<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 3, 1999
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 NUMBER 1-8941
FRUIT OF THE LOOM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3361804
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
5000 SEARS TOWER
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(Address of principal executive offices, including Zip Code)
(312) 876-1724
(Registrant's telephone number, including area code)
------------------------
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 [ ]
Common shares outstanding at April 30, 1999: 66,905,348 Class A Common
Shares, $.01 par value.
================================================================================
<PAGE> 2
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet --
April 3, 1999 (Unaudited) and January 2, 1999............. 2
Condensed Consolidated Statement of Operations (Unaudited)
for the Three Months Ended April 3, 1999 and March 28,
1998...................................................... 3
Condensed Consolidated Statement of Common Stockholders'
Equity (Unaudited) for the Three Months Ended April 3,
1999 and March 28, 1998................................... 4
Condensed Consolidated Statement of Cash Flows (Unaudited)
for the Three Months Ended April 3, 1999 and March 28,
1998...................................................... 5
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................ 17
</TABLE>
1
<PAGE> 3
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
APRIL 3, JANUARY 2,
1999 1999
----------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (including restricted cash)..... $ 20,400 $ 1,400
Notes and accounts receivable (less allowance for possible
losses of $10,000 and $12,000, respectively)........... 107,100 109,700
Inventories
Finished goods......................................... 533,900 500,700
Work in process........................................ 209,800 183,100
Materials and supplies................................. 73,800 58,200
---------- ----------
Total inventories................................. 817,500 742,000
Other..................................................... 52,200 41,100
---------- ----------
Total current assets.............................. 997,200 894,200
---------- ----------
Property, Plant and Equipment............................... 1,260,100 1,192,100
Less accumulated depreciation............................. 766,600 758,200
---------- ----------
Net property, plant and equipment................. 493,500 433,900
---------- ----------
Other Assets
Goodwill (less accumulated amortization of $342,800 and
$336,200, respectively)................................ 679,600 686,300
Deferred income taxes..................................... 35,000 36,700
Other..................................................... 168,900 238,700
---------- ----------
Total other assets................................ 883,500 961,700
---------- ----------
$2,374,200 $2,289,800
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt...................... $ 270,500 $ 270,500
Trade accounts payable.................................... 66,800 119,700
Other accounts payable and accrued expenses............... 261,500 226,700
---------- ----------
Total current liabilities......................... 598,800 616,900
---------- ----------
Noncurrent Liabilities
Long-term debt............................................ 979,000 856,600
Other..................................................... 267,500 267,400
---------- ----------
Total noncurrent liabilities...................... 1,246,500 1,124,000
---------- ----------
Preferred Stock............................................. 71,700 --
---------- ----------
Common Stockholders' Equity................................. 457,200 548,900
---------- ----------
$2,374,200 $2,289,800
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 4
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
APRIL 3, MARCH 28,
1999 1998
-------- ---------
<S> <C> <C>
Net sales................................................... $408,700 $457,200
Cost of sales............................................... 314,300 309,500
-------- --------
Gross earnings.................................... 94,400 147,700
Selling, general and administrative expenses................ 80,900 83,100
Goodwill amortization....................................... 6,600 6,600
-------- --------
Operating earnings................................ 6,900 58,000
Interest expense............................................ (21,600) (24,700)
Other income -- net......................................... 5,500 4,300
-------- --------
Earnings (loss) before income tax provision....... (9,200) 37,600
Income tax provision........................................ (500) 6,400
-------- --------
Net earnings (loss)............................... (8,700) 31,200
Preferred stock dividends................................... 300 --
-------- --------
Earnings (loss) applicable to common stock........ $ (9,000) $ 31,200
======== ========
Earnings (loss) per common share............................ $ (0.13) $ .43
======== ========
Earnings (loss) per common share -- assuming dilution....... $ (0.13) $ .43
======== ========
Average common shares....................................... 70,400 71,800
======== ========
Average common shares -- assuming dilution.................. 70,400 72,300
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 5
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
AND CAPITAL IN OTHER
COMMON EXCESS OF RETAINED COMPREHENSIVE
SHARES PAR VALUE EARNINGS INCOME TOTAL
------ -------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997.............. 71,901 $319,000 $140,700 $(37,600) $422,100
--------
Class A shares issued upon exercise of
options............................ 62 1,700 1,700
--------
Restricted stock --
Compensation earned................ 400 400
--------
Class A shares repurchased............ (121) (3,000) (3,000)
--------
Net earnings.......................... 31,200 31,200
Foreign currency translation
adjustments -- net................. (11,900) (11,900)
--------
Comprehensive earnings................ 19,300
------ -------- -------- -------- --------
BALANCE, MARCH 28, 1998................. 71,842 $318,100 $171,900 $(49,500) $440,500
====== ======== ======== ======== ========
BALANCE, JANUARY 2, 1999................ 72,150 $326,700 $276,600 $(54,400) $548,900
--------
Restricted stock --
Compensation earned................ 500 500
--------
Shares forfeited................... (16)
Class B shares exchanged for
exchangeable participating
preferred stock of the Company..... (5,229) (71,700) (71,700)
--------
Net loss.............................. (8,700) (8,700)
Foreign currency translation
adjustments -- net................. (11,500) (11,500)
--------
Comprehensive loss.................... (20,200)
--------
Preferred stock dividends............. (300) (300)
------ -------- -------- -------- --------
BALANCE, APRIL 3, 1999.................. 66,905 $255,500 $267,600 $(65,900) $457,200
====== ======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 6
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
APRIL 3, MARCH 28,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)....................................... $ (8,700) $ 31,200
Adjustments to reconcile to net cash used for operating
activities:
Preferred stock dividends.............................. (300) --
Depreciation and amortization.......................... 30,800 32,000
Deferred income tax provision.......................... 1,700 (100)
Increase in working capital............................ (77,700) (231,300)
Other -- net........................................... (21,400) (23,300)
--------- ---------
Net cash used for operating activities............ (75,600) (191,500)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................... (6,700) (6,400)
Proceeds from asset sales................................. 5,700 21,600
Other -- net.............................................. (21,200) (1,200)
--------- ---------
Net cash provided by (used for) investing
activities...................................... (22,200) 14,000
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................. 239,700 --
Proceeds under line-of-credit agreements.................. 189,700 284,100
Payments under line-of-credit agreements.................. (302,500) (96,400)
Principal payments on long-term debt and capital leases... (10,100) (8,400)
Common stock issued....................................... -- 1,400
Common stock repurchased.................................. -- (3,000)
--------- ---------
Net cash provided by financing activities......... 116,800 177,700
--------- ---------
Net increase in Cash and cash equivalents (including
restricted cash).......................................... 19,000 200
Cash and cash equivalents (including restricted cash) at
beginning of period....................................... 1,400 16,100
--------- ---------
Cash and cash equivalents (including restricted cash) at end
of period................................................. $ 20,400 $ 16,300
========= =========
</TABLE>
See accompanying notes.
5
<PAGE> 7
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. On March 4, 1999 Fruit of the Loom, LTD. ("FTL, Ltd."), a Cayman Islands
company, became the parent holding company of Fruit of the Loom, Inc. ("FTL,
Inc." or the "Company") pursuant to a reorganization (the "Reorganization")
approved by the stockholders of FTL, Inc. on November 12, 1998. Ownership of
essentially all of the businesses or subsidiaries of the Company located
outside the United States, other than certain interests of the Company in
Canada and Mexico and the beneficial ownership of certain trademarks, will be
transferred to FTL, Ltd. when the Reorganization is fully implemented.
The condensed consolidated financial statements contained herein should be
read in conjunction with the consolidated financial statements and related
notes contained in the Company's Annual Report on Form 10-K for the year
ended January 2, 1999. The information furnished herein reflects all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the results of
operations of the interim periods. Operating results for the three months
ended April 3, 1999 are not necessarily indicative of results that may be
expected for the full year.
In connection with the Reorganization, all outstanding shares of Class A
common stock of FTL, Inc. were automatically converted into Class A ordinary
shares of FTL, Ltd., and all outstanding shares of Class B common stock of
FTL, Inc. were automatically converted into shares of exchangeable
participating preferred stock of FTL, Inc. (the "FTL, Inc. Preferred Stock").
The FTL, Inc. Preferred Stock (5,229,000 shares outstanding) in the aggregate
(i) has a liquidation value of $71,700,000, which is equal to the fair market
value of the FTL, Inc. Class B common stock based upon the $13.71 average
closing price of FTL, Inc. Class A common stock on the New York Stock
Exchange for the 20 trading days prior to March 4, 1999, (ii) is entitled to
receive cumulative cash dividends of 4.5% per annum of the liquidation value,
payable quarterly, (iii) is exchangeable at the option of the holder, in
whole or from time to time in part, at any time for 4,981,000 FTL, Ltd. Class
A ordinary shares, (iv) is convertible at the option of the holder, in whole
or from time to time in part, at any time for 4,981,000 shares of FTL, Inc.
common stock, (v) participates with the holders of FTL, Inc. common stock in
all dividends and liquidation payments in addition to its preference payments
on an as converted basis, (vi) is redeemable by FTL, Inc., at its option,
after three years at a redemption price equal to the then fair market value
of FTL, Inc. Preferred Stock as determined by a nationally recognized
investment banking firm, and (vii) has the right to vote on all matters put
to a vote of the holders of FTL, Inc. common stock, voting together with such
holders as a single class, and is entitled to the number of votes which such
holder would have on an as converted basis.
The fixed dividend on the FTL, Inc. Preferred Stock of 4.5% of the
liquidation preference of $71,700,000 equals $3,200,000 on an annual basis.
In addition, preferred stockholders participate in FTL, Inc.'s earnings after
provision for the fixed preferred stock dividend. Participation in earnings
is determined as the ratio of preferred shares outstanding to the total of
preferred and common shares outstanding (7.2% at April 3, 1999). Preferred
stockholder participation in losses is limited to the preferred stockholders'
prior participation in earnings. Because FTL, Inc. had a loss in the three
months ended April 3, 1999, the minority interest participation is limited to
the fixed preferred dividend of $300,000 for the period.
Effective January 1, 1998, the Company changed its year end from December 31
to a 52 or 53 week year ending on the Saturday nearest December 31. All
quarterly reporting periods are prepared on a 4-4-5 accounting cycle with
each quarter ending on the Saturday nearest the calendar quarter end.
2. No dividends were declared on the Company's common stock for the three-month
periods ended April 3, 1999 and March 28, 1998.
3. The Company's effective income tax rate of 5.0% for the first three months of
1999 differed from the Federal statutory rate of 35% primarily due to the
impact of foreign earnings, certain of which are taxed at lower rates than in
the United States, partially offset by goodwill amortization, a portion of
which is not deductible for Federal income taxes, and a provision for
interest on prior years' taxes.
6
<PAGE> 8
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
The Company's effective income tax rate of 17% for the first three months of
1998 differed from the Federal statutory rate of 35% primarily due to the
impact of foreign earnings, certain of which are taxed at lower rates than in
the United States, partially offset by goodwill amortization, a portion of
which is not deductible for Federal income taxes, and state income taxes.
4. In 1995, management announced plans to close certain manufacturing operations
and to take other actions to reduce costs and improve operations. As a
result, the Company recorded charges of approximately $372,900,000
($287,400,000 after tax) related to impairment write-downs of goodwill, costs
associated with the closing or realignment of certain domestic manufacturing
facilities and attendant personnel reductions and charges related to
inventory write-downs and valuations, foreign operations and other corporate
issues.
A rollforward of the 1995 special charges from January 2, 1999 through April
3, 1999 is presented below (in thousands of dollars):
<TABLE>
<CAPTION>
RESERVE RESERVE
BALANCE BALANCE
JANUARY 2, CASH INCOME OTHER APRIL 3,
1999 PAYMENTS (EXPENSE) ACTIVITY 1999
---------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Impairment write down of goodwill........ $ -- $ -- $-- $-- $ --
Closing or realignment of manufacturing
operations
Loss on disposal of closed facilities,
improvements and equipment.......... -- -- -- -- --
Changes in estimates of insurance
liabilities......................... 9,500 2,300 -- -- 7,200
Costs related to expected increases in
workers' compensation and health
and welfare costs................... -- -- -- -- --
Costs related to termination of certain
lease obligations................... -- -- -- -- --
Costs related to severance of the
hourly workforce.................... -- -- -- -- --
Other.................................. 200 -- -- -- 200
------- ------ -- -- -------
9,700 2,300 -- -- 7,400
Severance................................ -- -- -- -- --
Other asset write downs, valuation
reserves and other reserves............ -- -- -- -- --
Changes in estimates of certain retained
liabilities of former subsidiaries..... 10,500 3,500 -- -- 7,000
Termination of management agreement...... -- -- -- -- --
------- ------ -- -- -------
$20,200 $5,800 $-- $-- $14,400
======= ====== == == =======
</TABLE>
In the fourth quarter of 1997, the Company recorded charges for costs related
to the closing and disposal of a number of domestic manufacturing and
distribution facilities, impairment of manufacturing equipment and other
assets and certain European manufacturing and distribution facilities, and
other costs associated with the Company's world-wide restructuring of
manufacturing and distribution facilities. These and other special charges
totalled $441,700,000 ($372,200,000 after tax).
7
<PAGE> 9
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
A rollforward of the 1997 special charges from January 2, 1999 through April
3, 1999 is presented below (in thousands of dollars):
<TABLE>
<CAPTION>
RESERVE RESERVE
BALANCE BALANCE
JANUARY 2, CASH INCOME OTHER APRIL 3,
1999 PAYMENTS (EXPENSE) ACTIVITY 1999
---------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Closing and disposal of U.S.
manufacturing and distribution
facilities
Loss on sale of facilities,
improvements and equipment:
Sewing, finishing and distribution
facilities...................... $ 60,100 $ -- $ -- $ -- $ 60,100
Impairment of mills to be sold.... 75,400 -- -- -- 75,400
Lease residual guarantees......... 61,000 8,400 -- -- 52,600
Other equipment................... 6,200 -- -- -- 6,200
-------- ------ ------ ------ --------
202,700 8,400 -- -- 194,300
Severance costs...................... 200 -- -- -- 200
Other accruals....................... 2,400 -- -- -- 2,400
-------- ------ ------ ------ --------
205,300 8,400 -- -- 196,900
-------- ------ ------ ------ --------
Impairment of European manufacturing
and distribution facilities
Impairment of long lived assets...... -- -- -- -- --
Other accruals....................... 1,100 -- -- 100 1,000
-------- ------ ------ ------ --------
1,100 -- -- 100 1,000
-------- ------ ------ ------ --------
Pro Player incentive compensation
agreement............................ -- -- -- -- --
-------- ------ ------ ------ --------
Other asset write-downs and reserves
Inventory valuation provisions....... -- -- -- -- --
Other accruals....................... 11,300 200 -- 1,800 9,300
-------- ------ ------ ------ --------
11,300 200 -- 1,800 9,300
-------- ------ ------ ------ --------
Changes in estimates of certain
retained liabilities of former
subsidiaries......................... 10,600 -- -- -- 10,600
-------- ------ ------ ------ --------
Total pretax charges......... $228,300 $8,600 $ -- $1,900 $217,800
======== ====== ====== ====== ========
</TABLE>
During the first quarter of 1998, the Company sold certain inventory which
had been written down as part of the 1997 special charges. Amounts received
for the inventory sold were in excess of amounts estimated, resulting in
reductions in cost of sales and increases to earnings before income tax
expense of $4,900,000 in the first quarter of 1998.
5. The Company and its subsidiaries are involved in certain legal proceedings
and have retained liabilities, including certain environmental liabilities,
such as those under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), its regulations and similar
state statutes ("Superfund Legislation"), in connection with the sale of
certain discontinued operations, some of which were significant generators of
hazardous waste. The Company and its subsidiaries have also retained certain
liabilities related to the sale of products in connection with the sale of
certain discontinued operations. The Company's retained liability reserves at
April 3, 1999 related to discontinued operations consist primarily of certain
environmental reserves of approximately $30,900,000 and product liability
reserves of approximately $4,000,000. During 1998, the Company purchased
insurance coverage for potential cleanup cost expenditures from approximately
the level of current environmental reserves up to $100,000,000 for certain
sites with on-going remediation, pollution liability
8
<PAGE> 10
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
coverage for claims arising out of pollution conditions at owned locations
including continuing operations, sold facilities and non-owned sites and
product liability coverage for claims arising out of products manufactured by
the sold operations. Management believes that adequate reserves have been
established to cover potential claims based on facts currently available and
current Superfund and CERCLA Legislation.
Generators of hazardous wastes which were disposed of at offsite locations
which are now superfund sites are subject to claims brought by state and
Federal regulatory agencies under Superfund Legislation and by private
citizens under Superfund Legislation and common law theories. Since 1982, the
United States Environmental Protection Agency (the "EPA") has actively sought
compensation for response costs and remedial action at offsite disposal
locations from waste generators under the Superfund Legislation, which
authorizes such action by the EPA regardless of fault, legality of original
disposal or ownership of a disposal site. The EPA's activities under the
Superfund Legislation can be expected to continue during the remainder of
1999 and future years.
On February 24, 1999, the Board of Directors, excluding Mr. Farley,
authorized the Company to guarantee a bank loan of $65,000,000 to Mr. Farley
in connection with Mr. Farley's refinancing and retirement of his $26,000,000
and $12,000,000 loans previously guaranteed by the Company and other
indebtedness of Mr. Farley. The Company's obligations under the guarantee are
secured by 2,507,512 shares of FTL, Inc. Preferred Stock and all of Mr.
Farley's assets. In consideration of the guarantee, which is scheduled to
expire in September 2000, Mr. Farley pays an annual guarantee fee equal to 2%
of the outstanding principal balance of the loan. The Board of Directors
received an opinion from an independent financial advisor that the terms of
the transaction are commercially reasonable. In addition, in October 1998,
the Company advanced $3,500,000 to Mr. Farley which was repaid in March 1999.
The Company has negotiated grants from the governments of the Republic of
Ireland, Northern Ireland and Germany. The grants are being used for employee
training, the acquisition of property and equipment and other governmental
business incentives such as general employment. At April 3, 1999, the Company
had a contingent liability to repay, in whole or in part, grants received of
approximately $28,200,000 in the event that the Company does not meet defined
average employment levels or terminates operations in the Republic of
Ireland, Northern Ireland and Germany.
On July 1, 1998, the New England Health Care Employees Pension Fund filed a
purported class action on behalf of all those who purchased Fruit of the
Loom, Inc. Class A Common Stock and publicly traded options between July 24,
1996 and September 5, 1997 (the "Class Period") against the Company and
William Farley, Bernhard Hansen, Richard C. Lappin, G. William Newton,
Burgess D. Ridge, Larry K. Switzer and John D. Wigodsky, each of whom are
current or former officers of the Company, in the United States District
Court for the Western District of Kentucky ("New England Action"). The
plaintiff claims that the defendants engaged in conduct violating Section
10(b) of the Securities Exchange Act of 1934, as amended (the "Act"), and
that the Company and Mr. Farley are also liable under Section 20(a) of the
Act. According to the plaintiff, the Company, with the knowledge and
assistance of the individual defendants, made certain material
misrepresentations and failed to disclose certain material facts about the
Company's condition and prospects during the Class Period, causing the
plaintiff and the class to buy Company stock or options at artificially
inflated prices. The plaintiff also alleges that during the Class Period, the
individual defendants sold stock of the Company while possessing material
non-public information. The plaintiff asks for unspecified amounts as
damages, interest and costs and ancillary relief. The defendants filed a
motion to dismiss the action, which is fully briefed and awaiting court
action. The defendants filed a motion to change venue from Bowling Green,
Kentucky, and such motion is not yet fully briefed.
9
<PAGE> 11
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
Management believes that the suit is without merit, and management and the
Company intend to defend it vigorously. Management believes, based on
information currently available, that the ultimate resolution of this
litigation will not have a material adverse effect on the financial condition
or results of the operations of the Company, but the ultimate resolution of
the suit, if unfavorable, could be material to the results of operations of a
particular future period.
On August 26, 1998, Carol Bradley filed a purported derivative action on
behalf of the Company, against William Farley, Richard C. Lappin, Omar Z. Al
Askari, Dennis S. Bookshester, Henry A. Johnson, Mark H. McCormack, Larry K.
Switzer, A. Lorne Weil and Sir Brian Wolfson, each of whom is a current or
former director of the Company, and the Company, as a nominal defendant, in
the Warren Circuit Court of the State of Kentucky. The plaintiff asserts
various common law claims against the individual defendants including, inter
alia, breach of fiduciary duty, waste of corporate assets, breach of contract
and constructive fraud claims. The plaintiff also asserts an insider trading
claim against defendants Farley, Lappin and Switzer. The claims asserted
against the individual defendants are based on the same alleged
misrepresentations and omissions which form the basis of the claims asserted
by the plaintiff in the New England Action as described above. The plaintiff
seeks unspecified compensatory and punitive damages, attorneys' fees and
costs and ancillary relief.
On September 18, 1998, defendant Farley, with the consent of the Company,
removed the action to the United States District Court for the Western
District of Kentucky. Those defendants subsequently filed a motion to dismiss
on the ground that the plaintiff failed to make an appropriate demand on the
Company prior to filing the action. That motion is fully briefed and awaiting
court action.
6. The following table sets forth the computation of basic and diluted earnings
per common share (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
APRIL 3, MARCH 28,
1999 1998
-------- ---------
<S> <C> <C>
NUMERATOR
For basic earnings per share --
Net earnings (loss) applicable to common stock............ $(9,000) $31,200
Add back dividends on exchangeable preferred assumed to be
converted.............................................. -- --
------- -------
For diluted earnings per share --
Earnings (loss) applicable to common stock after assumed
conversion............................................. $(9,000) $31,200
======= =======
DENOMINATOR
For basic earnings per common share --
weighted average shares outstanding....................... 70,400 71,800
Effect of dilutive employee stock options................... -- 500
Effect of dilutive exchangeable preferred................... -- --
------- -------
For diluted earnings per common share --
weighted average shares outstanding and assumed
conversions............................................ 70,400 72,300
======= =======
Earnings (loss) per common share............................ $ (0.13) $ 0.43
======= =======
Earnings (loss) per common share -- assuming dilution....... $ (0.13) $ 0.43
======= =======
</TABLE>
Because diluted EPS increases in the first quarter of 1999 from a loss of
$(0.13) to a loss of $(0.12), the effect of the assumed conversion of
exchangeable preferred stock (1,700,000 weighted average shares) is
antidilutive and has been ignored in the computation of diluted EPS.
Therefore, diluted EPS is reported as a loss of $(0.13) in the first quarter
of 1999. The effect of employee stock options was not material in 1999. All
employee stock options were converted to options to purchase FTL, Ltd. Class
A ordinary shares effective March 4, 1999.
10
<PAGE> 12
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Information
The Company desires to provide investors with meaningful and useful
information. Therefore, this Quarterly Report on Form 10-Q contains certain
statements that describe the Company's beliefs concerning future business
conditions and the outlook for the Company, based on currently available
information. Wherever possible, the Company has identified these "forward
looking" statements (as defined in Section 21E of the Securities Exchange Act of
1934) by words such as "anticipates," "believes," "estimates," "expects" and
similar expressions. These forward looking statements are subject to risks,
uncertainties and other factors which could cause the Company's actual results,
performance or achievements to differ materially from those expressed in, or
implied by, these statements. These risks, uncertainties and other factors
include, but are not limited to, the following: the financial strength of the
retail industry (particularly the mass merchant channel), the level of consumer
spending for apparel, demand for the Company's activewear screenprint products,
the competitive pricing environment within the basic apparel segment of the
apparel industry, the Company's ability to develop, market and sell new
products, the Company's effective income tax rate, the success of planned
advertising, marketing and promotional campaigns, international activities and
the resolution of legal proceedings and other contingent liabilities. The
Company assumes no obligation to update publicly any forward looking statements,
whether as a result of new information, future events or otherwise.
Results of Operations
The following discussion should be read in conjunction with the
accompanying condensed consolidated financial statements and related notes for
the period ended April 3, 1999 and the Company's consolidated financial
statements and related notes contained in the Company's Annual Report on Form
10-K for the year ended January 2, 1999.
SPECIAL CHARGES
During the first quarter of 1998, the Company sold certain inventory which
had been written down as part of the 1997 special charges. Amounts received for
the inventory sold were in excess of amounts estimated, resulting in reductions
in cost of sales and increases to earnings before income tax expense of
$4,900,000 in the first quarter of 1998.
In connection with the transfer of substantially all of its sewing
operations to offshore locations, and the related increase in the use of foreign
contract manufacturers, the Company is in the process of completing enhanced
inventory control procedures. Until such time as such procedures are completed,
the Company remains subject to increased risks regarding the management of its
inventory. These risks, such as inventory shrinkage and obsolescence, could
result in the Company incurring additional write-downs; however, the Company
believes it has adequate reserves for these potential write-downs. Although the
Company is not currently aware of any facts that would require any substantial
write-down of its inventory, there can be no assurance that write-downs will not
be recognized in the future.
The 1995 and 1997 restructuring activities are generally progressing as
expected, and management currently anticipates completion of these activities by
the end of 1999. There can be no assurance, however, that all activities will be
completed by the end of 1999.
11
<PAGE> 13
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
FIRST QUARTER 1999 COMPARED WITH 1998
The table below sets forth selected operating data (in millions of dollars
and as percentages of net sales).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
APRIL 3, MARCH 28,
1999 1998
-------- ---------
<S> <C> <C>
Net sales................................................... $408.7 $457.2
Gross earnings.............................................. 94.4 147.7
Gross margin................................................ 23.1% 32.3%
Operating earnings.......................................... 6.9 58.0
Operating margin............................................ 1.7% 12.7%
</TABLE>
First quarter net sales were $48,500,000 or 10.6% lower than the same
period last year. Fourth quarter 1998 production disruptions, including
Hurricane Mitch and the warm fall weather that impaired fleece sales, had a
greater than anticipated impact on product availability in Retail Products and
Activewear in the first quarter of 1999. Revenues were reduced by approximately
$40,000,000 because production could not be increased quickly enough to meet
demand. The increased demand was expected to offset a one-time decline in sales
of approximately $35,000,000 from lower Gitano sales due to customer mix, the
elimination of Winnie the Pooh licensed products and lower Activewear pricing.
Men's and boys' underwear sales grew 11.5% compared with the first quarter of
1998. Activewear sales declined 25.9% due to price competition and product
availability. Sales of sports licensed products were impacted by the NBA strike
and soft demand in the sports licensed market. In Europe, sales were down on
lower retail volume and unfavorable currency effects.
Segment net sales were as follows (in millions of dollars).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
APRIL 3, MARCH 28,
1999 1998
-------- ---------
<S> <C> <C>
NET SALES
Retail Products........................................... $191.1 $196.7
Activewear................................................ 110.1 148.6
Sports & Licensing........................................ 32.2 42.7
Europe.................................................... 64.9 69.2
Other..................................................... 10.4 --
------ ------
$408.7 $457.2
====== ======
</TABLE>
Gross earnings decreased $53,300,000 or 36.1% compared with the first
quarter of 1998. Gross margin decreased 9.2 percentage points to 23.1% of sales
for the quarter. Product availability and sales of higher cost inventory
manufactured in 1998 impacted Retail Products and Activewear gross earnings and
margin. Activewear results were further impacted by unfavorable pricing compared
with the first quarter of last year. Sports & Licensing and European results
were affected by lower volume.
Operating earnings decreased $51,100,000 or 88.1% in the first quarter
compared with 1998, and operating margin decreased 11.0 percentage points to
1.7% of sales. The unfavorable comparison was due to the gross earnings and
margin decline noted above. Selling, general and administrative expense declined
$2,200,000 or 2.6% reflecting lower advertising which more than offset
additional Year 2000 remediation costs. Selling, general and administrative
expense as a percent of net sales increased 1.6 percentage points to 19.8%.
12
<PAGE> 14
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
Segment operating earnings were as follows (in millions of dollars).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
APRIL 3, MARCH 28,
1999 1998
-------- ---------
<S> <C> <C>
OPERATING EARNINGS (LOSS)
Retail Products........................................... $ 6.5 $23.9
Activewear................................................ (3.3) 26.6
Sports & Licensing........................................ (2.6) 1.4
Europe.................................................... 7.7 8.4
Other..................................................... 5.2 4.3
Goodwill amortization..................................... (6.6) (6.6)
----- -----
$ 6.9 $58.0
===== =====
</TABLE>
Interest expense decreased $3,100,000 or 12.6% in the first quarter
compared with the same period last year. The decrease largely reflected a lower
average debt level, resulting from the positive cash flow from operations in the
twelve months ended April 3, 1999. Average borrowing rates were also favorable
compared with the first quarter of last year.
Other income--net in the first quarter increased $1,200,000 over 1998. Net
other income in the 1999 period included a recovery on previously settled
litigation ($3,900,000) and gains on asset sales ($2,200,000) and other
investments ($3,500,000). Receivable securitization costs totalled $2,400,000 in
the first quarter of 1999. Net other income in the 1998 period included gains on
asset sales ($6,400,000) and currency translation ($1,400,000). Receivable
securitization costs totalled $3,100,000 in the first quarter of 1998.
The Company's effective income tax rate of 5.0% for the first three months
of 1999 differed from the Federal statutory rate of 35% primarily due to the
impact of foreign earnings, certain of which are taxed at lower rates than in
the United States, partially offset by goodwill amortization, a portion of which
is not deductible for Federal income taxes, and a provision for interest on
prior years' taxes.
The Company's effective income tax rate of 17% for the first three months
of 1998 differed from the Federal statutory rate of 35% primarily due to the
impact of foreign earnings, certain of which are taxed at lower rates than in
the United States, partially offset by goodwill amortization, a portion of which
is not deductible for Federal income taxes, and state income taxes.
Earnings (loss) per common share, basic and diluted, consisted of a loss of
$(0.13) in 1999 and earnings of $0.43 in 1998. The effects of employee stock
options were immaterial in 1999, while the effect of the assumed conversion of
the FTL, Inc. Preferred Stock was antidilutive and has been ignored in the 1999
period. Average common shares were lower in 1999 due to the Reorganization.
Liquidity and Capital Resources
Funds generated from the Company's operations are its major source of
liquidity and are supplemented by funds obtained from capital markets, including
bank facilities. The Company has available for the funding of its operations
approximately $615,000,000 of revolving lines of credit. As of May 11, 1999,
approximately $291,500,000 was available and unused under these facilities.
Operating activities used a net of $75,600,000 in cash in the first quarter
of 1999, compared with a net use of $191,500,000 by operations in the same 1998
period. In reconciling from net earnings (loss) to net operating cash flows, the
year-to-year change reflected a reduction of $153,600,000 in the first quarter
working
13
<PAGE> 15
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
capital increase compared with 1998. Net earnings (loss) plus depreciation and
amortization, however, was $41,100,000 lower than the same period last year.
Investing activities used $22,200,000 in 1999, compared with $14,000,000
provided in the 1998 period. Proceeds from asset sales were $15,900,000 lower,
and the 1999 period included a payment of $8,400,000 under the minimum value
guarantee provision of the Company's synthetic lease agreement and a repayment
of $6,800,000 of employment grants under agreement with the Republic of Ireland.
Capital spending, primarily to support offshore assembly operations, is
anticipated to approximate $40,000,000 in 1999.
Net proceeds from financing activities were $116,800,000 in 1999, down from
$177,700,000 in 1998 due to the favorable comparison in operating cash flows. On
March 25, 1999, the Company issued $250,000,000 of its 8 7/8% Senior Notes due
April 2006 (the "8 7/8% Senior Notes"). Net proceeds of approximately
$239,700,000 were initially used to repay outstanding borrowings under the
Company's Credit Agreement.
In order to satisfy its repurchase obligation arising from the
Reorganization, the Company commenced an offer on April 5, 1999 to repurchase
all $250,000,000 of its 7 7/8% Senior Notes due October 15, 1999 (the "7 7/8%
Senior Notes") at a price equal to 101% of the principal amount thereof plus
accrued and unpaid interest. If all holders of the 7 7/8% Senior Notes accept
the purchase offer, the aggregate purchase price would be $252,500,000 plus
accrued and unpaid interest. The availability under the Bank Credit Agreement
created by the issuance of the 8 7/8% Senior Notes is expected to be used to
satisfy the Company's repurchase obligations with respect to the 7 7/8% Senior
Notes or to repay the 7 7/8% Senior Notes at maturity.
In November 1996, the Company's Board of Directors authorized the purchase
of up to $200,000,000 of the Company's common stock in open market and privately
negotiated transactions. Total purchases under the program through January 1998
were 5,890,000 shares at an aggregate cost of $193,200,000.
In December 1996, the Company entered into a three-year receivables
purchase agreement whereby it can currently sell to a third party up to a
$250,000,000 undivided interest in a defined pool of its trade accounts
receivable. The maximum amount outstanding as defined under the agreement varies
based upon the level of eligible receivables. Under the agreement, approximately
$205,300,000 of eligible receivables at April 3, 1999 and $220,700,000 of
eligible receivables at January 2, 1999 were sold to the Company's
unconsolidated receivable financing subsidiary, reducing consolidated notes and
accounts receivable. Proceeds of approximately $175,000,000 and $208,800,000
from the ultimate purchaser at the respective balance sheet dates were used to
reduce borrowings outstanding under the Company's revolving lines of credit.
Such proceeds as of January 2, 1999, included advances from the ultimate
purchaser totalling $55,900,000 which were included in trade accounts payable.
Management believes the funding available to the Company is sufficient to
meet anticipated requirements for capital expenditures, working capital and
other needs. The Company's debt instruments, principally its bank agreements,
contain covenants restricting the Company's ability to sell assets, incur debt,
pay dividends and make investments and require the Company to maintain certain
financial ratios.
The Euro
The adoption of a common currency by countries of the European Economic
Community beginning January 1, 1999 may ultimately expose the Company's European
operations to certain risk factors such as the resulting cross-border
transparency of pricing differences. Certain system conversion costs will also
necessarily be incurred. Because the Company already competes throughout Western
Europe, however, the emergence of a single market in this region would not
immediately expose the Company to increased competition and may present
opportunities for further economies of scale. Management has not completed its
study of the impact
14
<PAGE> 16
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
on the Company but anticipates no material adverse effect on the Company's
financial position or results of operations. Sales in the affected countries
totalled less than 10% of consolidated net sales in 1999 and 1998.
Accounting Standards
In June 1998, the Financial Accounting Standards Board issued FAS 133,
Accounting for Derivative Instruments and Hedging Activities. The new Statement
requires all derivatives to be recorded on the balance sheet at fair value and
establishes "special accounting" for the following three different types of
hedges: hedges of changes in the fair value of assets, liabilities, or firm
commitments (referred to as fair value hedges); hedges of the variable cash
flows of forecasted transactions (cash flow hedges); and hedges of foreign
currency exposures of net investments in foreign operations. Though the
accounting treatment and criteria for each of the three types of hedges are
unique, they all result in offsetting changes in fair values or cash flows of
both the hedge and the hedged item being recognized in earnings in the same
period. Changes in fair value of derivatives that do not meet the criteria of
one of these three categories of hedges are included in income. The Statement is
effective for years beginning after June 15, 1999, but companies can early adopt
as of the beginning of any fiscal quarter that begins after June 1998.
Management has not completed its review of FAS 133.
Year 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company presently believes that with modifications or replacements of
existing software and certain hardware, the Year 2000 Issue can be mitigated.
However, if such modifications and replacements are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the following
four phases: inventory/assessment, remediation, testing, and implementation. To
date, the Company has completed its assessment of mission-critical systems that
could be affected by the Year 2000 date. The completed assessment indicated that
most of the Company's significant information technology systems could be
affected, particularly the order, billing, and inventory systems. That
assessment also indicated that software and hardware (embedded chips) used in
production and manufacturing systems (hereafter also referred to as operating
equipment) also are at risk. Affected systems include technologies used in
various aspects of the manufacturing/distribution process. In addition, the
Company is gathering information about the Year 2000 compliance status of its
significant customers, suppliers and subcontractors, and continues to monitor
their compliance.
For its information technology exposures of mission critical systems,
through April 3, 1999, the Company is 75% complete on the remediation phase and
expects to complete software testing and deployment no later than September
1999. The Company is 50% complete on the remediation phase of less critical
systems, with completion of testing and redeployment phases for those systems by
September 1999.
The assessment phase of the operating equipment continued through December
1998. Remediation and replacement efforts are now underway for mission critical
and higher priority equipment that is not currently
15
<PAGE> 17
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
Year 2000 compliant. Remediation, testing and implementation for these systems
are on schedule to finish by September 1999. Non-compliant equipment that is
deemed of lesser importance will be remediated or replaced by December 1999.
The Company's order entry system interfaces directly with significant
customers. The Company is in the process of working with customers to ensure
that the Company's systems that interface directly with third parties are Year
2000 compliant by September 1999. The Company has completed its assessment and
remediation of these systems. Testing and implementation has begun and is
expected to be complete by September 1999.
The Company has queried its significant suppliers and subcontractors, none
of which share information systems with the Company (external agents). The
Company will continue to solicit Year 2000 compliance responses from suppliers
in an effort to reduce risk. To date, the Company is not aware of any external
agent with a Year 2000 issue that would materially impact the Company's results
of operations, liquidity, or capital resources. However, the Company has no
means of ensuring that external agents will be Year 2000 ready. The inability of
external agents to complete their Year 2000 resolution process in a timely
fashion could materially impact the Company. The effect of non-compliance by
external agents is not determinable.
The Company is utilizing both internal and external resources to reprogram
or replace, test, and implement the software, hardware and operating equipment
for Year 2000 modifications. The total cost of the Year 2000 project is
estimated at $18,400,000 and is being funded through operating cash flows.
Through April 3, 1999, the Company has incurred costs, related to all phases of
the Year 2000 project, totaling approximately $12,200,000 all of which has been
expensed, including $3,000,000 in the three months ended April 3, 1999. All
remaining expenditures related to repair of hardware and software will be
expensed as incurred.
Management believes the Company has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the Year 2000 program. In the event
that the Company does not complete any additional phases, the Company would
consider implementing remediated programs that have not been fully tested, thus
putting order/invoicing systems and other mission critical programs in jeopardy.
Additionally, the Company would be unable to fully manufacture or ship product
if no further Year 2000 effort were expended. Finally, disruptions in the
economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. The Company could be subject to litigation for
computer systems product failure, for example equipment shutdown or failure to
properly date business records. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
The Company has determined a need for contingency plans to cover loss or
disruption of critical applications, vendors, communication/community systems,
and equipment. These plans were drafted in the first quarter of 1999 and will be
finished/approved in the second quarter of 1999. Continuous updates will be made
thereafter as more information is made available by external agents and the
Company can better assess its risks.
16
<PAGE> 18
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
<TABLE>
<S> <C>
4(a)* $900,000,000 Credit Agreement dated as of September 19, 1997
(the "Credit Agreement"), among the several banks and other
financial institutions from time to time parties thereto
(the "Lenders"), NationsBank, N.A., as administrative agent
for the Lenders thereunder, Chase Manhattan Bank, Bankers
Trust Company, The Bank of New York and the Bank of Nova
Scotia, as co-agents (incorporated herein by reference to
Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997).
4(b)* First Amendment to Credit Agreement dated March 26, 1998;
Second Amendment to Credit Agreement dated July 2, 1998;
Third Amendment to Credit Agreement date December 31, 1998;
Fourth Amendment to Credit Agreement dated March 10, 1999;
Second Amended and Restated Pledge Agreement dated March 10,
1999 related to the Credit Agreement; and Bond Pledge
Agreement dated March 10, 1999 related to the Credit
Agreement (incorporated herein by reference to Exhibit 4(c)
to the Company's Annual Report on Form 10-K for the year
ended January 2, 1999).
4(c) Indenture dated as of March 25, 1999, among Fruit of the
Loom, Inc., as issuer, Fruit of the Loom, Ltd., as
guarantor, certain subsidiaries of Fruit of the Loom, Inc.,
as guarantors, and The Bank of New York, as trustee of the
8 7/8% Senior Notes due 2006.
27 Financial Data Schedule.
</TABLE>
- ---------------
* Document is available at the Public Reference Section of the Securities and
Exchange Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.
C. 20549 (Commission file No. 1-8941).
The Registrant has not listed nor filed as an Exhibit to this Quarterly
Report certain instruments with respect to long-term debt representing
indebtedness of the Registrant and its subsidiaries which do not individually
exceed 10% of the total assets of the Registrant and its subsidiaries on a
consolidated basis. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the
Registrant agrees to furnish such instruments to the Securities and Exchange
Commission upon request.
B. REPORTS ON FORM 8-K
In February 1999, the Company filed a Current Report on Form 8-K dated
February 17, 1999 reporting the Company's February 17, 1999 press release
announcing its earnings for the three months and years ended January 2, 1999 and
December 31, 1998. The financial statements attached to the press release
consisted of a condensed consolidated balance sheet as of January 2, 1999 and
December 31, 1998, a condensed consolidated statement of operations for the
three months and years ended January 2, 1999 and December 31, 1998 and a
condensed consolidated statement of cash flows for the years ended January 2,
1999 and December 31, 1998.
In March 1999, the Company filed a Current Report on Form 8-K dated March
4, 1999, reporting the Company's press release dated March 4, 1999, announcing
that as a result of the reorganization transaction completed March 4, 1999,
Fruit of the Loom, Ltd., a Cayman Islands company, became the successor
corporation to its subsidiary, Fruit of the Loom, Inc., a Delaware corporation,
under the Securities Exchange Act of 1934, as amended, with respect to its
common stock, and will succeed to Fruit of the Loom, Inc.'s reporting
obligations thereunder.
In March 1999, the Company filed a Current Report on Form 8-K dated March
24, 1999, reporting (i) the Company's press release dated March 1, 1999,
announcing its intention to raise approximately $250,000,000 through an offering
of senior notes to be placed privately with institutional investors, and (ii)
the Company's press release dated March 18, 1999, announcing its agreement to
sell $250,000,000 of its 8 7/8% Senior Notes due April 15, 2006.
17
<PAGE> 19
SIGNATURE
Pursuant to the requirements 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.
FRUIT OF THE LOOM, INC.
-----------------------
(Registrant)
G. WILLIAM NEWTON
----------------------------------
G. William Newton
Vice President Finance
and Acting Chief Financial Officer
(Principal Financial Officer
and duly authorized to sign
on behalf of Registrant)
Date: May 18, 1999
18
<PAGE> 1
================================================================================
FRUIT OF THE LOOM, INC.,
as Issuer
FRUIT OF THE LOOM, LTD.,
as Guarantor
THE GUARANTOR SUBSIDIARIES,
as Guarantors
8 7/8% Senior Notes Due 2006
------------------------------
INDENTURE
Dated as of March 25, 1999
------------------------
THE BANK OF NEW YORK, Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions........................................................ 1
SECTION 1.02. Other Definitions.................................................. 19
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act................................................... 19
SECTION 1.04. Rules of Construction.............................................. 20
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating.................................................... 20
SECTION 2.02. Execution and Authentication....................................... 21
SECTION 2.03. Registrar and Paying Agent......................................... 22
SECTION 2.04. Paying Agent To Hold Money in
Trust........................................................... 23
SECTION 2.05. Securityholder Lists............................................... 23
SECTION 2.06. Transfer and Exchange.............................................. 23
SECTION 2.07. Replacement Securities............................................. 24
SECTION 2.08. Outstanding Securities............................................. 24
SECTION 2.09. Temporary Securities............................................... 25
SECTION 2.10. Cancellation....................................................... 25
SECTION 2.11. Restrictive Legends................................................ 25
SECTION 2.12. Book-Entry Provisions for
Global Notes..................................................... 26
SECTION 2.13. Special Transfer Provisions........................................ 28
SECTION 2.14. Defaulted Interest................................................. 30
SECTION 2.15. Payment of Additional Interest Under
Registration Rights Agreement.................................... 30
SECTION 2.16. CUSIP Numbers...................................................... 30
ARTICLE 3
Redemption
SECTION 3.01. Redemption; Notices to Trustee..................................... 31
SECTION 3.02. Section of Securities to be
Redeemed......................................................... 31
SECTION 3.03. Notice of Redemption............................................... 31
SECTION 3.04. Effect of Notice of Redemption..................................... 32
SECTION 3.05. Deposit of Redemption Price........................................ 32
SECTION 3.06. Securities Redeemed in Part........................................ 33
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities.............................................. 33
SECTION 4.02. SEC Reports........................................................ 33
SECTION 4.03. Limitation on Debt................................................. 34
SECTION 4.04. Limitation on Debt and Preferred
Stock of Subsidiaries........................................... 35
SECTION 4.05. Limitation on Restricted Payments.................................. 37
SECTION 4.06. Additional Subsidiary Guarantees
and Releases..................................................... 40
SECTION 4.07. Disposition of Proceeds of Asset
Sales........................................................... 40
SECTION 4.08. Limitation on Transactions with
Affiliates...................................................... 43
SECTION 4.09. Restrictions on Secured Debt....................................... 44
SECTION 4.10. Restrictions on Sale and Leaseback
Transactions.................................................... 45
SECTION 4.11. Change of Control.................................................. 46
SECTION 4.12. Limitation on Restrictions on
Distributions from Subsidiaries
of FTL-Cayman...................................................... 48
SECTION 4.13. Compliance Certificate............................................. 48
SECTION 4.14. Further Instruments and Acts....................................... 49
SECTION 4.15. Covenants in Effect Prior to
Investment Grade Rating Date.................................... 49
SECTION 4.16. Payment of Additional Amounts...................................... 49
ARTICLE 5
Successor Companies
SECTION 5.01. When Company, FTL-Cayman or
Guarantor Subsidiaries May Merge
or Transfer Assets............................................... 51
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default.................................................. 53
SECTION 6.02. Acceleration....................................................... 55
SECTION 6.03. Other Remedies..................................................... 55
SECTION 6.04. Waiver of Past Defaults............................................ 56
SECTION 6.05. Control by Majority................................................ 56
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.06. Limitation on Suits................................................ 56
SECTION 6.07. Rights of Holders To Receive
Payment......................................................... 57
SECTION 6.08. Collection Suit by Trustee......................................... 57
SECTION 6.09. Trustee May File Proofs of Claim................................... 57
SECTION 6.10. Priorities......................................................... 57
SECTION 6.11. Undertaking for Costs.............................................. 58
SECTION 6.12. Waiver of Stay or Extension Laws................................... 58
SECTION 6.13. Indemnification of Judgment Currency............................... 58
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee.................................................. 59
SECTION 7.02. Rights of Trustee.................................................. 60
SECTION 7.03. Individual Rights of Trustee....................................... 61
SECTION 7.04. Trustee's Disclaimer............................................... 61
SECTION 7.05. Notice of Default.................................................. 61
SECTION 7.06. Reports by Trustee to Holders...................................... 62
SECTION 7.07. Compensation and Indemnity......................................... 62
SECTION 7.08. Replacement of Trustee............................................. 63
SECTION 7.09. Successor Trustee by Merger........................................ 63
SECTION 7.10. Eligibility Disqualification....................................... 64
SECTION 7.11. Preferential Collection of Claim
Against Company................................................. 64
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on
Securities; Defeasance.......................................... 64
SECTION 8.02. Conditions to Defeasance........................................... 65
SECTION 8.03. Application of Trust Money......................................... 67
SECTION 8.04. Repayment to Company............................................... 67
SECTION 8.05. Indemnity for Government
Obligations..................................................... 67
SECTION 8.06. Reinstatement...................................................... 67
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders......................................... 68
SECTION 9.02. With Consent of Holders............................................ 68
SECTION 9.03. Compliance with Trust Indenture
Act............................................................. 69
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 9.04. Revocation and Effect of Consents
and Waivers..................................................... 69
SECTION 9.05. Notation on or Exchange of
Securities...................................................... 70
SECTION 9.06. Trustee To Sign Amendments......................................... 70
SECTION 9.07. Payment for Consent................................................ 70
ARTICLE 10
Guarantee
SECTION 10.01. FTL-Cayman Guarantee............................................... 70
SECTION 10.02. Limitation of FTL-Cayman's Liability............................... 72
SECTION 10.03. Subsidiary Guarantees.............................................. 73
SECTION 10.04. Limitation of Guarantor Subsidiaries'
Liability........................................................ 74
SECTION 10.05. Termination of Subsidiary Guarantees............................... 75
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls....................................... 75
SECTION 11.02. Notices............................................................ 75
SECTION 11.03. Communication by Holders with Other
Holders......................................................... 76
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent............................................ 76
SECTION 11.05. Statements Required in Certificate
or Opinion...................................................... 76
SECTION 11.06. Appointment of Agent; Submission to
Jurisdiction; Waiver of Immunity;
Consent to Service............................................. 77
SECTION 11.07. When Securities Disregarded........................................ 77
SECTION 11.08. Rules by Trustee, Paying Agent and
Registrar....................................................... 78
SECTION 11.09. Legal Holidays..................................................... 78
SECTION 11.10. Governing Law...................................................... 78
SECTION 11.11. No Recourse Against Others......................................... 78
SECTION 11.12. Successors......................................................... 78
SECTION 11.13. Multiple Originals................................................. 78
SECTION 11.14. Table of Contents; Headings........................................ 79
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulation S
</TABLE>
-iv-
<PAGE> 6
INDENTURE dated as of March 25, 1999, among
FRUIT OF THE LOOM, INC., a Delaware corporation, (the
"Company"), FRUIT OF THE LOOM, LTD., a Cayman Islands
company, ("FTL-Cayman"), the Guarantor Subsidiaries
(as defined herein) and THE BANK OF NEW YORK, a New
York banking corporation (the "Trustee").
Recitals
WHEREAS, The Company has duly authorized the issuance of $250,000,000
aggregate principal amount of 8 7/8% Senior Notes due 2006 (the "Initial
Securities"), and the issuance of 8 7/8% Senior Notes due 2006, to be exchanged
for the Initial Securities as contemplated by the Registration Rights Agreement
(as defined herein) (the "Exchange Securities" and, together with the Initial
Securities, the "Securities"); and
WHEREAS, all acts and things necessary have been done to make (i) the
Securities, when duly issued and executed by the Company and authenticated and
delivered hereunder, the valid obligations of the Company and the FTL-Cayman
Guarantee, the valid obligation of the Guarantor and the Subsidiary Guarantees,
the valid obligation of the Guarantor Subsidiaries and (ii) this Indenture a
valid agreement of the Company, FTL-Cayman and the Guarantor Subsidiaries in
accordance with the terms of this Indenture;
NOW, THEREFORE, each party agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Accounts Receivable Subsidiary" means FTL Receivables Company
and any other present or future Subsidiary of FTL-Cayman which engages in no
activities other than in connection with the financing of accounts receivable
and which is designated by the Board of Directors of FTL-Cayman (as provided
below) as an Accounts Receivable Subsidiary and (a) for which no portion of the
Debt or any other obligation (contingent or otherwise) of which (i) is
guaranteed by FTL-Cayman or any Subsidiary of FTL-Cayman (excluding guarantees
of obligations (other than the principal of, and interest on, Debt) pursuant to
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction),
<PAGE> 7
(ii) is recourse to or obligates FTL-Cayman or any Subsidiary of FTL-Cayman in
any way other than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in connection with a
Qualified Receivables Transaction, or (iii) subjects any property or asset of
FTL-Cayman or any Subsidiary of FTL-Cayman (other than accounts receivable and
related assets as provided in the definition of "Qualified Receivables
Transaction"), directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction, (b) with which neither
FTL-Cayman nor any Subsidiary of FTL-Cayman has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
FTL-Cayman or such Subsidiary than those that might be obtained at the time from
persons who are not Affiliates of FTL-Cayman, other than fees payable in the
ordinary course of business in connection with servicing accounts receivable and
(c) with which neither FTL-Cayman nor any Subsidiary of FTL-Cayman has any
obligation to maintain or preserve such Subsidiary's financial condition or
cause such Subsidiary to achieve certain levels of operating results.
"Additional Subsidiary Guarantees" means the guarantees by the
Subsidiaries of FTL-Cayman of the payment of the Company's 7% Debentures due
2011, the Company's 6 1/2% Senior Notes due 2003 and the Company's 7 3/8%
Debentures due 2023.
"Affiliate" of any specified person means (i) any other person
which, directly or indirectly, is in control of, is controlled by or is under
common control with such specified person or (ii) any other person who is a
director or executive officer of the Company, FTL-Cayman or any Guarantor
Subsidiary. For purposes of this definition, control of a person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such person whether by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. No
person (other than FTL-Cayman or any Subsidiary of FTL-Cayman) in whom an
Accounts Receivable Subsidiary makes an Investment in connection with a
Qualified Receivables Transaction will be deemed to be an Affiliate of
FTL-Cayman or any of FTL-Cayman's Subsidiaries solely by reason of such
Investment.
"Articles of Association" means the Amended and Restated
Articles of Association of FTL-Cayman, as in effect on the Issue Date.
"Asset Acquisition" means (i) an investment by FTL-Cayman or
any Subsidiary of FTL-Cayman in any other person pursuant to which such person
will become a Subsidiary of FTL-Cayman or will be merged or consolidated with
or into FTL-Cayman or any Subsidiary of FTL-Cayman or (ii) the acquisition by
FTL-Cayman or any Subsidiary of FTL-Cayman of the assets of any person which
constitute substantially all of the assets of such person, or any division or
line of business of such person, or which is otherwise outside of the ordinary
course of business.
-2-
<PAGE> 8
"Asset Sale" means any direct or indirect sale, issuance, conveyance or
transfer or other disposition (including, without limitation, any merger,
consolidation or sale-leaseback transaction) to any person other than FTL-Cayman
or a Subsidiary of FTL-Cayman, in one or a series of related transactions, of
(i) any Capital Stock of any Subsidiary of FTL-Cayman; (ii) all or substantially
all of the assets of any division or line of business of FTL-Cayman or any
Subsidiary of FTL-Cayman; or (iii) any other properties or assets of FTL-Cayman
or any Subsidiary of FTL-Cayman other than in the ordinary course of business.
For the purposes of this definition, the term "Asset Sale" will not include (a)
any sale, issuance, conveyance, transfer, lease or other disposition of
properties or assets that is governed by the provisions of Article 5; (b) sales
of surplus and other property or equipment that has become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the business of
FTL-Cayman or any Subsidiary of FTL-Cayman, as the case may be; (c) any
transaction consummated in compliance with Section 4.05 or (d) any sale,
conveyance, transfer, lease or other disposition of any aircraft owned by
FTL-Cayman or any Subsidiary of FTL-Cayman as of the date of this Indenture. For
purposes of Section 4.07, the term "Asset Sale" shall not include (x) any sale,
conveyance, transfer, lease or other disposition of any property or asset,
whether in one transaction or a series of related transactions (1) constituting
a Capital Lease Obligation or a transfer consisting solely of a grant of a
security interest permitted by this Indenture or (2) involving assets with a
Fair Market Value not in excess of $10,000,000, (y) sales of accounts receivable
and related assets of the type specified in the definition of "Qualified
Receivables Transaction" to an Accounts Receivable Subsidiary for the fair
market value thereof, including cash in an amount at least equal to 75% of the
book value thereof as determined in accordance with GAAP, it being understood
that, for the purposes of this clause (y), notes (including subordinated notes)
received in exchange for the transfer of accounts receivable and related assets
will be deemed cash if the Accounts Receivable Subsidiary or other payor is
required to repay said notes as soon as practicable from available cash
collections less amounts required to be established as reserves pursuant to
contractual agreements with entities that are not Affiliates of FTL-Cayman
entered into as part of a Qualified Receivables Transaction; and (z) transfers
of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" (or a fractional undivided
interest therein) by an Accounts Receivable Subsidiary in a Qualified
Receivables Transaction.
-3-
<PAGE> 9
"Attributable Debt" means, as to any particular lease under
which any person is at the time liable and at any date as of which the amount
thereof is to be determined, the total net amount of rent required to be paid by
such person under such lease during the remaining primary term thereof, without
giving effect to any renewals at the option of the lessee, discounted from the
respective due dates thereof to such date at the rate of interest implicit in
the terms of such lease. The net amount of rent required to be paid under any
such lease for any such period shall be the aggregate amount of the rent payable
by the lessee with respect to such period after excluding amounts required to be
paid on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges.
"Average Life" means, as of the date of determination, with
respect to any Debt or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Debt or
redemption payment on such Preferred Stock multiplied by the amount of such
payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of
FTL-Cayman or any committee thereof duly authorized to act on behalf of such
Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a person means any obligation
which is required to be classified and accounted for as a capital lease on the
face of a balance sheet of such person prepared in accordance with GAAP; the
amount of such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) corporate stock, including any Preferred Stock.
"Cash Equivalents" means, at any time, (i) any evidence of
Debt with a maturity of not more than one year issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit,
Eurodollar time deposits or bankers' acceptances with a maturity of not more
than
-4-
<PAGE> 10
one year of any financial institution that is a member of the Federal Reserve
System having combined capital and surplus and undivided profits of not less
than $500.0 million; (iii) commercial paper with a maturity of not more than one
year issued by a corporation that is not an Affiliate of the Company organized
under the laws of any state of the United States or the District of Columbia and
rated at least A-1 by Standard & Poor's Ratings Group, at least P-1 by Moody's
Investor Services, Inc. or the equivalent to any such category of Standard &
Poor's Rating Group or Moody's Investor Services, Inc. used by another
nationally recognized rating agency; (iv) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clauses (i) and (ii) above; and (v) transaction deposit accounts with domestic
commercial banks.
"Change of Control" means the occurrence of any of the
following events:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a person shall be deemed to have
beneficial ownership of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of FTL-Cayman;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
of FTL-Cayman (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders
of FTL-Cayman was approved by a vote of 66 2/3% of the directors of
FTL-Cayman then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of FTL-Cayman then in office;
(iii) FTL-Cayman consolidates with or merges with or into
another person or conveys, transfers or leases all or substantially all
of its assets to any person, or any person consolidates with or merges
into FTL-Cayman, in either event pursuant to a transaction in which the
outstanding Voting Stock of FTL-Cayman is changed into or exchanged for
cash, securities or other property (excluding, however, any such
transaction where the outstanding Voting Stock of FTL-Cayman is changed
into or exchanged for Voting Stock of the surviving or transferee
corporation which is neither Redeemable Stock
-5-
<PAGE> 11
nor Exchangeable Stock and in which no "person" (as defined in clause
(i) above), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above), directly or
indirectly, of more than 50% of the total voting power of the Voting
Stock of the surviving or transferee corporation); or
(iv) FTL-Cayman ceases to own at least 90% of the Voting Stock
of the Company.
"Company" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the indenture securities.
"Consolidated EBITDA" means, with respect to any person for
any period, the Consolidated Net Income of such person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale, to the extent such losses were deducted in
computing such consolidated Net Income, plus (ii) provision for taxes based on
income or profits of such person and its Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) Consolidated Interest Expense of such person and its
Subsidiaries for such period, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash expenses were deducted in computing such Consolidated Net
Income, minus (v) non-cash items increasing such Consolidated Net Income for
such period (other than items that were accrued in the ordinary course of
business), in each case, on a consolidated basis and determined in accordance
with GAAP.
"Consolidated EBITDA Coverage Ratio" with respect to any
period means the ratio of (i) the aggregate amount of Consolidated EBITDA for
such period to (ii) the aggregate amount of Consolidated Interest Expense for
such period.
"Consolidated Interest Expense" means, for any period, the
total interest expense of FTL-Cayman and its consolidated subsidiaries,
determined on a consolidated basis in accordance with GAAP, plus the amount of
all dividends paid by FTL-Cayman or any Subsidiary of FTL-Cayman with respect to
(i) any Preferred Stock of any Subsidiary of FTL-Cayman or (ii) Preferred Stock
which is convertible into Debt of FTL-Cayman or any Subsidiary of FTL-Cayman, as
applicable.
-6-
<PAGE> 12
"Consolidated Net Income" means, for any period, the net
income of FTL-Cayman and its consolidated subsidiaries determined on a
consolidated basis in accordance with GAAP; provided, however, that there shall
not be included in such Consolidated Net Income:
(i) any net income of any person if such person is not a
Subsidiary of FTL-Cayman, except that (A) FTL-Cayman's equity in the
net income of any such person for such period shall be included in such
Consolidated Net Income for purposes of clause (3)(a) of Section 4.05
up to the aggregate amount of cash actually distributed by such person
during such period to FTL-Cayman or a Subsidiary of FTL-Cayman as a
dividend or other distribution (subject, in the case of a dividend or
other distribution to a Subsidiary of FTL-Cayman, to the limitations
contained in clause (iii) below) and (B) FTL-Cayman's equity in a net
loss of any such person for such period shall be included in
determining such Consolidated Net Income;
(ii) any net income of any person acquired by FTL-Cayman or a
Subsidiary of FTL-Cayman in a pooling of interests transaction for any
period prior to the date of such acquisition;
(iii) any net income of any Subsidiary of FTL-Cayman if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Subsidiary,
directly or indirectly, to FTL-Cayman, except that (A) FTL-Cayman's
equity in the net income of any such Subsidiary for such period shall
be included in such Consolidated Net Income up to the aggregate amount
of cash actually distributed by such Subsidiary during such period to
FTL-Cayman or another Subsidiary of FTL-Cayman as a dividend or other
distribution (subject, in the case of a dividend or other distribution
to another Subsidiary of FTL-Cayman, to the limitation contained in
this clause), (B) FTL-Cayman's equity in a net loss of any such
Subsidiary for such period shall be included in determining such
Consolidated Net Income and (C) FTL-Cayman's equity in the net income
or net loss of the Company for such period shall be included in such
Consolidated Net Income whether or not the Company is subject to
restrictions, directly or indirectly, on the payment of dividends or
the making of distributions to FTL-Cayman;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of FTL-Cayman or its
consolidated subsidiaries (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any person;
-7-
<PAGE> 13
(v) the cumulative effect of a change in accounting
principles; or
(vi) any write-downs, write-offs, other negative revaluations
and other negative extraordinary charges incurred prior to the Issue
Date.
"Consolidated Net Tangible Assets" means the total assets
shown on the balance sheet of FTL-Cayman and its consolidated subsidiaries,
determined on a consolidated basis using GAAP, as of any date selected by
FTL-Cayman not more than 90 days prior to the taking of any action for the
purpose of which the determination is being made, less (i) all current
liabilities and minority interests and (ii) goodwill and other intangibles.
"Consolidated Net Worth" of any person means the total amounts
shown on the balance sheet of such person and its consolidated subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of such person ending at least 45 days prior to the
taking of any action for the purpose of which the determination is being made,
as (i) the par or stated value of all outstanding Capital Stock of such person
plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit,
(B) any amounts attributable to Redeemable Stock and (C) any amounts
attributable to Exchangeable Stock.
"Credit Agreement" means the Credit Agreement dated as of
September 19, 1997, by and among the Company, certain subsidiaries of the
Company and the financial institutions named therein, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time, whether by the same or any other group
of lenders.
"Debt" of any person means, without duplication,
(i) the principal of and premium (if any) in respect of (A)
indebtedness of such person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for
the payment of which such person is responsible or liable;
(ii) all Capital Lease Obligations of such person;
(iii) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale obligations
of such person and all obligations of such person
-8-
<PAGE> 14
under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business);
(iv) all obligations of such person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i)
through (iii) above) entered into in the ordinary course of business of
such person to the extent such letters of credit are not drawn upon or,
if and to the extent drawn upon, such drawing is reimbursed no later
than the third Business Day following receipt by such person of a
demand for reimbursement following payment on the letter of credit);
(v) the amount of all obligations of such person with respect
to the redemption, repayment or other repurchase of any Redeemable
Stock or Exchangeable Stock (but excluding any accrued dividends);
(vi) all obligations of the type referred to in clauses (i)
through (v) of other persons and all dividends of other persons for the
payment of which, in either case, such person is responsible or liable
as obligor, guarantor or otherwise; provided, however, that to the
extent such person is responsible or liable for the obligation of
another person to pay interest on Debt, then a designated percentage of
such interest or the amount of the underlying Debt, as the case may be,
shall be deemed Debt of the referent person and the amount of such
deemed Debt of the referent person shall be equal to the lesser of (A)
the aggregate principal amount of the underlying Debt or (B) the
aggregate amount of interest due or payable over the term of such Debt
(or the term of the Securities, if shorter) determined based upon the
rate of interest in effect as of the date of such determination,
together with the maximum prepayment premium or penalty which could
become due or payable with respect to such Debt if such Debt was
prepaid prior to the maturity of the Securities;
(vii) all fees and expenses incurred by such person in
connection with the incurrence of any of the obligations described in
this definition; and
(viii) all obligations of the type referred to in clauses (i)
through (vii) of other persons secured by any Lien on any property or
asset of such person (whether or not such obligation is assumed by such
person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets or the amount of the obligation so
secured.
-9-
<PAGE> 15
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, or such
depositary as the Company may appoint as a successor thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Securities" has the meaning set forth in the
recitals hereto.
"Exchangeable Stock" means any Capital Stock of the Company or
FTL-Cayman which is exchangeable or convertible into another security (other
than Capital Stock of the Company or FTL-Cayman which is neither Exchangeable
Stock nor Redeemable Stock).
"Fair Market Value" means, with respect to any asset, the
price which could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of which is under
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined by the Board of Directors of FTL-Cayman acting in good faith
conclusively evidenced by a board resolution thereof delivered to the Trustee
or, with respect to any asset valued at up to $1,000,000, such determination may
be made by a duly authorized officer of FTL-Cayman evidenced by an Officer's
Certificate delivered to the Trustee.
"FTL-Cayman" means the party named as such in this Indenture
until a successor replaces it pursuant to Article 5 of this Indenture and
thereafter means such successor.
"FTL-Cayman Class A Shares" means the Class A ordinary shares,
par value $0.01 per share, of FTL-Cayman.
"FTL-Cayman Class B Shares" means the Class B redeemable
ordinary shares, par value $0.01 per share, of FTL-Cayman.
"FTL-Cayman Guarantee" means the full and unconditional
guarantee by FTL-Cayman of the obligations of the Company under the Securities
and this Indenture in accordance with Article 10.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
Issue Date and are consistently applied.
-10-
<PAGE> 16
"Guarantor Subsidiary" means each Subsidiary of the Company
that is a party to this Indenture on the Issue Date and any other Subsidiary of
FTL-Cayman that guarantees payment of the Securities by executing and delivering
a Subsidiary Guarantee.
"Holder" or "Securityholder" means the person in whose name a
Security is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented
from time to time.
"Initial Purchasers" means Credit Suisse First Boston
Corporation, NationsBanc Montgomery Securities LLC and Scotia Capital Markets
(USA), Inc.
"Initial Securities" has the meaning set forth in the preamble
hereto.
"Investment" in any person means any loan or advance to, any
acquisition of Capital Stock, equity interest, obligation or other security of,
or capital contribution or other investment in, such person.
"Investment Grade" means a rating in one of the four highest
categories (without regard to subcategories within such rating categories) by a
Rating Agency.
"Investment Grade Rating Date" means the first date on which
the Securities are rated Investment Grade by two Rating Agencies.
"Investment Grade Rating Period" means any period from an
Investment Grade Rating Date until the date immediately preceding a subsequent
Non-Investment Grade Rating Date.
"issue" means issue, assume, guarantee, incur or otherwise
become liable for; provided, however, that any Debt or Capital Stock of a person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary.
"Issue Date" means the original issue date of the Securities
hereunder.
"Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York or in
the state in which the Trustee has its principal corporate trust office.
-11-
<PAGE> 17
"Lien" means any mortgage, pledge, security interest,
conditional sale or other title retention agreement or other similar lien.
"Make-Whole Premium" means, with respect to any Security at
any Redemption Date, the excess, if any, of (a) the aggregate present value of
the sum of the principal amount of such Security and the amount of interest
(exclusive of interest accrued to the Redemption Date) that would have been
payable in respect of such principal amount if such redemption had not been
made, discounted on a semi-annual bond equivalent basis to the Redemption Date
from the respective dates on which such principal and interest would have been
payable at a per annum interest rate equal to the sum of the Treasury Yield
(determined on the Business Day immediately preceding the Redemption Date), plus
62.5 basis points, over (b) the principal amount of the Security being redeemed.
"Merger" means the merger of the Company with FTL Merger
Corp., a Wholly Owned Subsidiary of FTL-Cayman, pursuant to which the Company
became a Subsidiary of FTL-Cayman.
"Net Available Cash" means, with respect to any Asset Sale,
the proceeds thereof in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to FTL-Cayman or any Subsidiary of FTL-Cayman) net of (i)
brokerage commissions and other reasonable fees and expenses (including fees and
expenses of legal counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any person (other than FTL-Cayman or any
Subsidiary of FTL-Cayman) owning a beneficial interest in the assets subject to
the Asset Sale and (iv) appropriate amounts to be provided by FTL-Cayman or any
Subsidiary of FTL- Cayman, as the case may be, as a reserve required in
accordance with GAAP consistently applied against any liabilities associated
with such Asset Sale and retained by FTL-Cayman or any Subsidiary of FTL-Cayman,
as the case may be, after such Asset Sale, including, without limitation,
pension and other postemployment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale (provided that the amount of any such reserves
shall be deemed to constitute Net Available Cash at the time such reserves shall
have been released or are not otherwise required to be retained as a reserve).
"Net Cash Proceeds" means cash payments received (including
any cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when received) from
any sale, lease, transfer or other disposition of Capital Stock of FTL-Cayman or
a Subsidiary of FTL-Cayman or property or other assets of FTL-Cayman or a
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<PAGE> 18
Subsidiary of FTL-Cayman, in each case net of all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and any taxes
payable and reasonably estimated income taxes, as a consequence of such sale,
lease, transfer or other disposition.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible common
stock of such corporation; provided, however, that NonConvertible Capital Stock
shall not include any Redeemable Stock or Exchangeable Stock.
"Non-Investment Grade" means any rating by a Rating Agency
which does not constitute an Investment Grade Rating.
"Non-Investment Grade Rating Date" means each date on which
the Securities are rated Non-Investment Grade by two Rating Agencies.
"Non-Investment Grade Rating Period" means any period of time
which is not an Investment Grade Rating Period.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Offering" shall have the meaning set forth in the Offering
Circular.
"Offering Circular" means the offering circular dated as of
March 18, 1999 relating to the Offering and sale of the Securities.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary of the Company or FTL-Cayman, as
the case may be.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company, FTL-Cayman or the Trustee.
"Permitted Holders" means William Farley and his Affiliates.
"Permitted Mortgages" means (a) Mortgages imposed by
governmental authorities for taxes, assessments or other charges not yet subject
to penalty or which are being contested in good
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<PAGE> 19
faith and by appropriate proceedings, if adequate reserves with respect thereto
are maintained on the books of FTL-Cayman or the applicable Subsidiary in
accordance with GAAP; (b) statutory Mortgages of carriers, warehousemen,
mechanics, materialmen, landlords, repairmen or other like Mortgages arising by
operation of law in the ordinary course of business, (c) Mortgages securing the
performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business; (d)
Mortgages arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in an Event of Default with
respect thereto; and (e) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security legislation.
"Permitted Refinancing Debt" means any Debt of FTL-Cayman or
any of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Debt of
FTL-Cayman or any of FTL-Cayman's Subsidiaries (other than intercompany Debt);
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Debt does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the premium, if any,
together with all reasonable fees, charges and expenses incurred in connection
with the refinancing of the Debt so extended, refinanced, renewed, replaced,
defeased or refunded; (ii) such Permitted Refinancing Debt has a Stated Maturity
that is the same as or later than the Stated Maturity of, and has an Average
Life equal to or greater than the Average Life of, the Debt being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Debt being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Securities, the FTL-Cayman Guarantee or the Subsidiary
Guarantees, such Permitted Refinancing Debt is subordinated in right of payment
to the Securities, the FTL-Cayman Guarantee or the Subsidiary Guarantees, as the
case may be, to the same extent as the Debt being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) the Debt either is incurred by
FTL-Cayman, the Company or any of the Guarantor Subsidiaries or is incurred by
the Subsidiary who is the obligor on the Debt being extended, refinanced,
renewed, replaced, defeased or refunded.
"person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
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designated) which is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock of any other class
of such corporation.
"principal" of a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Qualified Receivables Transaction" means any transaction or
series of transactions entered into by FTL-Cayman or any of its Subsidiaries
pursuant to which FTL-Cayman or any of its Subsidiaries sells, conveys or
otherwise transfers to (i) an Accounts Receivable Subsidiary (in the case of a
transfer by FTL-Cayman or any of its Subsidiaries) or (ii) any other person (in
the case of a transfer by an Accounts Receivable Subsidiary), or grants a
security interest in, any accounts receivable (whether now existing or arising
in the future) of FTL-Cayman or any of its Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable, property sold giving rise to such accounts receivable (including
returned goods), all contracts and all guarantees or other obligations in
respect of such accounts receivable, proceeds of such accounts receivable and
other assets which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable.
"Rating Agency" means each of Standard & Poor's Rating
Services, Duff & Phelps Credit Rating Co. and Moody's Investors Service, Inc.
(or, in any case, if such person ceases to rate the Securities for reasons
outside the control of the Company, any other "nationally recognized statistical
rating organization" (within the meaning of Rule 15c3-1(c)(2)(vi) under the
Exchange Act) selected by the Company as a replacement rating agency.
"Redeemable Stock" means any Capital Stock that by its terms
or otherwise is required to be redeemed on or prior to the first anniversary of
the Stated Maturity of the Securities or is redeemable at the option of the
holder thereof at any time on or prior to the first anniversary of the Stated
Maturity of the Securities.
"Redemption Date" means the date fixed by the Company for
redemption of the Securities hereunder.
"Reference Period" with respect to any computation of the
Consolidated EBITDA Coverage Ratio, means the most recent four consecutive
fiscal quarters ending at least 45 days prior to the date of determination of
the Consolidated EBITDA Coverage Ratio.
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<PAGE> 21
"Registration Rights Agreement" means the registration rights
agreement, dated as of March 18, 1999, by and among the Company, FTL-Cayman, the
Guarantor Subsidiaries and the Initial Purchasers, with respect to the
Securities.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Restricted Security" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee
shall be entitled to receive, at its request, and conclusively rely on an
Opinion of Counsel with respect to whether any Security constitutes a Restricted
Security.
"Restricted Subsidiary" means a Subsidiary substantially all
the property of which is located, or substantially all the business of which is
carried on, within the United States of America.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Significant Subsidiary" means (i) any Subsidiary of
FTL-Cayman which at the time of determination either (A) had assets which, as of
the date of FTL-Cayman's most recent quarterly consolidated balance sheet,
constituted at least 5% of FTL-Cayman's total assets on a consolidated basis as
of such date or (B) had revenues for the 12-month period ending on the date of
FTL-Cayman's most recent quarterly consolidated statement of income which
constituted at least 5% of FTL-Cayman's total revenues on a consolidated basis
for such period (each such determination being made in accordance with GAAP) or
(ii) any Subsidiary of FTL-Cayman which, if merged with all Defaulting
Subsidiaries of FTL-Cayman, would at the time of determination either (A) have
had assets which, as of the date of FTL-Cayman's most recent quarterly
consolidated balance sheet, would have constituted at least 10% of FTL-Cayman's
total assets on a consolidated basis as of such date or (B) have had revenues
for the 12-month period ending on the date of FTL-Cayman's most recent quarterly
consolidated statement of income which would have constituted at least 10% of
FTL-Cayman's total revenues on a consolidated basis for such period (each such
determination being made in accordance with GAAP). "Defaulting Subsidiary" means
any Subsidiary of FTL-Cayman with respect to
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which an event described under clause (6), (7), (8) or (9) of Section 6.01 has
occurred and is continuing.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision.
"Subordinated Obligation" means any Debt of the Company which
is subordinate or junior in right of payment to the Securities, any Debt of any
Guarantor Subsidiary which is subordinate or junior in right of payment to the
Subsidiary Guarantee of such Guarantor Subsidiary and any Debt of FTL-Cayman
which is subordinate or junior in right of payment to the FTL-Cayman Guarantee,
in each case whether outstanding on the date hereof or hereafter incurred.
"Subsidiary" means, with respect to any person, any
corporation, association, partnership or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or other interests
(including partnership interests) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i) such
person, (ii) such person and one or more Subsidiaries or (iii) one or more
Subsidiaries.
"Subsidiary Guarantees" means the full and unconditional
guarantee by each of the Guarantor Subsidiaries of the obligations of the
Company under the Securities and this Indenture in accordance with Article 10.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided by
Section 9.03.
"Treasury Yield" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
complied by and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two Business Days prior
to the date fixed for redemption (or, if such Statistical Release is no longer
published, any publicly available source of similar data)) most nearly equal to
the then remaining Average Life of the Securities; provided, that if the Average
Life of the Securities is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Yield
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Average Life of the
Securities is less than one year, the weekly
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<PAGE> 23
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer its corporate trust matters.
"Trustee" means the party named as such in this Indenture
until a successor replaces it and, thereafter, means the successor.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly Owned Subsidiary" means, with respect to any person, a
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by such person or another Wholly Owned Subsidiary, provided,
however, that the Company shall be deemed a Wholly Owned Subsidiary of
FTL-Cayman so long as FTL-Cayman owns at least 90% of the Voting Stock of the
Company and the only outstanding Capital Stock of the Company is the class of
common stock and the shares of Preferred Stock outstanding immediately following
consummation of the Merger.
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<PAGE> 24
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Agent Members"...................................................... 2.12
"Affiliate Transaction".............................................. 4.08
"Bankruptcy Law"..................................................... 6.01
"Benefitted Party"................................................... 10.01
"covenant defeasance option"......................................... 8.01(b)
"Custodian".......................................................... 6.01
"Event of Default"................................................... 6.01
"Global Note"........................................................ 2.01
"legal defeasance option"............................................ 8.01(b)
"Legal Holiday"...................................................... 11.09
"Lender"............................................................. 4.10
"Mortgages".......................................................... 4.09
"Notice of Default".................................................. 6.01
"Offer".............................................................. 4.07(b)
"Offer Amount"....................................................... 4.07(c)
"Offer Period"....................................................... 4.07(c)
"Paying Agent"....................................................... 2.03
"Physical Notes"..................................................... 2.01
"Purchase Date"...................................................... 4.07(c)
"Private Placement Legend"........................................... 2.11
"QIB"................................................................ 2.13
"Registrar".......................................................... 2.03
"Restricted Payment"................................................. 4.05
"Unutilized Net Available Cash"...................................... 4.07(b)
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.
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<PAGE> 25
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect from time to time;
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured debt shall not be deemed to be subordinate or
junior to secured debt merely by virtue of its nature as unsecured
debt;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof
that would be shown on a balance sheet of the issuer dated such date
prepared in accordance with GAAP and accretion of principal on such
security shall be deemed to be the issuance of Debt; and
(8) the principal amount of any Redeemable Stock shall be (i)
the maximum liquidation value of such Redeemable Stock or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect
to such Redeemable Stock, whichever is greater.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. The Initial Securities and the
Trustee's certificate of authentication relating thereto shall be substantially
in the form of Exhibit A, which is hereby incorporated in and expressly made a
part of this Indenture. The Exchange Securities and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of Exhibit
B, which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or
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<PAGE> 26
endorsements required by law, stock exchange rule, agreements to which the
Company is subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Company). Each Security shall be
dated the date of its authentication. The terms of the Securities set forth in
Exhibit A and Exhibit B are part of the terms of this Indenture.
Securities offered and sold in reliance upon Rule 144A or in
offshore transactions in reliance upon Regulation S will initially be issued in
the form of one or more global Securities in registered form, substantially in
the form set forth in Exhibit A (the "Global Note"), deposited with the Trustee,
as custodian for the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided and shall bear the legend set forth in
Section 2.11 hereof. The aggregate principal amount of the Global Note may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary.
Subsequent to the initial issuance of the Global Note,
physical certificates for notes transferred in reliance on any exemption from
registration under the Securities Act, other than as described in the preceding
paragraph, shall be issued in substantially the form set forth in Exhibit A,
subject to the Company's and the Trustee's right prior to any such transfer to
require the delivery of an Opinion of Counsel, certifications and/or other
information satisfactory to each of them (the "Physical Notes"). Physical Notes
may initially be registered in the name of the Depositary or a nominee of such
Depositary and be delivered to the Trustee as custodian for such Depositary.
Beneficial owners of Physical Notes, however, may request registration of such
Physical Notes in their names or the names of their nominees.
SECTION 2.02. Execution and Authentication. Two Officers shall
sign the Securities for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication of the Security.
The Signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
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The Trustee shall authenticate and make available for delivery
(i) Initial Securities for original issue in an aggregate principal amount of
$250,000,000 and (ii) Exchange Securities from time to time for issue only in
exchange for a like principal amount of Initial Securities, in each case upon a
written order of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company. Such order
shall specify the amount of the Securities to be authenticated and the date on
which the original issue of Securities is to be authenticated, whether the
Securities are to be Initial Securities or Exchange Securities and whether the
Securities are to be issued as Physical Notes or Global Notes and such other
information as the Trustee may reasonably request. The aggregate principal
amount of Securities outstanding at any time may not exceed $250,000,000 except
as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any Subsidiary or Affiliate may act as Paying Agent, Registrar,
co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
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<PAGE> 28
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code are met. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Securities at the Registrar's or co-registrar's
request. The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with any transfer or
exchange pursuant to this Section. The Company shall not be required to make and
the Registrar need not register transfers or exchanges of Securities selected
for redemption (except, in the case of Securities to be redeemed in part, the
portion thereof not to be redeemed) or any Securities for a period of 15 days
before a selection of Securities to be redeemed or 15 days before an interest
payment date.
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<PAGE> 29
Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture will evidence the same debt and will be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. Such Holder shall furnish an
indemnity bond sufficient in the judgment of the Company and the Trustee to
protect the Company, the Trustee, the Paying Agent, the Registrar and any
co-registrar from any loss which any of them may suffer if a Security is
replaced. The Company and the Trustee may charge the Holder for their expenses
in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a Redemption Date, a repurchase date or
maturity date money sufficient to pay all principal and interest payable on that
date with respect to the Securities to be redeemed, repurchased or maturing, as
the case may be, and the Paying Agent is not prohibited from paying such money
to the Securityholders on that date pursuant to the terms of this
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Indenture, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall be substantially
in the form of definitive Securities but may have variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
and make them available for delivery in exchange for temporary Securities.
SECTION 2.10. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else shall
cancel all Securities surrendered for registration of transfer, exchange,
payment or cancellation and deliver canceled Securities to the Company. The
Company may not issue new Securities to replace Securities it has redeemed,
repurchased, paid or delivered to the Trustee for cancellation.
SECTION 2.11 Restrictive Legends.
Each Global Note and Physical Note that constitutes a
Restricted Security shall bear the following legend (the "Private Placement
Legend") on the face thereof until the second anniversary of the Issue Date,
unless otherwise agreed by the Company and the Holder thereof:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
1. REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT
HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT),
2. AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE, EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF
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RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR
(E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH OF
CASES (B) THROUGH (E), IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND
3. AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
Each Global Note shall also bear a legend on the face thereof
in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO
A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.12 OF THE INDENTURE.
SECTION 2.12. Book-Entry Provisions for Global Notes.
This Section 2.12 shall apply only to the Global Notes
deposited with the Depositary or its custodian.
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(1) So long as the Securities are eligible for book-entry
settlement with the Depositary, or unless otherwise required by law, the Global
Notes initially shall (i) be registered in the name of the Depositary or the
nominee of such Depositary, (ii) be delivered to the Trustee as custodian for
such Depositary and (iii) bear legends as set forth in Section 2.11.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Notes, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Notes for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any Agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(2) Transfers of the Global Notes shall be limited to
transfers in whole, but, subject to the immediately succeeding sentence, not in
part, to the Depositary, its successors or their respective nominees. Interests
of beneficial owners in the Global Notes may be transferred or exchanged for
Physical Notes in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.13 hereof. In addition, Physical Notes shall be
transferred to all beneficial owners in exchange for their beneficial interests
in the Global Notes if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the Global Notes and a
successor depositary is not appointed by the Company within 120 days or the
Depositary ceases to be a "Clearing Agency" registered under the Exchange Act,
(ii) the Company, at its option, notifies the Trustee in writing that it elects
to cause the issuance of the Physical Notes or (iii) upon the request of the
Trustee or Holders of a majority of the aggregate principal amount of
outstanding Securities if there shall have occurred and be continuing a Default
or Event of Default with respect to the Securities.
(3) In connection with any transfer or exchange of a portion
of the beneficial interest in a Global Note to beneficial owners to paragraph
(2), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of the Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more Physical Notes of
like tenor and amount.
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(4) In connection with the transfer of the beneficial
interests in an entire Global Note to beneficial owners pursuant to paragraph
(2), the Global Note shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Note, an equal aggregate principal
amount of Physical Notes of authorized denominations.
(5) Any Physical Note constituting a Restricted Security
delivered in exchange for a beneficial interest in a Global Note pursuant to
paragraph (2) or (3) shall, except as otherwise provided by paragraphs (1)(a)(x)
and (3) of Section 2.13 hereof, bear the Private Placement Legend.
(6) The owner of a beneficial interest in a Global Note may
grant proxies and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take any action which
a Holder is entitled to take under this Indenture or the Securities.
SECTION 2.13. Special Transfer Provisions.
(1) Transfers to Non-U.S. Persons. The following provisions
shall apply with respect to the registration of any proposed transfer of a
Security constituting a Restricted Security to any Non-U.S. Person:
(a) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears
the Private Placement Legend, if (x) the requested transfer is after
the second anniversary of the Issue Date or (y) in the case of a
transfer to a Non-U.S. Person, the proposed transferor has delivered to
the Registrar a certificate substantially in the form of Exhibit C
hereto; and
(b) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Register of
(x) the certificate, if any, required by paragraph (a) above and (y)
written instructions given in accordance with the Depositary's and the
Registrar's procedures,
whereupon (i) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the applicable Global Note in an amount
equal to the principal amount of the beneficial interest in the Global Note to
be transferred, and (ii) the Company shall execute and the TrusteE
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shall authenticate and deliver one or more Physical Notes of like tenor and
amount.
(2) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a qualified institutional buyer (as
defined in Rule 144A) ("QIB") (excluding transfers to Non-U.S. Persons):
(a) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has advised the Company and
the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has advised the
Company and the Registrar in writing, that it is purchasing the
Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account
is a QIB within the meaning of Rule 144A, and is aware that the sale to
it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A; and
(b) if the proposed transferor is an Agent Member, and the
Securities to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in a Global Note, upon
receipt by the Registrar of written instructions given in accordance
with the Depositary's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date and an increase in the
principal amount of the applicable Global Note in an amount equal to
the principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(3) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless (i) the requested transfer is after the
second anniversary of the Issue Date, or (ii) there is delivered to the
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.
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(4) General. By its acceptance of any Securities bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.12 hereof or this
Section 2.13. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
during the Registrar's normal business hours upon the giving of reasonable
written notice to the Registrar.
In connection with any transfer of the Securities, the
Trustee, the Registrar and the Company shall be entitled to receive, shall be
under no duty to inquire into, may conclusively presume the correctness of, and
shall be fully protected in relying upon the certificates, opinions and other
information referred to herein (or in the forms provided herein, attached hereto
or to the Securities, or otherwise) received from any Holder and any transferee
to receive such Note and any other facts and circumstances related to such
transfer.
SECTION 2.14. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Company may pay the defaulted interest to the persons who are
Securityholders on a subsequent special record date, which date shall be at
least five Business Days prior to the payment date. The Company shall fix or
cause to be fixed any such special record date and payment date, and, at least
15 days before any such special record date, the Company shall mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.15. Payment of Additional Interest Under
Registration Rights Agreement. Under certain circumstances, the Company and
FTL-Cayman will be obligated to pay certain additional amounts of interest to
the Holders, as more particularly set forth in section 2.5 of the Registration
Rights Agreement. The terms of section 2.5 of the Registration Rights Agreement
are hereby incorporated by reference and the Company and FTL-Cayman shall be
obligated to provide a copy of such Registration Rights Agreement to the
Trustee.
SECTION 2.16. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of
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redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE 3
Redemption
SECTION 3.01. Redemption; Notices to Trustee. The Securities
are redeemable, in whole or in part, at any time, at the option of the Company
at 100% of the principal amount thereof, plus the Make-Whole Premium, together
with all accrued and unpaid interest thereon, if any, to the Redemption Date. If
the Company elects to redeem the Securities, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed.
The Company shall give each notice to the Trustee provided for
in this Section at least 60 days before the Redemption Date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If less than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not less than 15 days after the date of notice to the Trustee.
SECTION 3.02. Section of Securities to be Redeemed. If less
than all the Securities are to be redeemed at any time the Trustee shall select
the Securities to be redeemed on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate. The Trustee shall make the
selection from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations larger than $1,000. Securities and portions of them the
Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall notify
the Company promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not
more than 60 days before a Redemption Date, the Company
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shall mail a notice of redemption by first-class mail to each Holder of
Securities to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be
redeemed, the identification and principal amounts of the
particular Securities to be redeemed and if any Security is to
be redeemed in part only, the portion of the principal amount
thereof to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment, interest on Securities (or portion
thereof) called for redemption ceases to accrue on and after
the Redemption Date; and
(7) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or
printed on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04 Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the Redemption Date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the Redemption Date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to the
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is the Paying Agent, shall segregate and hold in trust) money sufficient
to pay the redemption price of and accrued interest on all Securities to be
redeemed on that date other than Securities or portions of Securities called for
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redemption which have been delivered by the Company to the Trustee for
cancellation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due and the Trustee or the Paying Agent, as the
case may be, is not prohibited from paying such money to the Securityholder on
that date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
rate specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. The Company and FTL-Cayman shall
each file with the Trustee and provide Securityholders, within 15 days after it
files them with the SEC, copies of its annual report and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company or
FTL-Cayman is required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act. Notwithstanding that the Company or FTL-Cayman may not be
required to remain subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, FTL-Cayman shall continue to file with the SEC and provide
the Trustee and Securityholders with such annual reports and such information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which are specified in
Sections 13 and 15(d) of the Exchange Act. The Company and FTL-Cayman also shall
comply with the other provisions of TIA ss. 314(a).
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's
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receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 4.03. Limitation on Debt. (a) Neither FTL-Cayman nor
the Company shall issue, directly or indirectly, any Debt, unless the
Consolidated EBITDA Coverage Ratio (as shown by a consolidated pro forma income
statement of FTL-Cayman and its consolidated subsidiaries for the Reference
Period after giving effect to (i) the issuance of such Debt and (if applicable)
the application of the net proceeds thereof to refinance other Debt as if such
Debt was issued and the application of such proceeds occurred at the beginning
of the Reference Period, (ii) the issuance and retirement of any other Debt
since the last day of the most recent fiscal quarter covered by such income
statement as if such Debt was issued or retired at the beginning of the
Reference Period and (iii) the acquisition or disposition of any company or
business acquired or disposed of since the first day of the Reference Period,
including any acquisition or disposition which will be consummated substantially
contemporaneously with the issuance of such Debt, as if such acquisition or
disposition occurred at the beginning of the Reference Period and (iv) the
discontinuance of any operations since the first day of the Reference Period, as
if such discontinuance occurred on the first day of the Reference Period)
exceeds the ratio of 2.0 to 1.0 through the third anniversary of the Issue Date
and exceeds the ratio of 2.5 to 1.0 thereafter; provided, however, the guarantee
by FTL-Cayman of any Debt of the Company or any Subsidiary of the Company
outstanding on the Issue Date shall not be deemed the issuance of Debt by FTL-
Cayman for purposes of this Indenture.
(b) Notwithstanding Section 4.03(a), in addition to the Debt
issued by FTL-Cayman or the Company at the time the Consolidated EBITDA
Coverage Ratio (calculated as
described above) exceeds the applicable ratio set forth above, FTL-Cayman or the
Company may issue the following Debt:
(1) Debt borrowed under the Credit Agreement in an aggregate
principal amount outstanding at any time not to exceed the greater of
(x) $675,000,000 less the amount (not to exceed $75,000,000) of all
repayments of the Term Facility under the Credit Agreement and less the
amount of any other Debt under the Credit Agreement permanently retired
with the Net Available Cash of Asset Sales under Section 4.07 or (y)
the sum of (a) 50% of the book value of the inventory of FTL-Cayman and
its Subsidiaries and (b) 90% of the book value of the accounts
receivable of FTL-Cayman and its Subsidiaries (but excluding any
accounts receivable owned by an Accounts Receivable Subsidiary, or
which FTL-Cayman or any of its
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Subsidiaries has agreed to transfer to an Account Receivable Subsidiary
in connection with a Qualified Receivables Transaction), in each case
as determined in accordance with GAAP;
(2) Debt owed to and held by a Wholly Owned Subsidiary of
FTL-Cayman; provided, however, that, if the Company or FTL-Cayman is
the obligor on such Debt, such Debt shall be expressly subordinated to
the prior payment in full in cash of all obligations with respect to
the Securities or the FTL-Cayman Guarantee, as the case may be, and
that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary of FTL-Cayman or any transfer of such Debt (other than
to a Wholly Owned Subsidiary of FTL-Cayman) shall be deemed, in each
case, to constitute the issuance of such Debt by FTL-Cayman;
(3) the Securities and the FTL-Cayman Guarantee;
(4) Debt outstanding on the date on which the Securities were
originally issued;
(5) Debt created, incurred or assumed in connection with
industrial development bond financings for the acquisition,
construction and equipping of manufacturing facilities which are to be
used for a business related to the Company's current business, which
are located in the United States and which are owned or to be owned by
either (i) the Company or (ii) one or more governmental authorities or
subdivisions and, in each case, leased to the Company; provided,
however, that the principal amount of such Debt does not exceed the
principal amount of the related industrial development bonds;
(6) Permitted Refinancing Debt issued in exchange for, or the
proceeds of which are used to refund or refinance any Debt permitted by
any of clauses (3), (4), or (6) of this Section; and
(7) Debt in an aggregate principal amount at any time
outstanding not to exceed $150,000,000.
SECTION 4.04. Limitation on Debt and Preferred Stock of
Subsidiaries. The Company shall not permit any Subsidiary of the Company to
issue, directly or indirectly, any Debt or Preferred Stock except:
(1) Debt of an Accounts Receivable Subsidiary in a Qualified
Receivables Transaction that is without recourse to the Company or to
any other Subsidiary of the Company or their assets (other than such
Accounts Receivable Subsidiary and its
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assets and, as to the Company or any Subsidiary of the Company, other
than pursuant to representations, warranties, covenants and indemnities
customary for such transactions) and is not guaranteed by any such
person (except in the manner contemplated in the definition of the term
"Accounts Receivable Subsidiary");
(2) Debt or Preferred Stock issued to and held by the Company
or a Wholly Owned Subsidiary of the Company; provided, however, that,
if a Guarantor Subsidiary is the obligor on such Debt, such Debt shall
be expressly subordinated to the prior payment in full in cash of all
obligations with respect to the Subsidiary Guarantee of such Guarantor
Subsidiary and that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary of the Company or subsequent transfer of such
Debt or Preferred Stock (other than to the Company or a Wholly Owned
Subsidiary of the Company) shall be deemed, in each case, to constitute
the issuance of such Debt or Preferred Stock by the issuer thereof;
(3) Debt or Preferred Stock of a Subsidiary of the Company
issued and outstanding on or prior to the date on which such Subsidiary
was acquired by the Company (other than Debt or Preferred Stock issued
as consideration in, or to provide all or any portion of the funds
utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary of
the Company or was acquired by the Company);
(4) Debt or Preferred Stock issued and outstanding on or prior
to the date on which the Securities were originally issued;
(5) The Subsidiary Guarantees, the Additional Subsidiary
Guarantees and the guarantee of any other Debt permitted to be issued
under Section 4.03 by the Company or FTL-Cayman; provided, that if such
Debt is subordinated in right of payment to the Securities or the
FTL-Cayman Guarantee, such guarantee shall be subordinated to the
Subsidiary Guarantees to the same extent;
(6) Debt created, incurred or assumed in connection with
industrial development bond financings for the acquisition,
construction and equipping of manufacturing facilities which are to be
used for a business related to the Company's current business, which
are located in the United States and which are owned or to be owned by
either (i) a Subsidiary of the Company or (ii) one or more governmental
authorities or subdivisions and, in each case, leased to the Subsidiary
that created, incurred or assumed such Debt; provided, however, that
the
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principal amount of such Debt does not exceed the principal amount of
the related industrial development bonds;
(7) Permitted Refinancing Debt issued in exchange for, or the
proceeds of which are used to refund or refinance, Debt or Preferred
Stock referred to in clause (3), (4), or (7) of this Section; and
(8) Debt in an aggregate principal amount or Preferred Stock
having an aggregate liquidation value at any time outstanding not to
exceed $75,000,000; provided, that not more the $50,000,000 of such
outstanding Debt may be Debt of Subsidiaries that are not Guarantor
Subsidiaries..
SECTION 4.05. Limitation on Restricted Payments. (a)
FTL-Cayman shall not, and shall not permit any Subsidiary of FTL-Cayman,
directly or indirectly, to (i) declare or pay any dividend or make any
distribution on or in respect of its Capital Stock or to the direct or indirect
holders of its Capital Stock (except (x) dividends or distributions payable
solely in its NonConvertible Capital Stock or in options, warrants or other
rights to purchase its Non-Convertible Capital Stock, (y) dividends or
distributions payable to FTL-Cayman or a Subsidiary of FTL-Cayman and (z)
dividends payable on Preferred Stock of the Company issued to a Permitted Holder
in the Merger in an amount not to exceed in the aggregate $5,000,000 per year),
(ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock
of the Company not owned by FTL-Cayman or any Capital Stock of FTL-Cayman or of
any direct or indirect parent of FTL-Cayman, (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment any Subordinated
Obligations (other than the purchase, repurchase or other acquisition of
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) or (iv) make any Investment in any Affiliate of
FTL-Cayman, other than an Investment in a Subsidiary of FTL-Cayman or in a
person which will become a Subsidiary of FTL-Cayman as a result of any such
Investment (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being hereinafter
referred to as a "Restricted Payment") if at the time FTL-Cayman or such
Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) FTL-Cayman is not able to issue $1.00 of additional Debt
in accordance with the provisions of Section 4.03(a); or
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(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the date on which the Securities were
originally issued would exceed the greater of $50,000,000 and the sum
of:
(a) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from January 3,
1999, to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit), minus 100% of the amount of any
write-downs, write-offs, other negative revaluations and other
negative extraordinary charges not otherwise reflected in
Consolidated Net Income during such period and minus 100% of
the amount of any dividends paid on Preferred Stock of the
Company following the Merger, excluding, for all purposes of
this clause (a), items treated as balance sheet adjustments in
respect of foreign currency translations;
(b) the aggregate Net Cash Proceeds received by
FTL-Cayman from the issue or sale of its Capital Stock (other
than Redeemable Stock or Exchangeable Stock) subsequent to the
date on which the Securities were originally issued and which
are contributed as capital to the Company (other than an
issuance or sale to a Subsidiary of FTL-Cayman or an employee
stock ownership plan);
(c) the aggregate Net Cash Proceeds received by
FTL-Cayman from the issue or sale of its Capital Stock (other
than Redeemable Stock or Exchangeable Stock) to an employee
stock ownership plan subsequent to January 2, 1999 and
contributed as capital to the Company, but (if such employee
stock ownership plan incurs any Debt) only to the extent that
any such proceeds are equal to any increase in the
Consolidated Net Worth of FTL-Cayman resulting from principal
repayments made by such employee stock ownership plan with
respect to Debt incurred by it to finance the purchase of such
Capital Stock;
(d) the amount by which Debt of FTL-Cayman is reduced
on FTL-Cayman's balance sheet upon the conversion or exchange
(other than by a Subsidiary of FTL-Cayman) subsequent to the
date on which the Securities were originally issued of any
Debt of FTL-Cayman convertible or exchangeable for Capital
Stock (other than Redeemable Stock or Exchangeable Stock) of
FTL-Cayman (less the amount of any cash, or other property,
distributed by FTL-Cayman upon such conversion or exchange);
and
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(e) $50,000,000.
(b) The provisions of Section 4.05(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or
Subordinated Obligations made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Capital Stock of FTL-Cayman
(other than Redeemable Stock or Exchangeable Stock and other than
Capital Stock issued or sold to a Subsidiary of FTL-Cayman or an
employee stock ownership plan); provided, however, that (A) such
purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such
sale shall be excluded from clauses (3)(b) and (3)(c) of Section
4.05(a);
(ii) any purchase or redemption of Subordinated Obligations
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, new Subordinated Obligations; provided, however,
that such new Subordinated Obligations shall (A) be in a principal
amount that does not exceed the principal amount so refinanced, (B)
have an Average Life to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the Securities, (C) have a
Stated Maturity the same as or later than the Stated Maturity of the
Securities, and (D) be expressly subordinated in right of payment to
the Securities at least to the same extent as the Subordinated
Obligations to be refinanced; provided further, that such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with this Section; provided, however, that at the time of
payment of such dividend, no other Default shall have occurred and be
continuing (or result therefrom); provided further, however, that such
dividend shall be included (without duplication) in the calculation of
the amount of Restricted Payments;
(iv) any acquisition of Preferred Stock of the Company through
an exchange by the Company of FTL-Cayman Class A Shares for such
Preferred Stock; or
(v) any redemption of not more than four FTL-Cayman Class B
Shares in accordance with the terms of the Articles of Association of
FTL-Cayman, provided that the amount paid in such redemption does not
exceed $1,000.
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SECTION 4.06. Additional Subsidiary Guarantees and Releases.
If at any time during Non-Investment Grade Rating Periods, a Subsidiary of
FTL-Cayman enters into a guarantee pursuant to the Credit Agreement or any other
Debt of the Company or FTL-Cayman, or any renewal or replacement thereof,
FTL-Cayman shall cause such Subsidiary to concurrently execute a Subsidiary
Guarantee of the Securities in form and substance satisfactory to the Trustee
pursuant to which such Subsidiary shall fully and unconditionally guarantee the
obligations of the Company under the Securities and this Indenture in accordance
with Article 10. If at any time during Non- Investment Grade Rating Periods, a
Guarantor Subsidiary is released from all of its guarantees under the Credit
Agreement and any such other guaranteed Debt, or any renewal or replacement
thereof, such Guarantor Subsidiary shall be released from its Subsidiary
Guarantee.
SECTION 4.07. Disposition of Proceeds of Asset Sales.
(a) FTL-Cayman will not, and will not cause or permit any
Subsidiary of FTL-Cayman to, directly or indirectly, make any Asset Sale, unless
(i) FTL-Cayman or such Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
assets sold or otherwise disposed of and (ii) at least 75% of such consideration
consists of (A) cash or Cash Equivalents or (B) Capital Stock in any person
which thereby becomes a Wholly Owned Subsidiary of FTL-Cayman whose assets
consist primarily of properties and capital assets used in the same line of
business being conducted by FTL-Cayman or any Subsidiary of FTL-Cayman at such
time. In lieu of the consideration described in clause (ii) above, FTL-Cayman or
any Subsidiary of FTL-Cayman may receive consideration from an Asset Sale or
Asset Sales consisting of obligations payable to the sellers of such asset or
assets in an aggregate amount not to exceed $50,000,000 at any time outstanding;
provided, however, that all consideration received from an Asset Sale or Asset
Sales in excess of such $50,000,000 shall be subject to clause (ii) of the
immediately preceding sentence. The amount of any (i) Debt of a Subsidiary of
FTL-Cayman that is actually assumed by the transferee in such Asset Sale and
from which FTL-Cayman and the Subsidiaries of FTL-Cayman are fully released
shall be deemed to be cash for purposes of determining the percentage of cash
consideration received by FTL-Cayman or the Subsidiaries of FTL-Cayman (and
excluding any liabilities that are incurred in connection with or in
anticipation of such Asset Sale) and (ii) notes or other similar obligations
received by FTL-Cayman or any Subsidiary of FTL-Cayman from such transferee that
are immediately converted, sold or exchanged (or are converted, sold or
exchanged within 60 days of the related Asset Sale) by FTL-Cayman or the
Subsidiaries of FTL-Cayman into cash shall be deemed to be cash, in an amount
equal to the net cash proceeds realized upon such conversion, sale or
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exchange for purposes of determining the percentage of cash consideration
received by FTL-Cayman or the Subsidiaries of FTL-Cayman.
FTL-Cayman or such Subsidiary of FTL-Cayman, as the case may
be, may apply the Net Available Cash of any Asset Sale within 365 days of
receipt thereof to (i) repay Debt of FTL-Cayman or any Subsidiary of FTL-Cayman
(other than Subordinated Obligations) and permanently reduce any related
commitment, or (ii) make Asset Acquisitions or acquire, construct or improve
properties or capital assets, in each case, to be used in the same line of
business being conducted by FTL-Cayman or any Subsidiary of FTL-Cayman at such
time.
(b) To the extent all or part of the Net Available Cash of any
Asset Sale is not applied within 365 days of such Asset Sale as described in
clause (i) or (ii) of the immediately preceding paragraph (such Net Available
Cash, the "Unutilized Net Available Cash"), the Company shall, within 20 days
after such 365th day, make an offer to purchase (the "Offer") all outstanding
Securities up to a maximum principal amount (expressed as a multiple of $1,000)
of Securities equal to such Unutilized Net Available Cash, at a purchase price
in cash equal to 100% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (as hereinafter defined);
provided, however, that the Offer may be deferred until there is aggregate
Unutilized Net Available Cash equal to or in excess of $25,000,000, at which
time the entire amount of such Unutilized Net Available Cash, and not just the
amount in excess of $25,000,000, shall be applied as required pursuant to this
paragraph.
With respect to any Offer effected pursuant to this Section
4.07, to the extent the aggregate principal amount of Securities tendered
pursuant to such Offer exceeds the Unutilized Net Available Cash to be applied
to the repurchase thereof, such Securities shall be purchased pro rata based on
the aggregate principal amount of such Securities tendered by each Holder. To
the extent the Unutilized Net Available Cash exceeds the aggregate amount of
Securities tendered by the Holders of the Securities pursuant to such Offer, the
Company may retain and utilize any portion of the Unutilized Net Available Cash
not applied to repurchase the Securities for any purpose consistent with the
other terms of this Indenture.
(c) (1) In connection with any Offer required to be made
pursuant to this Section 4.07, the Company shall be obligated to deliver to the
Trustee and send, by first-class mail to each Holder, a written notice stating
that the Holder may elect to have his Securities purchased by the Company either
in whole or in part (subject to prorationing as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of $1,000 of
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principal amount, at the applicable purchase price. The notice shall specify a
purchase date not less than 30 days nor more than 60 days after the date of such
notice (the "Purchase Date") and shall contain information concerning the
business of the Company and FTL-Cayman which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum will
include (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of FTL-Cayman, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form
8-K of FTL-Cayman filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Sales otherwise described in the offering materials (or
corresponding successor reports), (ii) a description of material developments in
FTL-Cayman's business subsequent to the date of the latest of such Reports, and
(iii) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender Securities pursuant to the Offer,
together with the information contained in clause (3).
(2) Not later than the date upon which written notice
of an Offer is delivered to the Trustee as provided below, the Company shall
deliver to the Trustee an Officers' Certificate as to (i) the amount of the
Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from
the Asset Sales pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of Section 4.07(a). On such
date, the Company shall also irrevocably deposit with the Trustee or with a
paying agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust) in immediately available funds an amount equal to the Offer
Amount to be held for payment in accordance with the provisions of this Section.
Upon the expiration of the period for which the Offer remains open (the "Offer
Period"), the Company shall deliver to the Trustee the Securities or portions
thereof which have been properly tendered to and are to be accepted by the
Company. The Trustee shall, on the Purchase Date, mail or release payment to
each tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Company to the
Trustee is less than the Offer Amount, the Trustee shall deliver the excess to
the Company immediately after the expiration of the Offer Period.
(3) Holders electing to have a Security purchased
will be required to surrender the Security, with an appropriate form duly
completed, to the Company at the address specified in the notice at least ten
Business Days prior to the Purchase Date. Holders will be entitled to withdraw
their election if the Trustee or the Company receives not later than three
Business Days prior to the Purchase Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount and certificate
number of the Security which was delivered for purchase by the Holder and
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a statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Securities in denominations of $1,000, or integral multiples thereof, shall be
purchased). Holders whose Securities are purchased only in part will be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered.
(4) At the time the Company delivers Securities to
the Trustee which are to be accepted for purchase, the Company will also deliver
an Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or releases payment therefor to the
surrendering Holder.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section 4.07. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.07, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.07 by virtue
thereof.
SECTION 4.08. Limitation on Transactions With Affiliates.
FTL-Cayman shall not, and shall not permit any Subsidiary of FTL-Cayman to,
conduct any business or enter into any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of FTL-Cayman or any legal or
beneficial owner of 5% or more of any class of Capital Stock of FTL-Cayman or
with any Affiliate of such owner (other than a Wholly Owned Subsidiary of
FTL-Cayman or an employee stock ownership plan for the benefit of FTL-Cayman's
or its Subsidiary's employees) (each, an "Affiliate Transaction") unless the
terms of such Affiliate Transaction or series of Affiliate Transactions are (i)
as favorable to FTL-Cayman or such Subsidiary as terms that would be obtainable
at the time for a comparable transaction or series of similar transactions in
arm's-length dealings with an unrelated third person or, if such Affiliate
Transaction or series of Affiliate Transactions is not one which by its nature
could be obtained from such person, is on fair and reasonable terms and (ii) are
in the ordinary course of business or, if not in the ordinary course of
business, are set forth in writing and the Board of Directors of FTL-Cayman has,
by resolution, determined in good
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faith that such Affiliate Transaction or series of Affiliate Transactions meets
the applicable criteria set forth in (i) above; provided, that in any case
FTL-Cayman shall be entitled to rely upon the good faith determination by its
Board of Directors as to the foregoing. Notwithstanding the foregoing, the
following are not Affiliate Transactions subject to the provisions of this
Section 4.08: (a) Qualified Receivables Transactions between or among FTL-Cayman
or any of its Subsidiaries and any Accounts Receivable Subsidiary and (b)
contracts or other arrangements or commitments with respect thereto in existence
on the Issue Date or any extensions or renewals of any such contracts or other
arrangements or commitments with respect thereto, if such extensions or renewals
are on terms substantially the same as those in effect on such date.
SECTION 4.09. Restrictions on Secured Debt. FTL-Cayman shall
not, and shall not permit any Restricted Subsidiary of FTL-Cayman to, issue any
Debt secured after the date of this Indenture by pledge of, or mortgage or lien
on, any property of FTL-Cayman or any Restricted Subsidiary of FTL-Cayman or any
shares of Capital Stock or Debt of any Restricted Subsidiary of FTL-Cayman (any
mortgages, pledges and liens being herein called "Mortgages"), without
effectively providing that the Securities shall be secured equally and ratably
with such secured Debt and any other Debt entitled to share in such security, so
long as such secured Debt shall be so secured, unless, after giving effect
thereto, the aggregate amount of all such secured Debt plus all Attributable
Debt of FTL-Cayman and its Restricted Subsidiaries with respect to sale and
leaseback transactions to which Section 4.10 is applicable would not exceed 5%
of Consolidated Net Tangible Assets; provided, however, that this Section 4.09
does not apply to, and there shall be excluded from secured Debt in any
computation hereunder, Debt secured by:
(a) Mortgages on property of, or on any shares of Capital
Stock or Debt of, any corporation existing at the time such corporation
becomes a Restricted Subsidiary of FTL-Cayman;
(b) Mortgages in favor of FTL-Cayman or any Restricted
Subsidiary of FTL-Cayman;
(c) Mortgages on property, shares of Capital Stock or Debt
existing at the time of acquisition thereof (including acquisition
through merger or consolidation) or to secure the payment of all or any
part of the purchase price thereof or construction thereon or to secure
any Debt incurred prior to, at the time of, or within 180 days after
the later of the acquisition of such property, shares of Capital Stock
or Debt or the completion of construction for the purpose of financing
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all or any part of the purchase price thereof or construction thereon;
(d) Mortgages existing on the date of this Indenture (or
Mortgages which the Company or any Restricted Subsidiary has an
obligation to create under Debt which is outstanding on the date of
this Indenture), but only in an amount equal to the amount of the Debt
which is secured thereby and which is outstanding on the date of this
Indenture;
(e) Mortgages (or Mortgages which FTL-Cayman or any Restricted
Subsidiary has an obligation to create under the Credit Agreement)
securing the maximum amount of Debt permitted to be outstanding under
the Credit Agreement pursuant to Section 4.03(b)(1) or for which
FTL-Cayman or a Restricted Subsidiary of FTL-Cayman has outstanding
commitments under the Credit Agreement on the date of this Indenture;
(f) Mortgages on assets of FTL-Cayman or any of its
Subsidiaries (including an Account Receivable Subsidiary) incurred in
connection with a Qualified Receivables Transaction;
(g) Mortgages securing the Securities;
(h) Permitted Mortgages; and
(i) any Mortgage securing Permitted Refinancing Debt and any
extension, renewal or replacement as a whole or in part, of any
Mortgage referred to in clauses (a) through (g) or this clause (i);
provided, however, that (x) the aggregate Debt secured by such
extension, renewal or replacement Mortgage shall not exceed the amount
of the Permitted Refinancing Debt or the Debt secured by the original
Mortgage, as the case may be, and (y) such extension, renewal or
replacement Mortgage shall be limited to all or a part of the same
property, shares of Capital Stock or Debt (and substitutions therefor
and accretions thereto) that secured the original Mortgage.
SECTION 4.10. Restrictions on Sale and Leaseback Transactions.
FTL-Cayman shall not, and shall not permit any Restricted Subsidiary of
FTL-Cayman to, enter into any transaction after the date of this Indenture with
any bank, insurance company or other lender or investor ("Lender"), providing
for the leasing by FTL-Cayman or a Restricted Subsidiary of FTL-Cayman of any
property which has been or is to be sold or transferred by FTL-Cayman or such
Restricted Subsidiary to such Lender, or any person to whom funds have been or
are to be advanced by such Lender on the security of such property (herein
referred to as a "sale and leaseback transaction") unless, after giving effect
thereto, the
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aggregate amount of all Attributable Debt with respect to all such transactions
plus all secured Debt to which Section 4.09 is applicable would not exceed 5% of
Consolidated Net Tangible Assets. This Section 4.10 shall not apply to, and
there shall be excluded from Attributable Debt in any computation under this
Section, Attributable Debt with respect to any sale and leaseback transaction
if:
(a) the lease in such sale and leaseback transaction is for a
period, including renewal rights, of not in excess of three years;
(b) FTL-Cayman or a Restricted Subsidiary of FTL-Cayman,
within 180 days after the sale or transfer by FTL-Cayman or by a
Restricted Subsidiary of FTL-Cayman, applies an amount equal to the Net
Cash Proceeds of the sale of the property leased pursuant to such
arrangement to (i) the retirement of the Securities or other Debt of
FTL-Cayman ranking on a parity with or senior to the Securities, or the
retirement of such Debt of a Restricted Subsidiary of FTL-Cayman;
provided, however, that, notwithstanding the foregoing, no retirement
referred to in this clause (i) may be effected by payment at maturity
or pursuant to any mandatory sinking fund payment or any mandatory
prepayment provision; or (ii) the purchase of other property having a
fair market value, in the opinion of the Board of Directors of
FTL-Cayman, at least equal to the fair market value of the property
leased in such sale and leaseback transaction;
(c) such sale and leaseback transaction is entered into prior
to, at the time of, or within 180 days after the later of the
acquisition of the property or the completion of construction thereon;
or
(d) such sale and leaseback transaction is entered into
between FTL-Cayman and a Restricted Subsidiary of FTL-Cayman or between
Restricted Subsidiaries of FTL-Cayman.
SECTION 4.11. Change of Control. (a) Upon a Change of Control,
the Company shall be required to offer to repurchase all of the Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
prior right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), in accordance with the terms
contemplated in Section 4.11(b).
(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder with a copy to the Trustee stating:
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(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the prior right of Holders of record on the
relevant record date to receive interest due on the relevant interest
payment date);
(2) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical
income, cash flow and capitalization after giving effect to such Change
of Control);
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the instructions, determined by the Company consistent
with this Section, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate election form duly
completed, to the Company at the address specified in the notice at least 10
Business Days prior to the purchase date. Holders will be entitled to withdraw
their election if the Trustee or the Company receives not later than three
Business Days prior to the purchase date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount and certificate
number of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such security
purchased.
(d) On the purchase date, all Securities purchased by the
Company under this Section shall be delivered by the Trustee for cancellation,
and the Company shall pay the purchase price plus accrued and unpaid interest,
if any, to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
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SECTION 4.12. Limitation on Restrictions on Distributions from
Subsidiaries of FTL-Cayman. FTL-Cayman will not, and will not permit any
Subsidiary of FTL-Cayman to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on the ability of any
Subsidiary of FTL-Cayman to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Debt or other obligation owed to the Company or
FTL-Cayman, (ii) make any loans or advances to the Company or FTL-Cayman or
(iii) transfer any of its property or assets to the Company or FTL-Cayman,
except (1) any encumbrance or restriction pursuant to an agreement in effect at
or entered into on the date on which the Securities were originally issued; (2)
any encumbrance or restriction with respect to a Subsidiary of FTL-Cayman
pursuant to an agreement relating to any Debt issued by such Subsidiary on or
prior to the date on which such Subsidiary became a Subsidiary of FTL-Cayman or
was acquired by the Company or FTL-Cayman (other than Debt issued as
consideration in, or to provide all or any portion of the funds utilized to
consummate, the transaction or series of related transactions pursuant to which
such Subsidiary became a Subsidiary of FTL-Cayman or was acquired by the Company
or FTL-Cayman) and outstanding on such date; (3) any encumbrance or restriction
pursuant to an agreement effecting a refinancing of Debt issued, assumed or
incurred pursuant to an agreement referred to in clause (1) or (2) of this
paragraph or this clause (3) or contained in any amendment to any agreement
referred to in clause (1) or (2) of this paragraph or this clause (3); provided,
however, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment shall be no less favorable to the Holders
than encumbrances and restrictions contained in such agreements; (4) any such
encumbrance or restriction consisting of customary nonassignment provisions in
leases governing leasehold interests to the extent such provisions restrict the
transfer of the applicable lease; (5) in the case of clause (iii) above,
restrictions contained in security agreements securing Debt of a Subsidiary of
FTL-Cayman to the extent such restrictions restrict the transfer of the property
subject to such security agreements; and (6) any encumbrances or restrictions
with respect to Debt or other contractual requirements of an Accounts Receivable
Subsidiary in connection with a Qualified Receivables Transaction, provided that
such encumbrances and restrictions apply only to such Accounts Receivable
Subsidiary
SECTION 4.13. Compliance Certificate. The Company and
FTL-Cayman shall each deliver to the Trustee within 120 days after the end of
each fiscal year of the Company a brief certificate from the principal
executive, financial or accounting officer of the Company or FTL-Cayman, as the
case may be, as to his or her knowledge, after due inquiry, of the Company's or
FTL-Cayman's compliance with all conditions and covenants under the Indenture
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(such compliance to be determined without regard to any period of grace or
requirement of notice provided under the Indenture).
SECTION 4.14. Further Instruments and Acts. Upon request of
the Trustee, the Company, FTL-Cayman and the Guarantor Subsidiaries, as the case
may be, will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
SECTION 4.15. Covenants in Effect Prior to Investment Grade
Rating Date. The obligations of the Company and FTL-Cayman under the covenants
contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08 and 4.12 will cease to be
effective upon an Investment Grade Rating Date. Such obligations will be
reinstated during Non-Investment Grade Rating Periods. For purposes of the
covenants contained in the above-listed Sections, no action taken during any
Investment Grade Rating Period shall result in a violation of any such
obligation solely as a result of the reinstatement of such obligation. However,
such actions shall be taken into account when determining availability under,
and compliance with, such obligations.
SECTION 4.16 Payment of Additional Amounts. The Company will
pay to the Holder of any Security such additional amounts as may be necessary in
order that every net payment of the principal of and interest on such Security
after deduction or other withholding for or on account of any present or future
tax, assessment, or other governmental charge of any nature whatsoever imposed,
levied or collected by or on behalf of the country in which FTL-Cayman is
organized, or any political subdivision or taxing authority thereof or therein
having power to tax, will not be less than the amount provided for in such
Security to be then due and payable; provided, however, that the foregoing
obligation to pay additional amounts will not apply on account of any tax,
assessment, or other governmental charge which is payable (i) otherwise than by
deduction or withholding from payments of principal of or interest on such
Security; or (ii) by reason of such Holder, or a person on behalf of such
Holder, having, or having had, some personal or business connection with the
country in which FTL-Cayman is organized other than the mere receipt of such
payment or the ownership or holding of a Security; or (iii) to, or to a person
on behalf of, a Holder who presents a Security where presentation is required
for payment more than 30 days after the relevant date for payment of principal
or interest in respect of such Security except to the extent that such Holder
would have been entitled to such additional amounts on presenting such Security
for payment on the last day of such period of 30 days; or (iv) by reason of any
estate, excise, inheritance, gift, sales, transfer, wealth or personal property
tax or any similar assessment or governmental charge; or (v) as a result of the
failure of a
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Holder, or a person on behalf of such Holder, to satisfy any statutory
requirements or make a declaration of nonresidence or other similar claim for
exemption to the relevant tax authority; or (vi) owing to any combination of
clauses (i) through (v) above.
No additional amounts will be paid as provided above with
respect to any payment of principal of or interest on any such Security to any
Holder who is a fiduciary or partnership or other than the sole beneficial owner
of any such payment to the extent that the beneficiary or settlor with respect
to such fiduciary, a member of such a partnership or the beneficial owner of
such payment would not have been entitled to the additional amounts had such
beneficiary, settlor, member of beneficial owner been the Holder of any such
Security.
Whenever in this Indenture there is mentioned, in any context,
the payment of any principal of or interest on any Security, such mention shall
be deemed to include mention of the payment of additional amounts provided for
in this Section 4.16 to the extent that, in such context, additional amounts
are, were or would be payable in respect thereof pursuant to the provisions of
this Section 4.16, and express mention of the payment of additional amounts (if
applicable) in any provisions hereof shall not be construed as excluding
additional amounts in those provisions hereof where such express mention is not
made.
At least 10 days prior to the first interest payment date with
respect to the Securities, and at least 10 days prior to each date of payment of
principal and interest, if there has been any change with respect to the payment
of additional amounts as provided by this Section 4.16 with respect to the
matters set forth in the below-mentioned Officers' Certificate, the Company will
furnish the Trustee and Paying Agent with an Officers' Certificate instructing
the Trustee and the Paying Agent whether such payment of principal of and
interest on the Securities shall be made to Holders without withholding for or
on account of any tax, assessment or other governmental charge in respect of
which, in each case, additional amounts are payable pursuant to this Section
4.16 as referred to above. If any such withholding shall be required, then such
Officers' Certificate shall specify by country the amount, if any, required to
be withheld on such payments to such Holders of Securities and the Company will
pay to the Trustee or the Paying Agent such additional amounts as may be
required pursuant to the terms hereof.
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ARTICLE 5
Successor Companies
SECTION 5.01. When Company, FTL-Cayman or Guarantor
Subsidiaries May Merge or Transfer Assets. (a) Neither the Company nor
FTL-Cayman shall consolidate with or merge with or into, or convey, transfer or
lease all or substantially all its assets to, any person, unless:
(i) the resulting, surviving or transferee person (if not the
Company or FTL-Cayman) shall be a person organized and existing under
the laws of the United States of America, any State thereof or the
District of Columbia (in the case of any such transaction involving the
Company) and such person shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the respective obligations of the
Company or FTL-Cayman, as the case may be, under the Securities, the
FTL-Cayman Guarantee and this Indenture;
(ii) immediately prior to and after giving effect to such
transaction (and treating any Debt which becomes an obligation of the
resulting, surviving or transferee person or any Subsidiary of such
person, as a result of such transaction as having been issued by such
person or such Subsidiary at the time of such transaction), no Default
shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
resulting, surviving or transferee person would be able to issue at
least $1.00 of Debt pursuant to Section 4.03(a); provided, however,
that the Consolidated EBITDA Coverage Ratio of the resulting, surviving
or transferee person for the Reference Period shall be calculated on a
pro forma basis as if the transaction occurred at the beginning of the
Reference Period;
(iv) immediately after giving effect to such transaction, the
resulting, surviving or transferee person shall have Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of
the Company, or FTL-Cayman, as the case may be, prior to such
transaction; and
(v) the Company, or FTL-Cayman, as the case may be, shall have
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture;
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The resulting, surviving or transferee person will be the
successor Company or the successor guarantor, as the case may be, and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or FTL-Cayman, as the case may be, under this Indenture, but the
predecessor Company or the predecessor guarantor, as the case may be, in the
case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of and interest on the Securities (in the case
of the Company) or the obligation to guarantee such payment (in the case of
FTL-Cayman).
(b) During Non-Investment Grade Rating Periods, no Guarantor
Subsidiary shall consolidate with or merge with or into, or convey, transfer or
lease all or substantially all its assets to, any person unless:
(i) the resulting, surviving or transferee person (if not the
Guarantor Subsidiary) is organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia
and such person expressly assumes by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the of the Guarantor Subsidiary under its Subsidiary
Guarantee and this Indenture;
(ii) immediately prior to and after giving effect to such
transaction (and treating any Debt which becomes an obligation of the
resulting, surviving or transferee person or any Subsidiary of such
person as a result of such transaction as having been issued by such
person or such Subsidiary at the time of such transaction), no Default
has occurred and is continuing; and
(iii) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture.
The resulting, surviving or transferee person will be the
successor Guarantor Subsidiary and shall succeed to, and be substituted for and
may exercise every right and power of a Guarantor Subsidiary under this
Indenture.
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ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, and such default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of
any Security when the same becomes due and payable at its Stated
Maturity, upon redemption, upon required repurchase, upon declaration
or otherwise;
(3) the Company, FTL-Cayman or any Guarantor Subsidiary fails
to comply with Section 5.01;
(4) the Company or FTL-Cayman fails to comply with Section
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 or 4.12 and
such failure continues for 30 days after the notice specified below;
(5) the Company or FTL-Cayman fails to comply with any of its
agreements in the Securities, the FTL-Cayman Guarantee or this
Indenture (other than those referred to in (1), (2), (3) or (4) above)
and such failure continues for 60 days after the notice specified
below;
(6) Debt of FTL-Cayman, or any Significant Subsidiary, is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default, the total
amount of such Debt unpaid or accelerated exceeds $25,000,000 or its
foreign currency equivalent and such default continues for 10 days
after the notice specified below;
(7) FTL-Cayman or any Significant Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief
against it in an involuntary case;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
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or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against FTL-Cayman or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of FTL-Cayman or any
Significant Subsidiary or for any substantial part of its
property; or
(C) orders the winding up or liquidation of
FTL-Cayman or any Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order
or decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess
of $25,000,000, is rendered against FTL-Cayman or any Significant
Subsidiary and is not discharged and either (A) an enforcement
proceeding has been commenced by any creditor upon such judgment or
decree or (B) there is a period of 60 days following such judgment or
decree during which such judgment or decree is not discharged, waived
or the execution thereof stayed and, in the case of (B), such default
continues for 10 days after the notice specified below;
(10) the FTL-Cayman Guarantee shall cease to be in full force
and effect or FTL-Cayman or any person acting by or on behalf of
FTL-Cayman shall deny or disaffirm FTL-Cayman's obligations under the
FTL-Cayman Guarantee; or
(11) during Non-Investment Grade Rating Periods, any
Subsidiary Guarantee shall cease to be in full force and effect or any
Guarantor Subsidiary, or any person acting by or on behalf of such
Guarantor Subsidiary shall deny or disaffirm such Guarantor
Subsidiary's obligations under its Subsidiary Guarantee, except as
permitted under Section 4.06.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.
The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal, state or foreign law for the relief
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of debtors. The term "Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (9)(B) is not an Event
of Default until the Trustee or the Holders of at least 25% in principal amount
of the outstanding Securities notify the Company in writing of the Default and
the Company does not cure such Default within the time specified after receipt
of such Notice. Such Notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default."
The Company or FTL-Cayman, as the case may be, shall deliver
to the Trustee, within 30 days after the occurrence thereof, written notice in
the form of an Officers' Certificate of any event which with the giving of
notice and the lapse of time would become an Event of Default under clause (4),
(5), (6) or (9), its status and what action the Company or FTL-Cayman is taking
or proposes to take with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company or FTL-Cayman) occurs and is continuing, the Trustee by notice to the
Company, or the Holders of at least 25% in principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to the Company or
FTL-Cayman occurs, the principal of and interest on all the Securities shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Securityholders. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any
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Securityholder in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in principal amount of the Securities by notice to the Trustee may
waive an existing Default and its consequences except (i) a Default in the
payment of the principal of or interest on a Security or (ii) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority
in principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. A Securityholder may not
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee security or
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
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(5) the Holders of a majority in principal amount of the
Securities do not give the Trustee a direction inconsistent with the
request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of interest or principal specified in Section 6.01(1) or (2)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid (together with interest on such unpaid
interest to the extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Securityholders
(or any other obligor of the Securities) allowed in any judicial proceedings
relative to the Company, its creditors or its property and, unless prohibited by
law or applicable regulations, may vote on behalf of the Holders in any election
of a trustee in bankruptcy or other person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
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preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest, respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Securityholders pursuant to this Section. At least 15 days before
such record date, the Company shall mail to each Securityholder and the Trustee
a notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07
or a suit by Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. The Company,
FTL-Cayman and each Guarantor Subsidiary (to the extent they may lawfully do so)
shall not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company, FTL-Cayman and each Guarantor
Subsidiary (to the extent that they may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted;
provided, however, that the provisions of this Section 6.12 shall not be deemed
to restrict the right of the Company, FTL-Cayman or any Guarantor Subsidiary to
appeal any decision of any court or other governmental body.
SECTION 6.13 Indemnification of Judgment Currency. The Company
will indemnify a Securityholder against any loss incurred by such Holder as a
result of any judgment or order being given or made for any amount due under
such Security and such judgment or order being expressed and paid in a currency
(the "Judgment Currency") other than U.S. dollars and as a result of any
variation as between (i) the rate of exchange at which the U.S. dollar amount is
converted into the Judgment Currency for the purpose of such judgment or order
and (ii) the spot rate of exchange in The City of
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New York at which the Holder on the date of payment of such judgment or order is
able to purchase U.S. dollars with the amount of the Judgment Currency actually
received by the Holder.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b)
of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
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(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel of its selection, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in
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good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such Holder
shall have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
(g) The Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Trust Officer has actual knowledge thereof
or unless written notice of any event which is in fact such a Default is
received by the Trustee at the principal corporate trust office of the Trustee,
and such notice references the Securities and this Indenture.
(h) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and to each agent, custodian and other person
employed to act hereunder.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Default. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of, premium, if any, or interest
on any Security, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
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SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of May 15 that
complies with TIA ss. 313(a), if such report is required by TIA ss. 313(a). The
Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to
Securityholders shall be filed with the SEC and each stock exchange (if any) on
which the Securities are listed. The Company agrees to notify promptly the
Trustee whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time such compensation as the Company and the
Trustee shall from time to time agree in writing for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Company
shall indemnify the Trustee against any and all loss, damage, claim, liability
or expense (including reasonable attorneys' fees and expenses) incurred by it in
connection with the acceptance or administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations
hereunder. The Company shall defend the claim and the Trustee may have separate
counsel and the Company shall pay the fees and expenses of such counsel. The
Company need not reimburse any expense or indemnify against any loss, damage,
claim, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section
shall survive the discharge of this Indenture. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 6.01(7) or (8) with
respect to the Company, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
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SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of a majority in principal amount of the Securities may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to
this Section, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting,
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surviving or transferee corporation without any further act shall be the
successor Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b), including the optional provision permitted by the second sentence of
TIA ss. 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Securities have become due and payable and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity all outstanding Securities, including interest thereon (other than
Securities replaced pursuant to Section 2.07), and if in either case the Company
pays all other sums payable hereunder by the Company, then this Indenture shall,
subject to Sections 8.01(c) and
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8.06, cease to be of further effect. The Trustee shall acknowledge satisfaction
and discharge of this Indenture on demand of the Company accompanied by an
Officers' Certificate and an Opinion of Counsel and at the cost and expense of
the Company.
(b) Subject to Sections 8.01(c), 8.02 and 8.06, the Company
and FTL-Cayman at any time may terminate (i) all their obligations under the
Securities and this Indenture ("legal defeasance option") or (ii) their
obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 5.01 (iii) and 5.01 (iv) and the operation of Sections 6.01(3)
(insofar as it relates to compliance with Sections 5.01(iii) and 5.01(iv))
6.01(4), 6.01(6), 6.01(7) (with respect to any Significant Subsidiary other than
the Company), 6.01(8) (with respect to any Significant Subsidiary other than the
Company) and 6.01(9) ("covenant defeasance option"). The Company and FTL-Cayman
may exercise their legal defeasance option notwithstanding their prior exercise
of their covenant defeasance option.
If the Company and FTL-Cayman exercise their legal defeasance
option, payment of the Securities may not be accelerated because of an Event of
Default. If the Company and FTL-Cayman exercise their covenant defeasance
option, payment of the Securities may not be accelerated because of an Event of
Default specified in Section 6.01(4), 6.01(6), 6.01(7) (with respect to any
Significant Subsidiary other than the Company), 6.01(8) (with respect to any
Significant Subsidiary other than the Company) or 6.01(9) or because of the
failure of the Company to comply with Section 5.01(iii) or 5.01(iv).
Upon satisfaction of the conditions set forth herein and upon
request of the Company and FTL-Cayman, the Trustee shall acknowledge in writing
the discharge of those obligations that the Company and FTL-Cayman terminate.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and
8.06 shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company and
FTL-Cayman may exercise their legal defeasance option or their covenant
defeasance option only if:
(1) the Company and FTL-Cayman irrevocably deposit in trust
with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Securities to maturity or redemption,
as the case may be;
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(2) the Company and FTL-Cayman deliver to the Trustee a
certificate from a nationally recognized firm of independent
accountants expressing their opinion that the payments of principal and
interest when due and without reinvestment on the deposited U.S.
Government Obligations plus any deposited money without investment will
provide cash at such times and in such amounts (but, in the case of the
legal defeasance option only, not more than such amounts) as will be
sufficient to pay principal and interest when due on all the Securities
to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 6.01(7) or (8) with
respect to the Company occurs which is continuing at the end of the
period;
(4) no Default has occurred and is continuing on the date of
such deposit and after giving effect thereto;
(5) the deposit does not constitute a default under any other
agreement binding on the Company or FTL-Cayman;
(6) the Company and FTL-Cayman deliver to the Trustee an
Opinion of Counsel to the effect that the trust resulting from the
deposit does not constitute, or is qualified as, a regulated investment
company under the Investment Company Act of 1940;
(7) in the case of the legal defeasance option, the Company
and FTL-Cayman shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or (ii) since
the date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Securityholders
will not recognize income, gain or loss for Federal income tax purposes
as a result of such defeasance and will be subject to Federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Company
and FTL-Cayman shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securityholders will not recognize
income, gain or loss for Federal income tax purposes as a result of
such covenant defeasance and will be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not occurred; and
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(9) the Company and FTL-Cayman deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Securities
as contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon written request any money
held by them for the payment of principal or interest that remains unclaimed for
two years, and, thereafter, Securityholders entitled to the money must look to
the Company for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. The
Company and FTL-Cayman shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest received on such U.S.
Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's and FTL-Cayman's
obligations under this Indenture, the Securities and the FTL-Cayman Guarantee
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that, if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
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ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company,
FTL-Cayman and the Trustee may amend this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or
in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, as amended, or in
a manner such that the uncertificated Securities are described in
Section 163(f)(2)(B) of the Internal Revenue Code of 1986, as amended;
(4) to add Guarantor Subsidiaries or other guarantees with
respect to the Securities;
(5) to add to the covenants of the Company or FTL-Cayman for
the benefit of the Holders or to surrender any right or power herein
conferred upon the Company or FTL-Cayman;
(6) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the Trust Indenture Act of 1939;
or
(7) to make any change that does not adversely affect the
rights of any Securityholder.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.02. With Consent of Holders. The Company, FTL-Cayman
and the Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the Securities. However, without the consent of
each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent
to an amendment;
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(2) reduce the rate of or extend the time for payment of
interest on any Security;
(3) reduce the principal of or extend the fixed maturity of
any Security;
(4) reduce the premium payable upon the redemption or
repurchase of any Security or change the time at which any Security may
or shall be redeemed or repurchased;
(5) make any Security payable in money other than that stated
in the Security;
(6) make any change in Section 6.04 or 6.07 or the second
sentence of this Section.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any such
Holder or subsequent Holder may revoke the consent or waiver as to such Holder's
Security or portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. After an
amendment or waiver becomes effective, it shall bind every Securityholder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Securityholders entitled to give their
consent or take any other action described above or required or permitted to be
taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those persons who were
Securityholders at such record date (or their duly designated proxies), and only
those persons, shall be entitled to give such
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consent or to revoke any consent previously given or to take any such action,
whether or not such persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 120 days after such
record date.
SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article 9 if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may but need not sign it. In signing such
amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying on, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the Company,
FTL-Cayman, any Affiliate of the Company or FTL-Cayman, nor any Subsidiary
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any Holder for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Securities unless such consideration is offered to be
paid or agreed to be paid to all Holders which so consent, waive or agree to
amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
ARTICLE 10
Guarantees
SECTION 10.01 FTL-Cayman Guarantee. Subject to the provisions
of this Article 10, FTL-Cayman hereby fully and unconditionally guarantees, to
each Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity or
enforceability of this Indenture, the Securities or the obligations of the
Company under this Indenture or the Securities, that: (i) the principal of,
premium (if any) and interest (and additional
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interest pursuant to Section 2.15, if any) on the Securities will be paid in
full when due, whether at maturity by acceleration or otherwise, and interest on
the overdue principal and premium (if any) and (to the extent permitted by law)
interest and additional interest pursuant to Section 2.15 (if any) on the
Securities will be promptly paid in full; (ii) all other obligations of the
Company to the Holders or the Trustee under this Indenture or the Securities
will be promptly paid in full or performed, all in accordance with the terms of
this Indenture and the Securities; and (iii) in case of any extension of time in
payment or renewal of any Securities or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance of any
other obligation of the Company to the Holders or the Trustee, for whatever
reason, FTL-Cayman will be obligated to pay, or to perform or cause the
performance of, the same before such failure becomes an Event of Default.
FTL-Cayman agrees that this is a guarantee of payment not a guarantee of
collection.
FTL-Cayman hereby agrees that its obligations with regard to
this FTL-Cayman Guarantee shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or the obligations of the Company
under this Indenture, the absence of any action to enforce the same, the
recovery of any judgment against the Company or any other obligor with respect
to this Indenture, the Securities or the obligations of the Company under this
Indenture or the Securities, any action to enforce the same or any other
circumstances (other than complete performance) which might otherwise constitute
a legal or equitable discharge or defense of a guarantor. FTL-Cayman further, to
the extent permitted by law, hereby waives (a) demand, protest and notice of any
kind, (b) any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other person or the failure of the
Trustee, the Holders or the Company (each a "Benefitted Party") to file or
enforce a claim against the estate (in administration, bankruptcy or any other
proceeding) of any other person, (c) notice of the existence, creation or
incurring of any new or additional Debt or obligation, (d) any right to require
a proceeding first against the Company or right to require the prior disposition
of the assets of the Company to meet its obligations, (e) any defense based upon
an election of remedies by a Benefitted Party, including but not limited to an
election law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal, (f) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under Bankruptcy Law, of the application of 11 U.S.C.
Section 1111(b)(2) or (g) any defense based on any borrowing or grant of a
security interest under 11 U.S.C. Section 364. FTL-Cayman hereby covenants that
its
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FTL-Cayman Guarantee will not be discharged except by complete performance of
the obligations contained in the Securities, the FTL-Cayman Guarantee and this
Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or FTL-Cayman, or any custodian acting
in relation to either the Company or FTL-Cayman, any amount paid by the Company
or FTL-Cayman to the Trustee or such Holder, the FTL-Cayman Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
FTL-Cayman agrees that it will not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. FTL-Cayman agrees that, as
between it, on the one hand, and the Holders of Securities and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 10 hereof for the purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article 10 hereof,
such obligations (whether or not due and payable) shall forthwith become due and
payable by FTL-Cayman for the purpose of its FTL-Cayman Guarantee.
FTL-Cayman hereby agrees that by virtue of FTL-Cayman's
execution and delivery of this Indenture, FTL-Cayman shall be deemed to have
signed on each Security issued hereunder (including each Exchange Security) the
notation of the FTL-Cayman Guarantee set forth on the forms of the Security
attached hereto as Exhibit A and Exhibit B.
SECTION 10.02. Limitation of FTL-Cayman's Liability.
FTL-Cayman acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by this Indenture. FTL-Cayman and by its
acceptance hereof, each beneficiary hereof, hereby confirms that it is its
intention that the FTL-Cayman Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal, state or
foreign law to the extent applicable to the FTL-Cayman Guarantee. To effectuate
the foregoing intention, each such person hereby irrevocably agrees that the
obligation of FTL-Cayman under the FTL-Cayman Guarantee under this Article 10
shall be limited to the maximum amount as will, after giving effect to such
maximum amount and all other (contingent or otherwise) liabilities of FTL-Cayman
that are relevant under such laws, result in the obligations of FTL-Cayman in
respect of such maximum amount not constituting a fraudulent conveyance.
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SECTION 10.03 Subsidiary Guarantees. Subject to the provisions
of this Article 10, each Guarantor Subsidiary hereby fully and unconditionally
guarantees, jointly and severally, to each Holder of a Security authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity or enforceability of this Indenture, the Securities
or the obligations of the Company under this Indenture or the Securities, that:
(i) the principal of, premium (if any) and interest (and additional interest
pursuant to Section 2.15, if any) on the Securities will be paid in full when
due, whether at maturity by acceleration or otherwise, and interest on the
overdue principal and premium (if any) and (to the extent permitted by law)
interest and additional interest pursuant to Section 2.15 (if any) on the
Securities will be promptly paid in full; (ii) all other obligations of the
Company to the Holders or the Trustee under this Indenture or the Securities
will be promptly paid in full or performed, all in accordance with the terms of
this Indenture and the Securities; and (iii) in case of any extension of time in
payment or renewal of any Securities or any of such other obligations, they will
be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance of any
other obligation of the Company to the Holders or the Trustee, for whatever
reason, each Guarantor Subsidiary will be obligated to pay, or to perform or
cause the performance of, the same before such failure becomes an Event of
Default. Each Guarantor Subsidiary agrees that this is a guarantee of payment
not a guarantee of collection.
Each Guarantor Subsidiary hereby agrees that its obligations
with regard to this Subsidiary Guarantee shall be unconditional, irrespective of
the validity, regularity or enforceability of the Securities or the obligations
of the Company under this Indenture, the absence of any action to enforce the
same, the recovery of any judgment against the Company or any other obligor with
respect to this Indenture, the Securities or the obligations of the Company
under this Indenture or the Securities, any action to enforce the same or any
other circumstances (other than complete performance) which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each
Guarantor Subsidiary further, to the extent permitted by law, hereby waives (a)
demand, protest and notice of any kind, (b) any defense that may arise by reason
of the incapacity, lack of authority, death or disability of any other person or
the failure of any Benefitted Party to file or enforce a claim against the
estate (in administration, bankruptcy or any other proceeding) of any other
person, (c) notice of the existence, creation or incurring of any new or
additional Debt or obligation, (d) any right to require a proceeding first
against the Company or right to require the prior disposition of the assets of
the Company to meet its obligations,
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(e) any defense based upon an election of remedies by a Benefitted Party,
including but not limited to an election law which provides that the obligation
of a surety must be neither larger in amount nor in other respects more
burdensome than that of the principal, (f) any defense arising because of a
Benefitted Party's election, in any proceeding instituted under Bankruptcy Law,
of the application of 11 U.S.C. Section 1111(b)(2) or (g) any defense based on
any borrowing or grant of a security interest under 11 U.S.C. Section 364. Each
Guarantor Subsidiary hereby covenants that its Subsidiary Guarantee will not be
discharged except by complete performance of the obligations contained in the
Securities, the Subsidiary Guarantee and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor Subsidiary, or any
custodian acting in relation to either the Company or any Guarantor Subsidiary,
any amount paid by the Company or any Guarantor Subsidiary to the Trustee or
such Holder, the Subsidiary Guarantees, to the extent theretofore discharged,
shall be reinstated in full force and effect. Each Guarantor Subsidiary agrees
that it will not be entitled to any right of subrogation in relation to the
Holders in respect of any obligations guaranteed hereby until payment in full of
all obligations guaranteed hereby. Each Guarantor Subsidiary agrees that, as
between it, on the one hand, and the Holders of Securities and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 10 hereof for the purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article 10 hereof,
such obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor Subsidiary for the purpose of its Subsidiary
Guarantee.
Each Guarantor Subsidiary hereby agrees that by virtue of its
execution and delivery of this Indenture, it shall be deemed to have signed on
each Security issued hereunder (including each Exchange Security) the notation
of the Subsidiary Guarantee set forth on the forms of the Security attached
hereto as Exhibit A and Exhibit B.
SECTION 10.04. Limitation of the Guarantor Subsidiaries'
Liability. Each Guarantor Subsidiary acknowledges that its Subsidiary Guarantee
has been made to allow the Securities to receive a higher rating by each Rating
Agency than it otherwise would have, and, accordingly, that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Indenture. Each Guarantor Subsidiary and by its acceptance hereof, each
beneficiary hereof, hereby confirms that it is its intention that the Subsidiary
Guarantee of such Guarantor
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Subsidiary not constitute a fraudulent transfer or conveyance for purposes of
the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal, state or foreign law to the
extent applicable to such Subsidiary Guarantee. To effectuate the foregoing
intention, each such person hereby irrevocably agrees that the obligation of
each Guarantor Subsidiary under its Subsidiary Guarantee under this Article 10
shall be limited to the maximum amount as will, after giving effect to such
maximum amount and all other (contingent or otherwise) liabilities of each
Guarantor Subsidiary that are relevant under such laws, result in the
obligations of each Guarantor Subsidiary in respect of such maximum amount not
constituting a fraudulent conveyance.
SECTION 10.05. Effectiveness of Subsidiary Guarantees. The
obligations of each Guarantor Subsidiary under its Subsidiary Guarantee shall be
effective during each Non-Investment Grade Rating Period.
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company or FTL-Cayman or any Guarantor Subsidiary:
Fruit of the Loom, Inc.
5000 Sears Tower
Chicago, Illinois 60606
Attention: Secretary
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Attention: Corporate Trust
Trustee Administration
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<PAGE> 81
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall
be mailed to the Securityholder at the Securityholder's address as it appears on
the registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
\ SECTION 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company, FTL-Cayman or any
Guarantor Subsidiary to the Trustee to take or refrain from taking any action
under this Indenture, the Company, FTL-Cayman or the Guarantor Subsidiary, as
the case may be, shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
-76-
<PAGE> 82
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such covenant or condition has been complied with.
SECTION 11.06. Appointment of Agent; Submission to
Jurisdiction; Waiver of Immunity; Consent to Service. FTL-Cayman has irrevocably
designated and appointed CT Corporation System, Borough of Manhattan, The City
of New York, New York, as its authorized agent upon which process may be served
in any suit or proceeding arising out of or relating to the Securities, the
FTL-Cayman Guarantee or this Indenture which may be instituted in any State or
Federal court of The City of New York. By the execution and delivery of this
Indenture, FTL-Cayman submits to the nonexclusive jurisdiction of any such court
in any such suit or proceeding, and agrees that services of process upon said
agent, together with written notice of said service to FTL-Cayman, shall be
deemed in every respect effective service of process upon FTL-Cayman, in any
such suit or proceeding. FTL-Cayman agrees, to the fullest extent that it
lawfully may do so, that final judgment in any suit, action or proceeding
brought in such a court shall be conclusive and binding upon it and may be
enforced in the courts of the Cayman Islands (or any other courts to the
jurisdiction of which it is subject). FTL-Cayman further agrees to take any and
all action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
said agent in full force and effect so long as any of the Securities shall be
outstanding.
Notwithstanding the foregoing, any actions arising out of or
relating to the Securities, the FTL-Cayman Guarantee or the Indenture may be
instituted by the Trustee or the Holder of any Security in any competent court
in the Cayman Islands, or such other competent jurisdiction, as the case may be.
SECTION 11.07. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such
-77-
<PAGE> 83
direction, waiver or consent, only Securities which a Trust Officer actually
knows are so owned shall be so disregarded. Also, subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 11.08. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 11.09. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not required to be
open in the State of New York or in the state in which the Trustee has its
principal corporate trust office. If a payment date is a Legal Holiday, payment
shall be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period. If a regular record date is a
Legal Holiday, the record date shall not be affected.
SECTION 11.10. Governing Law. This Indenture and the
Securities shall be governed by, and construed in accordance with, the laws of
the State of New York without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
SECTION 11.11. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company, FTL-Cayman or any of
the Guarantor Subsidiaries shall not have any liability for any obligations of
the Company, FTL-Cayman or any Guarantor Subsidiary under the Securities, the
FTL-Cayman Guarantee, the Subsidiary Guarantees or this Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.12. Successors. All agreements of the Company,
FTL-Cayman and the Guarantor Subsidiaries in this Indenture and the Securities
shall bind their successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 11.13. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.
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<PAGE> 84
SECTION 11.14. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.
-79-
<PAGE> 85
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
FRUIT OF THE LOOM, INC.
By:
----------------------------------
Name:
Title:
FRUIT OF THE LOOM, LTD.
By:
-----------------------------------
Name:
Title:
GUARANTOR SUBSIDIARIES:
UNION UNDERWEAR COMPANY, INC.,
a New York corporation
ALICEVILLE COTTON MILL, INC.,
an Alabama corporation
THE B.V.D. LICENSING CORPORATION,
a Delaware corporation
DEKALB KNITTING CORPORATION, INC.,
an Alabama corporation
FAYETTE COTTON MILL, INC.,
an Alabama corporation
FOL CARIBBEAN CORPORATION,
a Delaware corporation
FRUIT OF THE LOOM ARKANSAS, INC.,
an Arkansas corporation
FRUIT OF THE LOOM CARIBBEAN, INC.,
a Delaware corporation
<PAGE> 86
FRUIT OF THE LOOM, INC.,
a New York corporation
FRUIT OF THE LOOM TRADING COMPANY,
a Delaware corporation
FTL REGIONAL SALES COMPANY, INC.,
a Delaware corporation
FTL SALES COMPANY, INC.,
a New York corporation
FRUIT OF THE LOOM, TEXAS, INC.,
a Texas corporation
GITANO FASHIONS LIMITED,
a Delaware corporation
GREENVILLE MANUFACTURING, INC.,
a Mississippi corporation
JET SEW TECHNOLOGIES, INC.,
a New York corporation
LEESBURG YARN MILLS, INC.,
an Alabama corporation
MARTIN MILLS, INC.,
a Louisiana corporation
PRO-PLAYER, INC.,
a New York corporation
RABUN APPAREL, INC.,
a Georgia corporation
RUSSELL HOSIERY MILLS, INC.,
a North Carolina corporation
SALEM SPORTSWEAR CORPORATION,
a Delaware corporation
SALEM SPORTSWEAR, INC.,
a New Hampshire corporation
SHERMAN WAREHOUSE CORPORATION,
a Mississippi corporation
UNION SALES, INC.,
a Delaware corporation
UNION YARN MILLS, INC.,
an Alabama corporation
<PAGE> 87
WHITMIRE MANUFACTURING, INC.,
a South Carolina corporation
WINFIELD COTTON MILL, INC.,
an Alabama corporation
By:
--------------------------------------
Name:
Title:
of each of the foregoing
entities identified as a
Guarantor Subsidiary
THE BANK OF NEW YORK, as Trustee
By:
--------------------------------------
Name:
Title:
<PAGE> 88
EXHIBIT A
[FORM OF FACE OF SECURITY]
No. $
CUSIP No. 359416 AP 9
8 7/8% Senior Note Due 2006
FRUIT OF THE LOOM, INC., a Delaware corporation, promises to
pay to , or registered assigns, the principal sum of Dollars
on April 15, 2006.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Additional provisions of this Security are set forth on the
other side of this Security.
FRUIT OF THE LOOM, INC.
by
----------------------
Title:
---------------------
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK [Seal]
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
----------------------------
Authorized Signatory
A-1
<PAGE> 89
[FORM OF REVERSE SIDE OF SECURITY]
8 7/8% Senior Note Due 2006
1. Interest
Fruit of the Loom, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on April 15 and October 15 of each year
commencing on October 15, 1999. Interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from March 25, 1999. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Company shall pay interest on overdue
principal at the rate borne by the Securities plus 1% per annum, and it shall
pay interest on overdue installments of interest at the same rate to the extent
lawful.
The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement (the "Registration Rights Agreement") among the
Company, FTL-Cayman, the Guarantor Subsidiaries and the Initial Purchasers,
dated March 18, 1999, pursuant to which, subject to the terms and conditions
thereof, the Company is obligated to consummate the Exchange Offer pursuant to
which the Holder of this Security shall have the right to exchange this Security
for 87/8% Senior Notes due 2006 (herein called the "Exchange Securities") in
like principal amount as provided therein. The Initial Securities and the
Exchange Securities are together referred to as the "Securities." The Initial
Securities rank pari passu in right of payment with the Exchange Securities.
In the event that (a) the Exchange Offer Registration
Statement is not filed with the Commission on or prior to the 60th calendar day
following the date of original issue of the Initial Securities, (b) the Exchange
Offer Registration Statement has not been declared effective on or prior to the
120th calendar day following the date of original issue of the Initial
Securities, (c) the Exchange Offer is not consummated on or prior to the 150th
calendar day following the date of original issue of the Initial Securities or a
Shelf Registration Statement is not declared effective on or prior to the 150th
calendar day following the date of original issue of the Initial Securities (or,
if a Shelf Registration Statement is required to be filed because of the request
by any Initial Purchaser, 90 days following the request by any such Initial
Purchaser that the Company file the Shelf Registration Statement) or (d) the
Exchange Offer Registration Statement or Shelf Registration Statement is
declared effective but
A-2
<PAGE> 90
thereafter ceases to be effective or usable within the applicable period, as
provided in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above, a "Registration Default"), the interest rate
borne by the Initial Securities shall be increased by an amount equal to
one-quarter of one percent per annum upon the occurrence of any Registration
Default, which rate will increase by an additional one quarter of one percent
each 90-day period that such additional interest continues to accrue under any
such circumstance, with an aggregate maximum increase in the interest rate equal
to one percent (1%) per annum. Following the cure of all Registration Defaults
the accrual of additional interest will cease and the interest rate will revert
to the original rate.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the persons who are registered holders of Securities at
the close of business on the April 1 or October 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by Global Notes (including principal, premium, if any, and interest)
shall be made by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. With respect to Securities represented by
Physical Notes, the Company will make all payments of principal, premium, if
any, and interest by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of March 25, 1999 ("Indenture"), among the Company, FTL-Cayman, the Guarantor
Subsidiaries and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of
A-3
<PAGE> 91
1939 (15 U.S.C. ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Act"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such terms,
and Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the
Company limited to $250,000,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture imposes certain limitations on the
issuance of Debt by the Company and FTL-Cayman, the issuance of Debt and
preferred stock by the Subsidiaries of the Company, the payment of dividends and
other distributions and acquisitions or retirements of FTL-Cayman's Capital
Stock and Subordinated Obligations, the sale or transfer of assets and
Subsidiary stock, transactions with Affiliates, the incurrence of secured debt
and sale/leaseback transactions, the merger or consolidation of the Company or
FTL-Cayman and the sale of all or substantially all the assets of the Company or
FTL-Cayman.
5. Optional Redemption
The Securities are redeemable, in whole or in part, at any
time, at the option of the Company at 100% of the principal amount thereof, plus
the Make-Whole Premium (as defined in the Indenture), together with all accrued
and unpaid interest thereon, if any, to the date of redemption.
6. Put Provisions
Upon a Change of Control, the Company will be required to
offer to repurchase all of the Securities at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase as provided in, and subject to the terms of, the
Indenture.
7. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture.
The Registrar need not register the transfer of or exchange
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15
A-4
<PAGE> 92
days before a selection of Securities to be redeemed or 15 days before an
interest payment date.
8. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
9. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
10. Defeasance
Subject to certain conditions, the Company and FTL-Cayman at
any time may terminate some or all of their obligations under the Securities and
the Indenture if the Company and FTL-Cayman deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
11. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company, FTL-Cayman and the
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to comply with the Act or to add additional
covenants or surrender rights conferred upon the Company or FTL-Cayman, or to
make any change that does not adversely affect the rights of any Securityholder.
12. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon
A-5
<PAGE> 93
required repurchase, upon declaration or otherwise; (iii) failure by the Company
and FTL-Cayman to comply with other agreements in the Indenture or the
Securities, in certain cases subject to notice and lapse of time; (iv) certain
accelerations (including failure to pay within any grace period after final
maturity) of other Debt of FTL-Cayman or any Significant Subsidiary if the
amount accelerated (or so unpaid) exceeds $25,000,000 and continues for 10 days
after the required notice to the Company; (v) certain events of bankruptcy or
insolvency with respect to the Company or any Significant Subsidiary; (vi)
certain judgments or decrees for the payment of money in excess of $25,000,000;
(vii) the FTL-Cayman Guarantee ceasing to be effective; and (viii) during
Non-Investment Grade Rating Periods, any Subsidiary Guarantee ceasing to be
effective. If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency with respect to the Company or FTL-Cayman are Events of Default
which will result in the Securities being due and payable immediately upon the
occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives indemnity or security
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is in their interest.
13. Guarantees
The Securities are fully and unconditionally guaranteed by
FTL-Cayman pursuant to terms of the FTL-Cayman Guarantee and by each Guarantor
Subsidiary pursuant to the terms of the Subsidiary Guarantees, each as
specifically described in the Indenture.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its affiliates and may otherwise deal
with the Company or its affiliates with the same rights it would have if it were
not Trustee.
A-6
<PAGE> 94
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company, FTL-Cayman or the Trustee shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture which
has in it the text of this Security in larger type. Requests may be made to:
Fruit of the Loom, Inc., 5000 Sears Tower, Chicago, Illinois 60606, Attention:
Secretary.
A-7
<PAGE> 95
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
- --------------------------------------------------------------------------------
Date: _________________ Your Signature: ________________________________________
- --------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
A-8
<PAGE> 96
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.07 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.07 of the Indenture, state the
amount and check the box:
[ ]
If you want to elect to have this Security repurchased by the
Company pursuant to Section 4.11 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
repurchased by the Company pursuant to Section 4.11 of the Indenture, state the
amount and check the box:
[ ]
Date: __________________ Your Signature:________________________________________
(Sign exactly as your name appears on the other side
of this Security)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed )
A-9
<PAGE> 97
EXHIBIT B
[FORM OF FACE OF SECURITY]
No. $
CUSIP No. 359416 AQ 7
8 7/8% Senior Note Due 2006
FRUIT OF THE LOOM, INC., a Delaware corporation, promises to
pay to , or registered assigns, the principal sum of
Dollars on April 15, 2006.
Interest Payment Dates: April 15 and October 15
Record Dates: April 1 and October 1
Additional provisions of this Security are set forth on the
other side of this Security.
FRUIT OF THE LOOM, INC.
by
-----------------------------
Title:
by
-----------------------------
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK [Seal]
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
------------------------------------
Authorized Signatory
B-1
<PAGE> 98
[FORM OF REVERSE SIDE OF SECURITY]
8 7/8% Senior Note Due 2006
1. Interest
Fruit of the Loom, Inc., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on April 15 and October 15 of each year
commencing October 15, 1999. Interest on the Securities will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from March 25, 1999. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. The Company shall pay interest on overdue
principal at the rate borne by the Securities plus 1% per annum, and it shall
pay interest on overdue installments of interest at the same rate to the extent
lawful.
2. Method of Payment
The Company will pay interest on the Securities (except
defaulted interest) to the persons who are registered holders of Securities at
the close of business on the April 1 or October 1 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date. Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company will pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by Global Notes (including principal, premium, if any, and interest)
shall be made by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. With respect to Securities represented by
Physical Notes, the Company will make all payments of principal, premium, if
any, and interest by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.
B-2
<PAGE> 99
4. Indenture
The Company issued the Securities under an Indenture dated as
of March 25, 1999 ("Indenture"), among the Company, FTL-Cayman, the Guarantor
Subsidiaries and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.. 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Capitalized terms used herein and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all such terms, and Securityholders are referred to the Indenture and
the Act for a statement of those terms.
The Securities are general unsecured obligations of the
Company limited to $250,000,000 aggregate principal amount (subject to Section
2.07 of the Indenture). The Indenture imposes certain limitations on the
issuance of Debt by the Company and FTL-Cayman, the issuance of Debt and
preferred stock by the Subsidiaries of the Company, the payment of dividends and
other distributions and acquisitions or retirements of FTL-Cayman's Capital
Stock and Subordinated Obligations, the sale or transfer of assets and
Subsidiary stock, transactions with Affiliates, the incurrence of secured debt
and sale/leaseback transactions, the merger or consolidation of the Company or
FTL-Cayman and the sale of all or substantially all the assets of the Company or
FTL-Cayman.
5. Optional Redemption
The Securities are redeemable, in whole or in part, at any
time, at the option of the Company at 100% of the principal amount thereof, plus
the Make-Whole Premium (as defined in the Indenture), together with all accrued
and unpaid interest thereon, if any, to the date of redemption.
6. Put Provisions
Upon a Change of Control, the Company will be required to
offer to repurchase all of the Securities at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase as provided in, and subject to the terms of, the
Indenture.
7. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to
B-3
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pay any taxes and fees required by law or permitted by the Indenture.
The Registrar need not register the transfer of or exchange
any Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
8. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
9. Unclaimed Money
If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.
10. Defeasance
Subject to certain conditions, the Company and FTL-Cayman at
any time may terminate some or all of their obligations under the Securities and
the Indenture if the Company and FTL-Cayman deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
11. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company, FTL-Cayman and the
Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 of the Indenture,
or to provide for uncertificated Securities in addition to or in place of
certificated Securities, or to comply with the Act or to add additional
covenants or surrender rights conferred upon the Company or FTL-Cayman, or to
make any change that does not adversely affect the rights of any Securityholder.
B-4
<PAGE> 101
12. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
of the Securities, upon required repurchase, upon declaration or otherwise;
(iii) failure by the Company or FTL-Cayman to comply with other agreements in
the Indenture or the Securities, in certain cases subject to notice and lapse of
time; (iv) certain accelerations (including failure to pay within any grace
period after final maturity) of other Debt of FTL-Cayman or any Significant
Subsidiary if the amount accelerated (or so unpaid) exceeds $25,000,000 and
continues for 10 days after the required notice to the Company; (v) certain
events of bankruptcy or insolvency with respect to the Company or any
Significant Subsidiary; (vi) certain judgments or decrees for the payment of
money in excess of $25,000,000; (vii) the FTL-Cayman Guarantee ceasing to be
effective; and (viii) during Non-Investment Grade Rating Periods, any Subsidiary
Guarantee ceasing to be effective. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Securities may declare all the Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency with respect to the Company or
FTL-Cayman are Events of Default which will result in the Securities being due
and payable immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives indemnity or security
satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Securityholders notice of any
continuing Default (except a Default in payment of principal or interest) if it
determines that withholding notice is in their interest.
13. Guarantees
The Securities are fully and unconditionally guaranteed by
FTL-Cayman pursuant to terms of the FTL-Cayman Guarantee and by each Guarantor
Subsidiary pursuant to the terms of the Subsidiary Guarantees, each as
specifically described in the Indenture.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the
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<PAGE> 102
Company or its affiliates and may otherwise deal with the Company or its
affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company, FTL-Cayman or the Trustee shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
18. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written
request and without charge to the Securityholder a copy of the Indenture which
has in it the text of this Security in larger type. Requests may be made to:
Fruit of the Loom, Inc., 5000 Sears Tower, Chicago, Illinois 60606, Attention:
Secretary.
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<PAGE> 103
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the
Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: _________________ Your Signature: ________________________________________
- --------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
B-7
<PAGE> 104
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.07 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.07 of the Indenture, state the
amount and check the box:
$_____________________
[ ]
If you want to elect to have this Security repurchased by the
Company pursuant to Section 4.11 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
repurchased by the Company pursuant to Section 4.11 of the Indenture, state the
amount and check the box:
$------------------
[ ]
Date: __________________ Your Signature:________________________________________
(Sign exactly as your name appears on the other side
of this Security)
Signature Guarantee:____________________________________________________________
(Signature must be guaranteed )
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<PAGE> 105
Exhibit C
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation
----------------------------
-----------, --
Attention:
Re: Fruit of the Loom, Inc. (the "Company")
8 7/8% Senior Notes due 2006 (the "Notes")
-----------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $_________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
1. the offer of the Notes was not made to a person in the
United States;
2. either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
3. no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
4. the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
5. we have advised the transferee of the transfer restrictions
applicable to the Notes.
You, the Company and counsel for the Company are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in
C-1
<PAGE> 106
any administrative or legal proceedings or official inquire with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferee]
By
--------------------------
C-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> APR-03-1999
<CASH> 20,400
<SECURITIES> 0
<RECEIVABLES> 117,100
<ALLOWANCES> 10,000
<INVENTORY> 817,500
<CURRENT-ASSETS> 997,200
<PP&E> 1,260,100
<DEPRECIATION> 766,600
<TOTAL-ASSETS> 2,374,200
<CURRENT-LIABILITIES> 598,800
<BONDS> 979,000
0
71,700
<COMMON> 255,500
<OTHER-SE> 201,700
<TOTAL-LIABILITY-AND-EQUITY> 2,374,200
<SALES> 408,700
<TOTAL-REVENUES> 408,700
<CGS> 314,300
<TOTAL-COSTS> 314,300
<OTHER-EXPENSES> (5,500)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,600
<INCOME-PRETAX> (9,200)
<INCOME-TAX> (500)
<INCOME-CONTINUING> (8,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,700)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
