner, stockholder, consultant, agent,
advisor, partner (general or limited) or otherwise), individually or as a part
of a group, own, operate, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with any part of
the business presently engaged in by the Company within any geographical area in
which the Company engages or has proposed to engage in such business (or solicit
any person to engage in any of the foregoing activities). For purposes of the
foregoing, a business shall be deemed to be competing with the business of the
Company if such business (a) operates apparel stores in small markets (i.e.,
with populations of less than 50,000) and (b) operates a significant number of
its apparel stores (25% or more of its total apparel stores) in 10,000 - 30,000
square foot formats and (c) has sales in excess of $10 million per annum.
"NONCOMPETE PERIOD" shall mean the term of Executive's employment and a period
of time following his termination of 24 months. Nothing herein shall prohibit
Executive from being a passive owner of not more than 5% in the aggregate, of
the outstanding stock of any class of a corporation which is publicly traded and
which competes with the business of the Company so long as Executive has no
direct or indirect participation in the management of such corporation.
Executive acknowledged that there is no general geographical restriction (other
than in small markets with populations less than 100,000) contained in this
paragraph due to the Company-wide nature of his job responsibilities and that no
lesser scope of the restriction would adequately protect the Company's assets
and other legitimate business interests.
(b) During this same period of time following his termination which is
covered by salary replacement, Executive agrees not to directly or indirectly,
on his own behalf or for any other person or entity, induce or attempt to induce
any employee of the Company to leave the employ of the Company, hire any person
who is an employee of the Company as of or immediately prior to the time of such
hiring, or induce or attempt to induce any manufacturers' representative,
customer, supplier, licensee, agent or other business relation of the Company to
cease doing business with the Company.
9. SURVIVAL. Paragraphs 7 and 8 and paragraphs 11 through 18 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
10. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
5
<PAGE>
NOTICES TO EXECUTIVE:
Harry Brown
4130 Hyde Park
Sugarland, Texas 77479
NOTICES TO THE COMPANY:
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Executive
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. COMPETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of every date herewith embody the
complete agreement and understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. NO STRICT CONSTRUCTION. The language used in this Agreement shall
deemed to be language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
14. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. CHOICE OF LAW. All issues and questions concerning the construction,
validity, enforcement
6
<PAGE>
and interpretation of this Agreement and the exhibits and schedules hereto shall
be governed by, and construed in accordance with, the laws of the State of
Texas, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas. In furtherance of the foregoing, the internal law of the State of Texas
shall control the interpretation and construction of this Agreement (and all
schedules and exhibits hereto), even though under the jurisdiction's choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
17. AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity binding effect or
enforceability of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
STAGE STORES, INC.
By __________________________
Its _________________________
_____________________________
7
EXHIBIT 10.6
STAGE STORES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 1, 1998, between Stage Stores, Inc. A
Delaware Corporation (the "COMPANY"), and James A. Marcum ("EXECUTIVE").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall continue to employ Executive, and
Executive hereby accepts continued employment with the Company, upon the terms
and conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 4 hereof (the EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the Vice
Chairman - Chief Financial Officer of the Company and shall have the normal
duties, responsibilities and authority of the Vice Chairman - Chief Financial
Officer, subject to the power of the Board to expand such duties,
responsibilities and authority and to override actions of Vice Chairman - Chief
Financial Officer.
(b) Executive shall report to the Board or to the Chief Executive
Officer, as designated by this Board, and Executive shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company and its Subsidiaries. Executive shall perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "SUBSIDIARIES" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
(d) Whenever this Agreement calls for action on the part of the Board,
the Board may delegate responsibility for such action to a duly appointed
committee of the Board, including the Compensation Committee of the Board.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, Executive's base salary shall be
$425,000 per annum or such other higher rate as the Board may designate from
time to time (the "BASE SALARY"), which salary shall be payable in regular
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding. Executive shall also receive an auto
allowance of $1,000.00 per month or such other rate as the Board of Directors
may designate and be reimbursed for actual and necessary tax
<PAGE>
planning and financial planning expenses up to a maximum of $5,000 per year or
such other annual amount designated by the Board of Directors. In addition,
during the Employment Period, Executive shall be entitled to participate in all
of the Company's employment benefit programs for which senior executive
employees of the Company and its Subsidiaries are generally eligible, including
all supplemental benefit programs such as; supplemental retirement plans,
supplemental medical plans, supplemental disability plans, deferred compensation
plans, supplemental life insurance plans and any other approved plans made
available by the Company to the Executive. Also, the Executive shall be entitled
to four (4) weeks of paid vacation each year, which if not taken may not be
carried forward to any subsequent year.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing such duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, the Board may award a bonus to
Executive following the end of each fiscal year during the Employment Period
based upon Executive's performance and the Company's operating results during
such year in relation to performance targets established by the Board. The
target level of such bonus is 50% of base salary, or such higher rate as
designated by the Board. Determination of the bonus amount shall take into
account such unusual or non-recurring items as Board deems appropriate.
4. TERM AND TERMINATION.
(a) The initial employment period shall end on April 1, 1999 and the
Employment Period shall be automatically renewed for consecutive additional
periods of one year each commencing at the end of the initial Employment Period
hereof or any subsequent renewal term, on the same terms and conditions as
herein set forth; however (i) the Employment Period shall terminate prior to the
expiration of the initial or subsequent Employment Period upon Executive's
resignation, (other than for Good Reason as defined below), death or permanent
disability or incapacity (as determined by the Board in its good faith
judgement) and (ii) the Employment Period may be terminated by the Company at
any time prior to such a date for Good Cause (as defined below) or without Good
Cause. In the event the Company chooses not to continue automatic renewal of
this contract at the conclusion of any one year employment period, or the
Company lowers the benefit or compensation level in this Agreement, the Company
must notify Executive in writing 30 days prior to the end of the employment
period that the employment agreement will not be renewed for an additional one
year period. Such notification by the Company will be deemed appropriate grounds
for the Executives resignation and termination for Good Reason making Executive
eligible for benefits and payments under section 5. of this agreement.
(b) If the Employment Period is terminated by the Company without Good
Cause, Executive shall be entitled to receive an amount equal to two times his
annual Base Salary and benefits plus an amount equal to two times the
Executive's annual targeted bonus amount in effect on the date of termination of
Executive's employment (the "TERMINATION DATE") together with any accrued and
unpaid benefits and bonus, if and only if Executive has not breached the
provisions of paragraphs 7 and 8 hereof
2
<PAGE>
and is not entitled to receive payments pursuant to paragraph 5 hereof. The
amounts payable pursuant to this paragraph 4(b) may be payable, at the
Executives discretion, in one lump sum within thirty (30) days following
termination of the Employment period and will not be reduced by any other
compensation he has earned from any other source nor by any benefits due to him.
Also, if the Employment Period is terminated without Good Cause, Executives
Stock Option Awards and Restricted Stock Grant Awards will continue to vest
during the two year time period following termination without Good Cause. During
this two year period of vesting, Executive will be able to exercise Stock
Options and receive distribution of Restricted Grant shares as though Executive
had continued to work and vest normally for twenty four (24) months after the
date of termination.
(c) If the Employment Period is terminated by the Company for Good Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses hereunder
(if any) which otherwise would accrue after the termination of the Employment
Period shall cease upon such termination.
(e) Prior to receipt of any severance benefits hereunder including any
amounts payable pursuant to sections 4(b), 4(c) or 5(a), Executive shall execute
a release of claims against the Company and its affiliates in form and substance
reasonably satisfactory to the Company.
5. CHANGE IN CONTROL.
(a) If at any time after the date hereof a Change in Control (as
defined) of the Company occurs and within two years thereafter (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
termination for Good Cause, disability or death or (ii) Executive terminates his
employment with the Company for Good Reason (as defined), then Executive shall
be entitled to benefits under this Section 5. The amount of such benefits (which
benefits shall be in addition to any other benefits to which Executive is
entitled other than by reason of this Agreement) shall be equal to the sum of
(i) unpaid salary with respect to any vacation days accrued but not taken as of
the Termination Date; (ii) accrued but unpaid salary and targeted bonus through
the Termination Date; and (iii) an amount equal to three times the Base Salary
and benefits in effect at the time plus an amount equal to three times the
Executives annual targeted bonus amount in effect on the Termination Date; In
addition, Executive shall receive an amount equal to the additional tax due
defined as excise tax computed on the severance payment of three times base and
bonus which amount shall be grossed up for tax purposes. The amount of any
payment or benefit provided for in clause 5(a)(iii) above shall be payable at
Executives discretion in one lump sum payment within 30 days following the
termination of Executive and shall not be reduced by any compensation earned by
him from any other source.
3
<PAGE>
(b) Executive is the holder of various stock option agreements and also
is entitled to receive various restricted stock grant awards which are approved
by the Board. Each of these "option" and "grant" agreements specify individual
vesting schedules which determine the dates upon which Executive can take
ownership of the stipulated shares. At any time after the date hereof a Change
in Control (as defined) of the Company occurs, then effective on that date (the
"TRIGGER Date") all of Executives stock option agreements and restricted stock
grant awards will automatically become fully vested and Executive will be
enabled to purchase and/or take possession of all otherwise unvested shares.
Executive will also be entitled to receive from the Company an amount equal to
the federal taxes due (including any excise taxes due) on the gain of these
shares which were received due to the accelerated vesting plus additional "tax"
on the tax computed by the companies traditional "tax grossing-up method". The
amount of this tax payment will be made to the Executives tax withholding
account within 30 days following the Trigger Date of said Change in Control.
(c) For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to have occurred if (i) any "person" or "group" (as such terms are used
in Section 13(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities and, following such "person" or "group" acquiring 50% or
more of the combined voting power of the Company (the "TRIGGER DATE") the
members of the Board immediately prior to the Trigger Date cease to constitute a
majority of the Board, (ii) there shall be consummated any consolidation or
merger of the Company in which the Company is not the surviving or continuing
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have (directly or indirectly) at least a 51% ownership interest in
the outstanding Common Stock of the surviving corporation immediately after the
merger, (iii) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the assets of
the Company, or (iv) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company.
6. CERTAIN DEFINITIONS. For purposes of this Agreement, "GOOD CAUSE"
means (a) Executive's conviction of any criminal violation involving dishonesty
or fraud, (b) Executive's gross negligence or willful and serious misconduct in
the performance of his duties, or (c) Executive's willful failure to comply with
reasonable directives of the Board or the Chief Executive Officer; and "GOOD
REASON" shall exist if, without Executive's express written consent, (a)
Executive is assigned duties inconsistent with his position, duties,
responsibilities and status with the Company as of the time of a Change of
Control, (b) the Company reduces Executive's Base Salary as in effect on the
effective date hereof, or (c) the Company requires Executive regularly to
perform his duties of employment beyond a fifty-mile radius from the location of
his employment as of the time of a Change in Control.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any
Subsidiary ("CONFIDENTIAL INFORMATION") are the property of the Company or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his
4
<PAGE>
own purposes any Confidential Information without the prior written consent of
the Board, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions. Executive shall deliver to the Company at the
termination of the Employment Period, or at any time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, or the business of the Company or any Subsidiary which
he may then posses or have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive hereby agrees that during the Noncompete Period (as
defined below), he will not directly or indirectly either for himself or for any
other person or entity (whether as an owner, stockholder, consultant, agent,
advisor, partner (general or limited) or otherwise), individually or as a part
of a group, own, operate, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with any part of
the business presently engaged in by the Company within any geographical area in
which the Company engages or has proposed to engage in such business (or solicit
any person to engage in any of the foregoing activities). For purposes of the
foregoing, a business shall be deemed to be competing with the business of the
Company if such business (a) operates apparel stores in small markets (i.e.,
with populations of less than 50,000) and (b) operates a significant number of
its apparel stores (25% or more of its total apparel stores) in 10,000 - 30,000
square foot formats and (c) has sales in excess of $10 million per annum.
"NONCOMPETE PERIOD" shall mean the term of Executive's employment and a period
of time following his termination of 24 months. Nothing herein shall prohibit
Executive from being a passive owner of not more than 5% in the aggregate, of
the outstanding stock of any class of a corporation which is publicly traded and
which competes with the business of the Company so long as Executive has no
direct or indirect participation in the management of such corporation.
Executive acknowledged that there is no general geographical restriction (other
than in small markets with populations less than 100,000) contained in this
paragraph due to the Company-wide nature of his job responsibilities and that no
lesser scope of the restriction would adequately protect the Company's assets
and other legitimate business interests.
(b) During this same period of time following his termination which is
covered by salary replacement, Executive agrees not to directly or indirectly,
on his own behalf or for any other person or entity, induce or attempt to induce
any employee of the Company to leave the employ of the Company, hire any person
who is an employee of the Company as of or immediately prior to the time of such
hiring, or induce or attempt to induce any manufacturers' representative,
customer, supplier, licensee, agent or other business relation of the Company to
cease doing business with the Company.
9. SURVIVAL. Paragraphs 7 and 8 and paragraphs 11 through 18 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
10. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
5
<PAGE>
NOTICES TO EXECUTIVE:
James A. Marcum
3406 Onion Creek
Sugarland, Texas 77479
NOTICES TO THE COMPANY:
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Executive
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. COMPETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of every date herewith embody the
complete agreement and understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. NO STRICT CONSTRUCTION. The language used in this Agreement shall
deemed to be language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
14. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. CHOICE OF LAW. All issues and questions concerning the construction,
validity, enforcement
6
<PAGE>
and interpretation of this Agreement and the exhibits and schedules hereto shall
be governed by, and construed in accordance with, the laws of the State of
Texas, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas. In furtherance of the foregoing, the internal law of the State of Texas
shall control the interpretation and construction of this Agreement (and all
schedules and exhibits hereto), even though under the jurisdiction's choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
17. AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity binding effect or
enforceability of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
STAGE STORES, INC.
By __________________________
Its __________________________
-----------------------------
7
EXHIBIT 10.7
STAGE STORES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 1, 1998, between Stage Stores, Inc. A
Delaware Corporation (the "COMPANY"), and Stephen Lovell ("EXECUTIVE").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall continue to employ Executive, and
Executive hereby accepts continued employment with the Company, upon the terms
and conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 4 hereof (the EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the Vice
Chairman - Chief Field Operations Officer of the Company and shall have the
normal duties, responsibilities and authority of the Vice Chairman - Chief Field
Operations Officer, subject to the power of the Board to expand such duties,
responsibilities and authority and to override actions of Vice Chairman Chief
Field Operations Officer.
(b) Executive shall report to the Board or to the Chief Executive
Officer, as designated by this Board, and Executive shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company and its Subsidiaries. Executive shall perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "SUBSIDIARIES" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
(d) Whenever this Agreement calls for action on the part of the Board,
the Board may delegate responsibility for such action to a duly appointed
committee of the Board, including the Compensation Committee of the Board.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, Executive's base salary shall be
$425,000 per annum or such other higher rate as the Board may designate from
time to time (the "BASE SALARY"), which salary shall be payable in regular
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding. Executive shall also receive an auto
allowance of $1,000.00 per month or such other rate as the Board of Directors
may designate and be reimbursed for actual and necessary tax
<PAGE>
planning and financial planning expenses up to a maximum of $5,000 per year or
such other annual amount designated by the Board of Directors. In addition,
during the Employment Period, Executive shall be entitled to participate in all
of the Company's employment benefit programs for which senior executive
employees of the Company and its Subsidiaries are generally eligible, including
all supplemental benefit programs such as; supplemental retirement plans,
supplemental medical plans, supplemental disability plans, deferred compensation
plans, supplemental life insurance plans and any other approved plans made
available by the Company to the Executive. Also, the Executive shall be entitled
to four (4) weeks of paid vacation each year, which if not taken may not be
carried forward to any subsequent year.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing such duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, the Board may award a bonus to
Executive following the end of each fiscal year during the Employment Period
based upon Executive's performance and the Company's operating results during
such year in relation to performance targets established by the Board. The
target level of such bonus is 50% of base salary, or such higher rate as
designated by the Board. Determination of the bonus amount shall take into
account such unusual or non-recurring items as Board deems appropriate.
4. TERM AND TERMINATION.
(a) The initial employment period shall end on April 1, 1999 and the
Employment Period shall be automatically renewed for consecutive additional
periods of one year each commencing at the end of the initial Employment Period
hereof or any subsequent renewal term, on the same terms and conditions as
herein set forth; however (i) the Employment Period shall terminate prior to the
expiration of the initial or subsequent Employment Period upon Executive's
resignation, (other than for Good Reason as defined below), death or permanent
disability or incapacity (as determined by the Board in its good faith
judgement) and (ii) the Employment Period may be terminated by the Company at
any time prior to such a date for Good Cause (as defined below) or without Good
Cause. In the event the Company chooses not to continue automatic renewal of
this contract at the conclusion of any one year employment period, or the
Company lowers the benefit or compensation level in this Agreement, the Company
must notify Executive in writing 30 days prior to the end of the employment
period that the employment agreement will not be renewed for an additional one
year period. Such notification by the Company will be deemed appropriate grounds
for the Executives resignation and termination for Good Reason making Executive
eligible for benefits and payments under section 5. of this agreement.
(b) If the Employment Period is terminated by the Company without Good
Cause, Executive shall be entitled to receive an amount equal to two times his
annual Base Salary and benefits plus an amount equal to two times the
Executive's annual targeted bonus amount in effect on the date of termination of
Executive's employment (the "TERMINATION DATE") together with any accrued and
unpaid benefits and bonus, if and only if Executive has not breached the
provisions of paragraphs 7 and 8 hereof
2
<PAGE>
and is not entitled to receive payments pursuant to paragraph 5 hereof. The
amounts payable pursuant to this paragraph 4(b) may be payable, at the
Executives discretion, in one lump sum within thirty (30) days following
termination of the Employment period and will not be reduced by any other
compensation he has earned from any other source nor by any benefits due to him.
Also, if the Employment Period is terminated without Good Cause, Executives
Stock Option Awards and Restricted Stock Grant Awards will continue to vest
during the two year time period following termination without Good Cause. During
this two year period of vesting, Executive will be able to exercise Stock
Options and receive distribution of Restricted Grant shares as though Executive
had continued to work and vest normally for twenty four (24) months after the
date of termination.
(c) If the Employment Period is terminated by the Company for Good Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses hereunder
(if any) which otherwise would accrue after the termination of the Employment
Period shall cease upon such termination.
(e) Prior to receipt of any severance benefits hereunder including any
amounts payable pursuant to sections 4(b), 4(c) or 5(a), Executive shall execute
a release of claims against the Company and its affiliates in form and substance
reasonably satisfactory to the Company.
5. CHANGE IN CONTROL.
(a) If at any time after the date hereof a Change in Control (as
defined) of the Company occurs and within two years thereafter (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
termination for Good Cause, disability or death or (ii) Executive terminates his
employment with the Company for Good Reason (as defined), then Executive shall
be entitled to benefits under this Section 5. The amount of such benefits (which
benefits shall be in addition to any other benefits to which Executive is
entitled other than by reason of this Agreement) shall be equal to the sum of
(i) unpaid salary with respect to any vacation days accrued but not taken as of
the Termination Date; (ii) accrued but unpaid salary and targeted bonus through
the Termination Date; and (iii) an amount equal to three times the Base Salary
and benefits in effect at the time plus an amount equal to three times the
Executives annual targeted bonus amount in effect on the Termination Date; In
addition, Executive shall receive an amount equal to the additional tax due
defined as excise tax computed on the severance payment of three times base and
bonus which amount shall be grossed up for tax purposes. The amount of any
payment or benefit provided for in clause 5(a)(iii) above shall be payable at
Executives discretion in one lump sum payment within 30 days following the
termination of Executive and shall not be reduced by any compensation earned by
him from any other source.
3
<PAGE>
(b) Executive is the holder of various stock option agreements and also
is entitled to receive various restricted stock grant awards which are approved
by the Board. Each of these "option" and "grant" agreements specify individual
vesting schedules which determine the dates upon which Executive can take
ownership of the stipulated shares. At any time after the date hereof a Change
in Control (as defined) of the Company occurs, then effective on that date (the
"TRIGGER Date") all of Executives stock option agreements and restricted stock
grant awards will automatically become fully vested and Executive will be
enabled to purchase and/or take possession of all otherwise unvested shares.
Executive will also be entitled to receive from the Company an amount equal to
the federal taxes due (including any excise taxes due) on the gain of these
shares which were received due to the accelerated vesting plus additional "tax"
on the tax computed by the companies traditional "tax grossing-up method". The
amount of this tax payment will be made to the Executives tax withholding
account within 30 days following the Trigger Date of said Change in Control.
(c) For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to have occurred if (i) any "person" or "group" (as such terms are used
in Section 13(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities and, following such "person" or "group" acquiring 50% or
more of the combined voting power of the Company (the "TRIGGER DATE") the
members of the Board immediately prior to the Trigger Date cease to constitute a
majority of the Board, (ii) there shall be consummated any consolidation or
merger of the Company in which the Company is not the surviving or continuing
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have (directly or indirectly) at least a 51% ownership interest in
the outstanding Common Stock of the surviving corporation immediately after the
merger, (iii) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the assets of
the Company, or (iv) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company.
6. CERTAIN DEFINITIONS. For purposes of this Agreement, "GOOD CAUSE"
means (a) Executive's conviction of any criminal violation involving dishonesty
or fraud, (b) Executive's gross negligence or willful and serious misconduct in
the performance of his duties, or (c) Executive's willful failure to comply with
reasonable directives of the Board or the Chief Executive Officer; and "GOOD
REASON" shall exist if, without Executive's express written consent, (a)
Executive is assigned duties inconsistent with his position, duties,
responsibilities and status with the Company as of the time of a Change of
Control, (b) the Company reduces Executive's Base Salary as in effect on the
effective date hereof, or (c) the Company requires Executive regularly to
perform his duties of employment beyond a fifty-mile radius from the location of
his employment as of the time of a Change in Control.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any
Subsidiary ("CONFIDENTIAL INFORMATION") are the property of the Company or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his
4
<PAGE>
own purposes any Confidential Information without the prior written consent of
the Board, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions. Executive shall deliver to the Company at the
termination of the Employment Period, or at any time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, or the business of the Company or any Subsidiary which
he may then posses or have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive hereby agrees that during the Noncompete Period (as
defined below), he will not directly or indirectly either for himself or for any
other person or entity (whether as an owner, stockholder, consultant, agent,
advisor, partner (general or limited) or otherwise), individually or as a part
of a group, own, operate, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with any part of
the business presently engaged in by the Company within any geographical area in
which the Company engages or has proposed to engage in such business (or solicit
any person to engage in any of the foregoing activities). For purposes of the
foregoing, a business shall be deemed to be competing with the business of the
Company if such business (a) operates apparel stores in small markets (i.e.,
with populations of less than 50,000) and (b) operates a significant number of
its apparel stores (25% or more of its total apparel stores) in 10,000 - 30,000
square foot formats and (c) has sales in excess of $10 million per annum.
"NONCOMPETE PERIOD" shall mean the term of Executive's employment and a period
of time following his termination of 24 months. Nothing herein shall prohibit
Executive from being a passive owner of not more than 5% in the aggregate, of
the outstanding stock of any class of a corporation which is publicly traded and
which competes with the business of the Company so long as Executive has no
direct or indirect participation in the management of such corporation.
Executive acknowledged that there is no general geographical restriction (other
than in small markets with populations less than 100,000) contained in this
paragraph due to the Company-wide nature of his job responsibilities and that no
lesser scope of the restriction would adequately protect the Company's assets
and other legitimate business interests.
(b) During this same period of time following his termination which is
covered by salary replacement, Executive agrees not to directly or indirectly,
on his own behalf or for any other person or entity, induce or attempt to induce
any employee of the Company to leave the employ of the Company, hire any person
who is an employee of the Company as of or immediately prior to the time of such
hiring, or induce or attempt to induce any manufacturers' representative,
customer, supplier, licensee, agent or other business relation of the Company to
cease doing business with the Company.
9. SURVIVAL. Paragraphs 7 and 8 and paragraphs 11 through 18 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
10. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
5
<PAGE>
NOTICES TO EXECUTIVE:
---------------------
Stephen Lovell
3319 Onion Creek
Sugarland, Texas 77479
NOTICES TO THE COMPANY:
-----------------------
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Executive
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. COMPETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of every date herewith embody the
complete agreement and understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. NO STRICT CONSTRUCTION. The language used in this Agreement shall
deemed to be language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
14. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. CHOICE OF LAW. All issues and questions concerning the construction,
validity, enforcement
6
<PAGE>
and interpretation of this Agreement and the exhibits and schedules hereto shall
be governed by, and construed in accordance with, the laws of the State of
Texas, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas. In furtherance of the foregoing, the internal law of the State of Texas
shall control the interpretation and construction of this Agreement (and all
schedules and exhibits hereto), even though under the jurisdiction's choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
17. AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity binding effect or
enforceability of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
STAGE STORES, INC.
By __________________________
Its __________________________
-----------------------------
7
EXHIBIT 10.8
STAGE STORES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 1, 1998, between Stage Stores, Inc. A
Delaware Corporation (the "COMPANY"), and Ron Lucas ("EXECUTIVE").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall continue to employ Executive, and
Executive hereby accepts continued employment with the Company, upon the terms
and conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 4 hereof (the EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the Executive
Vice President Human Resources of the Company and shall have the normal duties,
responsibilities and authority of the Executive Vice President - Human
Resources, subject to the power of the Board to expand such duties,
responsibilities and authority and to override actions of Executive Vice
President - Human Resources.
(b) Executive shall report to the Board or to the Chief Executive
Officer, as designated by this Board, and Executive shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company and its Subsidiaries. Executive shall perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "SUBSIDIARIES" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
(d) Whenever this Agreement calls for action on the part of the Board,
the Board may delegate responsibility for such action to a duly appointed
committee of the Board, including the Compensation Committee of the Board.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, Executive's base salary shall be
$225,000 per annum or such other higher rate as the Board may designate from
time to time (the "BASE SALARY"), which salary shall be payable in regular
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding. Executive shall also receive an auto
allowance of $1,000.00 per month or such other rate as the Board of Directors
may designate and be reimbursed for actual and necessary tax
<PAGE>
planning and financial planning expenses up to a maximum of $5,000 per year or
such other annual amount designated by the Board of Directors. In addition,
during the Employment Period, Executive shall be entitled to participate in all
of the Company's employment benefit programs for which senior executive
employees of the Company and its Subsidiaries are generally eligible, including
all supplemental benefit programs such as; supplemental retirement plans,
supplemental medical plans, supplemental disability plans, deferred compensation
plans, supplemental life insurance plans and any other approved plans made
available by the Company to the Executive. Also, the Executive shall be entitled
to four (4) weeks of paid vacation each year, which if not taken may not be
carried forward to any subsequent year.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing such duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, the Board may award a bonus to
Executive following the end of each fiscal year during the Employment Period
based upon Executive's performance and the Company's operating results during
such year in relation to performance targets established by the Board. The
target level of such bonus is 50% of base salary, or such higher rate as
designated by the Board. Determination of the bonus amount shall take into
account such unusual or non-recurring items as Board deems appropriate.
4. TERM AND TERMINATION.
(a) The initial employment period shall end on April 1, 1999 and the
Employment Period shall be automatically renewed for consecutive additional
periods of one year each commencing at the end of the initial Employment Period
hereof or any subsequent renewal term, on the same terms and conditions as
herein set forth; however (i) the Employment Period shall terminate prior to the
expiration of the initial or subsequent Employment Period upon Executive's
resignation, (other than for Good Reason as defined below), death or permanent
disability or incapacity (as determined by the Board in its good faith
judgement) and (ii) the Employment Period may be terminated by the Company at
any time prior to such a date for Good Cause (as defined below) or without Good
Cause. In the event the Company chooses not to continue automatic renewal of
this contract at the conclusion of any one year employment period, or the
Company lowers the benefit or compensation level in this Agreement, the Company
must notify Executive in writing 30 days prior to the end of the employment
period that the employment agreement will not be renewed for an additional one
year period. Such notification by the Company will be deemed appropriate grounds
for the Executives resignation and termination for Good Reason making Executive
eligible for benefits and payments under section 5. of this agreement.
(b) If the Employment Period is terminated by the Company without Good
Cause, Executive shall be entitled to receive an amount equal to two times his
annual Base Salary and benefits plus an amount equal to two times the
Executive's annual targeted bonus amount in effect on the date of termination of
Executive's employment (the "TERMINATION DATE") together with any accrued and
unpaid benefits and bonus, if and only if Executive has not breached the
provisions of paragraphs 7 and 8 hereof
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<PAGE>
and is not entitled to receive payments pursuant to paragraph 5 hereof. The
amounts payable pursuant to this paragraph 4(b) may be payable, at the
Executives discretion, in one lump sum within thirty (30) days following
termination of the Employment period and will not be reduced by any other
compensation he has earned from any other source nor by any benefits due to him.
Also, if the Employment Period is terminated without Good Cause, Executives
Stock Option Awards and Restricted Stock Grant Awards will continue to vest
during the two year time period following termination without Good Cause. During
this two year period of vesting, Executive will be able to exercise Stock
Options and receive distribution of Restricted Grant shares as though Executive
had continued to work and vest normally for twenty four (24) months after the
date of termination.
(c) If the Employment Period is terminated by the Company for Good Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses hereunder
(if any) which otherwise would accrue after the termination of the Employment
Period shall cease upon such termination.
(e) Prior to receipt of any severance benefits hereunder including any
amounts payable pursuant to sections 4(b), 4(c) or 5(a), Executive shall execute
a release of claims against the Company and its affiliates in form and substance
reasonably satisfactory to the Company.
5. CHANGE IN CONTROL.
(a) If at any time after the date hereof a Change in Control (as
defined) of the Company occurs and within two years thereafter (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
termination for Good Cause, disability or death or (ii) Executive terminates his
employment with the Company for Good Reason (as defined), then Executive shall
be entitled to benefits under this Section 5. The amount of such benefits (which
benefits shall be in addition to any other benefits to which Executive is
entitled other than by reason of this Agreement) shall be equal to the sum of
(i) unpaid salary with respect to any vacation days accrued but not taken as of
the Termination Date; (ii) accrued but unpaid salary and targeted bonus through
the Termination Date; and (iii) an amount equal to three times the Base Salary
and benefits in effect at the time plus an amount equal to three times the
Executives annual targeted bonus amount in effect on the Termination Date; In
addition, Executive shall receive an amount equal to the additional tax due
defined as excise tax computed on the severance payment of three times base and
bonus which amount shall be grossed up for tax purposes. The amount of any
payment or benefit provided for in clause 5(a)(iii) above shall be payable at
Executives discretion in one lump sum payment within 30 days following the
termination of Executive and shall not be reduced by any compensation earned by
him from any other source.
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<PAGE>
(b) Executive is the holder of various stock option agreements and also
is entitled to receive various restricted stock grant awards which are approved
by the Board. Each of these "option" and "grant" agreements specify individual
vesting schedules which determine the dates upon which Executive can take
ownership of the stipulated shares. At any time after the date hereof a Change
in Control (as defined) of the Company occurs, then effective on that date (the
"TRIGGER Date") all of Executives stock option agreements and restricted stock
grant awards will automatically become fully vested and Executive will be
enabled to purchase and/or take possession of all otherwise unvested shares.
Executive will also be entitled to receive from the Company an amount equal to
the federal taxes due (including any excise taxes due) on the gain of these
shares which were received due to the accelerated vesting plus additional "tax"
on the tax computed by the companies traditional "tax grossing-up method". The
amount of this tax payment will be made to the Executives tax withholding
account within 30 days following the Trigger Date of said Change in Control.
(c) For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to have occurred if (i) any "person" or "group" (as such terms are used
in Section 13(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities and, following such "person" or "group" acquiring 50% or
more of the combined voting power of the Company (the "TRIGGER DATE") the
members of the Board immediately prior to the Trigger Date cease to constitute a
majority of the Board, (ii) there shall be consummated any consolidation or
merger of the Company in which the Company is not the surviving or continuing
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have (directly or indirectly) at least a 51% ownership interest in
the outstanding Common Stock of the surviving corporation immediately after the
merger, (iii) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the assets of
the Company, or (iv) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company.
6. CERTAIN DEFINITIONS. For purposes of this Agreement, "GOOD CAUSE"
means (a) Executive's conviction of any criminal violation involving dishonesty
or fraud, (b) Executive's gross negligence or willful and serious misconduct in
the performance of his duties, or (c) Executive's willful failure to comply with
reasonable directives of the Board or the Chief Executive Officer; and "GOOD
REASON" shall exist if, without Executive's express written consent, (a)
Executive is assigned duties inconsistent with his position, duties,
responsibilities and status with the Company as of the time of a Change of
Control, (b) the Company reduces Executive's Base Salary as in effect on the
effective date hereof, or (c) the Company requires Executive regularly to
perform his duties of employment beyond a fifty-mile radius from the location of
his employment as of the time of a Change in Control.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any
Subsidiary ("CONFIDENTIAL INFORMATION") are the property of the Company or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his
4
<PAGE>
own purposes any Confidential Information without the prior written consent of
the Board, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions. Executive shall deliver to the Company at the
termination of the Employment Period, or at any time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, or the business of the Company or any Subsidiary which
he may then posses or have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive hereby agrees that during the Noncompete Period (as
defined below), he will not directly or indirectly either for himself or for any
other person or entity (whether as an owner, stockholder, consultant, agent,
advisor, partner (general or limited) or otherwise), individually or as a part
of a group, own, operate, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with any part of
the business presently engaged in by the Company within any geographical area in
which the Company engages or has proposed to engage in such business (or solicit
any person to engage in any of the foregoing activities). For purposes of the
foregoing, a business shall be deemed to be competing with the business of the
Company if such business (a) operates apparel stores in small markets (i.e.,
with populations of less than 50,000) and (b) operates a significant number of
its apparel stores (25% or more of its total apparel stores) in 10,000 - 30,000
square foot formats and (c) has sales in excess of $10 million per annum.
"NONCOMPETE PERIOD" shall mean the term of Executive's employment and a period
of time following his termination of 24 months. Nothing herein shall prohibit
Executive from being a passive owner of not more than 5% in the aggregate, of
the outstanding stock of any class of a corporation which is publicly traded and
which competes with the business of the Company so long as Executive has no
direct or indirect participation in the management of such corporation.
Executive acknowledged that there is no general geographical restriction (other
than in small markets with populations less than 100,000) contained in this
paragraph due to the Company-wide nature of his job responsibilities and that no
lesser scope of the restriction would adequately protect the Company's assets
and other legitimate business interests.
(b) During this same period of time following his termination which is
covered by salary replacement, Executive agrees not to directly or indirectly,
on his own behalf or for any other person or entity, induce or attempt to induce
any employee of the Company to leave the employ of the Company, hire any person
who is an employee of the Company as of or immediately prior to the time of such
hiring, or induce or attempt to induce any manufacturers' representative,
customer, supplier, licensee, agent or other business relation of the Company to
cease doing business with the Company.
9. SURVIVAL. Paragraphs 7 and 8 and paragraphs 11 through 18 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
10. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
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<PAGE>
NOTICES TO EXECUTIVE:
Ron Lucas
7171 Buffalo Speedway, #737
Houston, Texas 77025
NOTICES TO THE COMPANY:
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Executive
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. COMPETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of every date herewith embody the
complete agreement and understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. NO STRICT CONSTRUCTION. The language used in this Agreement shall
deemed to be language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
14. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. CHOICE OF LAW. All issues and questions concerning the construction,
validity, enforcement
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<PAGE>
and interpretation of this Agreement and the exhibits and schedules hereto shall
be governed by, and construed in accordance with, the laws of the State of
Texas, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas. In furtherance of the foregoing, the internal law of the State of Texas
shall control the interpretation and construction of this Agreement (and all
schedules and exhibits hereto), even though under the jurisdiction's choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
17. AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity binding effect or
enforceability of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
STAGE STORES, INC.
By __________________________
Its __________________________
-----------------------------
7
EXHIBIT 10.9
STAGE STORES, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 1, 1998, between Stage Stores, Inc. A
Delaware Corporation (the "COMPANY"), and Jim Bodemuller ("EXECUTIVE").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall continue to employ Executive, and
Executive hereby accepts continued employment with the Company, upon the terms
and conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 4 hereof (the EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the Executive
Vice President Planning & Allocation of the Company and shall have the normal
duties, responsibilities and authority of the Executive Vice President -
Planning & Allocation, subject to the power of the Board to expand such duties,
responsibilities and authority and to override actions of Executive Vice
President - Planning & Allocation.
(b) Executive shall report to the Board or to the Chief Executive
Officer, as designated by this Board, and Executive shall devote his best
efforts and his full business time and attention (except for permitted vacation
periods and reasonable periods of illness or other incapacity) to the business
and affairs of the Company and its Subsidiaries. Executive shall perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(c) For purposes of this Agreement, "SUBSIDIARIES" shall mean any
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
(d) Whenever this Agreement calls for action on the part of the Board,
the Board may delegate responsibility for such action to a duly appointed
committee of the Board, including the Compensation Committee of the Board.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, Executive's base salary shall be
$300,000 per annum or such other higher rate as the Board may designate from
time to time (the "BASE SALARY"), which salary shall be payable in regular
installments in accordance with the Company's general payroll practices and
shall be subject to customary withholding. Executive shall also receive an auto
allowance of $1,000.00 per month
<PAGE>
or such other rate as the Board of Directors may designate and be reimbursed for
actual and necessary tax planning and financial planning expenses up to a
maximum of $5,000 per year or such other annual amount designated by the Board
of Directors. In addition, during the Employment Period, Executive shall be
entitled to participate in all of the Company's employment benefit programs for
which senior executive employees of the Company and its Subsidiaries are
generally eligible, including all supplemental benefit programs such as;
supplemental retirement plans, supplemental medical plans, supplemental
disability plans, deferred compensation plans, supplemental life insurance plans
and any other approved plans made available by the Company to the Executive.
Also, the Executive shall be entitled to four (4) weeks of paid vacation each
year, which if not taken may not be carried forward to any subsequent year.
(b) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing such duties under this Agreement
which are consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such
expenses.
(c) In addition to the Base Salary, the Board may award a bonus to
Executive following the end of each fiscal year during the Employment Period
based upon Executive's performance and the Company's operating results during
such year in relation to performance targets established by the Board. The
target level of such bonus is 50% of base salary, or such higher rate as
designated by the Board. Determination of the bonus amount shall take into
account such unusual or non-recurring items as Board deems appropriate.
4. TERM AND TERMINATION.
(a) The initial employment period shall end on April 1, 1999 and the
Employment Period shall be automatically renewed for consecutive additional
periods of one year each commencing at the end of the initial Employment Period
hereof or any subsequent renewal term, on the same terms and conditions as
herein set forth; however (i) the Employment Period shall terminate prior to the
expiration of the initial or subsequent Employment Period upon Executive's
resignation, (other than for Good Reason as defined below), death or permanent
disability or incapacity (as determined by the Board in its good faith
judgement) and (ii) the Employment Period may be terminated by the Company at
any time prior to such a date for Good Cause (as defined below) or without Good
Cause. In the event the Company chooses not to continue automatic renewal of
this contract at the conclusion of any one year employment period, or the
Company lowers the benefit or compensation level in this Agreement, the Company
must notify Executive in writing 30 days prior to the end of the employment
period that the employment agreement will not be renewed for an additional one
year period. Such notification by the Company will be deemed appropriate grounds
for the Executives resignation and termination for Good Reason making Executive
eligible for benefits and payments under section 5. of this agreement.
(b) If the Employment Period is terminated by the Company without Good
Cause, Executive shall be entitled to receive an amount equal to two times his
annual Base Salary and benefits plus an amount equal to two times the
Executive's annual targeted bonus amount in effect on the date of termination of
Executive's employment (the "TERMINATION DATE") together with any accrued and
unpaid
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<PAGE>
benefits and bonus, if and only if Executive has not breached the provisions of
paragraphs 7 and 8 hereof and is not entitled to receive payments pursuant to
paragraph 5 hereof. The amounts payable pursuant to this paragraph 4(b) may be
payable, at the Executives discretion, in one lump sum within thirty (30) days
following termination of the Employment period and will not be reduced by any
other compensation he has earned from any other source nor by any benefits due
to him. Also, if the Employment Period is terminated without Good Cause,
Executives Stock Option Awards and Restricted Stock Grant Awards will continue
to vest during the two year time period following termination without Good
Cause. During this two year period of vesting, Executive will be able to
exercise Stock Options and receive distribution of Restricted Grant shares as
though Executive had continued to work and vest normally for twenty four (24)
months after the date of termination.
(c) If the Employment Period is terminated by the Company for Good Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
receive his Base Salary through the date of termination.
(d) All of Executive's rights to fringe benefits and bonuses hereunder
(if any) which otherwise would accrue after the termination of the Employment
Period shall cease upon such termination.
(e) Prior to receipt of any severance benefits hereunder including any
amounts payable pursuant to sections 4(b), 4(c) or 5(a), Executive shall execute
a release of claims against the Company and its affiliates in form and substance
reasonably satisfactory to the Company.
5. CHANGE IN CONTROL.
(a) If at any time after the date hereof a Change in Control (as
defined) of the Company occurs and within two years thereafter (i) Executive
involuntarily ceases to be an employee of the Company for any reason other than
termination for Good Cause, disability or death or (ii) Executive terminates his
employment with the Company for Good Reason (as defined), then Executive shall
be entitled to benefits under this Section 5. The amount of such benefits (which
benefits shall be in addition to any other benefits to which Executive is
entitled other than by reason of this Agreement) shall be equal to the sum of
(i) unpaid salary with respect to any vacation days accrued but not taken as of
the Termination Date; (ii) accrued but unpaid salary and targeted bonus through
the Termination Date; and (iii) an amount equal to three times the Base Salary
and benefits in effect at the time plus an amount equal to three times the
Executives annual targeted bonus amount in effect on the Termination Date; In
addition, Executive shall receive an amount equal to the additional tax due
defined as excise tax computed on the severance payment of three times base and
bonus which amount shall be grossed up for tax purposes. The amount of any
payment or benefit provided for in clause 5(a)(iii) above shall be payable at
Executives discretion in one lump sum payment within 30 days following the
termination of Executive and shall not be reduced by any compensation earned by
him from any other source.
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(b) Executive is the holder of various stock option agreements and also
is entitled to receive various restricted stock grant awards which are approved
by the Board. Each of these "option" and "grant" agreements specify individual
vesting schedules which determine the dates upon which Executive can take
ownership of the stipulated shares. At any time after the date hereof a Change
in Control (as defined) of the Company occurs, then effective on that date (the
"TRIGGER Date") all of Executives stock option agreements and restricted stock
grant awards will automatically become fully vested and Executive will be
enabled to purchase and/or take possession of all otherwise unvested shares.
Executive will also be entitled to receive from the Company an amount equal to
the federal taxes due (including any excise taxes due) on the gain of these
shares which were received due to the accelerated vesting plus additional "tax"
on the tax computed by the companies traditional "tax grossing-up method". The
amount of this tax payment will be made to the Executives tax withholding
account within 30 days following the Trigger Date of said Change in Control.
(c) For purposes of this Agreement, a "CHANGE OF CONTROL" shall be
deemed to have occurred if (i) any "person" or "group" (as such terms are used
in Section 13(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities and, following such "person" or "group" acquiring 50% or
more of the combined voting power of the Company (the "TRIGGER DATE") the
members of the Board immediately prior to the Trigger Date cease to constitute a
majority of the Board, (ii) there shall be consummated any consolidation or
merger of the Company in which the Company is not the surviving or continuing
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have (directly or indirectly) at least a 51% ownership interest in
the outstanding Common Stock of the surviving corporation immediately after the
merger, (iii) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, of the assets of
the Company, or (iv) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company.
6. CERTAIN DEFINITIONS. For purposes of this Agreement, "GOOD CAUSE"
means (a) Executive's conviction of any criminal violation involving dishonesty
or fraud, (b) Executive's gross negligence or willful and serious misconduct in
the performance of his duties, or (c) Executive's willful failure to comply with
reasonable directives of the Board or the Chief Executive Officer; and "GOOD
REASON" shall exist if, without Executive's express written consent, (a)
Executive is assigned duties inconsistent with his position, duties,
responsibilities and status with the Company as of the time of a Change of
Control, (b) the Company reduces Executive's Base Salary as in effect on the
effective date hereof, or (c) the Company requires Executive regularly to
perform his duties of employment beyond a fifty-mile radius from the location of
his employment as of the time of a Change in Control.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company or any
Subsidiary ("CONFIDENTIAL INFORMATION") are the property of the Company or such
Subsidiary. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his
4
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own purposes any Confidential Information without the prior written consent of
the Board, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions. Executive shall deliver to the Company at the
termination of the Employment Period, or at any time the Company may request,
all memoranda, notes, plans, records, reports, computer tapes, printouts and
software and other documents and data (and copies thereof) relating to the
Confidential Information, or the business of the Company or any Subsidiary which
he may then posses or have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive hereby agrees that during the Noncompete Period (as
defined below), he will not directly or indirectly either for himself or for any
other person or entity (whether as an owner, stockholder, consultant, agent,
advisor, partner (general or limited) or otherwise), individually or as a part
of a group, own, operate, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with any part of
the business presently engaged in by the Company within any geographical area in
which the Company engages or has proposed to engage in such business (or solicit
any person to engage in any of the foregoing activities). For purposes of the
foregoing, a business shall be deemed to be competing with the business of the
Company if such business (a) operates apparel stores in small markets (i.e.,
with populations of less than 50,000) and (b) operates a significant number of
its apparel stores (25% or more of its total apparel stores) in 10,000 - 30,000
square foot formats and (c) has sales in excess of $10 million per annum.
"NONCOMPETE PERIOD" shall mean the term of Executive's employment and a period
of time following his termination of 24 months. Nothing herein shall prohibit
Executive from being a passive owner of not more than 5% in the aggregate, of
the outstanding stock of any class of a corporation which is publicly traded and
which competes with the business of the Company so long as Executive has no
direct or indirect participation in the management of such corporation.
Executive acknowledged that there is no general geographical restriction (other
than in small markets with populations less than 100,000) contained in this
paragraph due to the Company-wide nature of his job responsibilities and that no
lesser scope of the restriction would adequately protect the Company's assets
and other legitimate business interests.
(b) During this same period of time following his termination which is
covered by salary replacement, Executive agrees not to directly or indirectly,
on his own behalf or for any other person or entity, induce or attempt to induce
any employee of the Company to leave the employ of the Company, hire any person
who is an employee of the Company as of or immediately prior to the time of such
hiring, or induce or attempt to induce any manufacturers' representative,
customer, supplier, licensee, agent or other business relation of the Company to
cease doing business with the Company.
9. SURVIVAL. Paragraphs 7 and 8 and paragraphs 11 through 18 shall
survive and continue in full force in accordance with their terms
notwithstanding any termination of the Employment Period.
10. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
return receipt requested, to the recipient at the address below indicated:
5
<PAGE>
NOTICES TO EXECUTIVE:
Jim Bodemuller
4835 Menlo Park Drive
Sugarland, TX 77478
NOTICES TO THE COMPANY:
Stage Stores, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Executive
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. COMPETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of every date herewith embody the
complete agreement and understanding among the parties and supersede and preempt
any prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. NO STRICT CONSTRUCTION. The language used in this Agreement shall
deemed to be language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
14. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
15. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.
16. CHOICE OF LAW. All issues and questions concerning the construction,
validity, enforcement
6
<PAGE>
and interpretation of this Agreement and the exhibits and schedules hereto shall
be governed by, and construed in accordance with, the laws of the State of
Texas, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas. In furtherance of the foregoing, the internal law of the State of Texas
shall control the interpretation and construction of this Agreement (and all
schedules and exhibits hereto), even though under the jurisdiction's choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
17. AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity binding effect or
enforceability of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
STAGE STORES, INC.
By __________________________
Its __________________________
-----------------------------
7
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-15981) of Stage Stores, Inc. of our report dated
March 12, 1998 appearing on page F-1 of this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
April 21, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STAGE STORIES, INC. CONSOLIDATED FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-1998
<PERIOD-END> JAN-01-1998
<CASH> 23,315
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 303,115
<CURRENT-ASSETS> 465,846
<PP&E> 171,654
<DEPRECIATION> 0
<TOTAL-ASSETS> 759,396
<CURRENT-LIABILITIES> 147,782
<BONDS> 395,248
0
0
<COMMON> 278
<OTHER-SE> (59,879)
<TOTAL-LIABILITY-AND-EQUITY> 759,396
<SALES> 1,073,316
<TOTAL-REVENUES> 1,073,316
<CGS> 730,179
<TOTAL-COSTS> 730,179
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,277
<INCOME-PRETAX> 56,163
<INCOME-TAX> 21,623
<INCOME-CONTINUING> 34,540
<DISCONTINUED> 0
<EXTRAORDINARY> (18,295)
<CHANGES> 0
<NET-INCOME> 16,245
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.61
</TABLE>
