<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 4, 1996
- ----- 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 1-9505
-----------------------------
HILLS STORES COMPANY
--------------------
(Exact name of registrant as specified in its charter)
DELAWARE 31-1153510
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
15 DAN ROAD, CANTON, MASSACHUSETTS 02021
---------------------------------- -----
(Address of principal executive offices) (Zip Code)
617-821-1000
------------
(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
------- -------
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
------- -------
The number of shares of common stock outstanding as of May 27, 1996 was
10,192,540 shares.
<PAGE> 2
HILLS STORES COMPANY AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of May 4, 1996,
February 3, 1996, and April 29, 1995 3
Condensed Consolidated Statements of Operations for the
Quarters Ended May 4, 1996 and April 29, 1995 4
Condensed Consolidated Statements of Cash Flows for the Quarters
Ended May 4, 1996 and April 29, 1995 5
Notes to Condensed Consolidated Financial Statements 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 10
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 10
2
<PAGE> 3
HILLS STORES COMPANY AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
Proforma
May 4, May 4, February 3, April 29,
(in thousands) 1996 1996 1996 1995
- ------------------------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
(Note 4)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,885 $ 12,665 $ 18,058 $ 6,360
Cash restricted to redemption
of senior notes (Note 4) - 153,762 - -
Accounts receivables, net 28,203 28,203 25,187 28,782
Inventories 410,330 410,330 331,697 400,328
Deferred tax asset 34,011 34,011 34,011 20,923
Other current assets 5,735 5,735 5,352 5,002
-------- ---------- -------- --------
Total current assets 486,164 644,706 414,305 461,395
Property and equipment, net 182,096 182,096 190,893 166,741
Property under capital leases, net 109,610 109,610 113,785 121,524
Beneficial lease rights, net 7,782 7,782 8,247 8,868
Other assets, net 20,530 22,223 15,746 5,176
Deferred tax asset 8,233 8,233 8,233 10,061
Reorganization value in excess of amounts
allocable to identifiable assets, net 105,158 105,158 107,514 142,826
-------- ---------- -------- --------
$919,573 $1,079,808 $858,723 $916,591
======== ========== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Senior notes subject to
redemption (Note 4) $ - $ 154,725 $ - $ -
Current portion of capital leases 5,732 5,732 5,732 6,121
Borrowings under the revolving
credit facility 43,000 43,000 - -
Accounts payable, trade 108,984 108,984 82,631 126,353
Other accounts payable and accrued
expenses 154,332 157,844 178,852 174,192
-------- ---------- -------- --------
Total current liabilities 312,048 470,285 267,215 306,666
Long-term senior notes (Note 4) 195,000 195,000 160,000 160,000
Long-term obligations under capital leases 117,148 117,148 118,776 123,037
Financing obligation - sale/leaseback 25,169 25,169 25,169 25,169
Other liabilities 7,536 7,536 8,264 10,098
Commitments and contingencies - - - -
Preferred stock, at mandatory redemption
value (Note 2) 21,498 21,498 24,636 27,482
Common shareholders' equity 241,174 243,172 254,663 264,139
-------- ---------- -------- --------
$919,573 $1,079,808 $858,723 $916,591
======== ========== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
HILLS STORES COMPANY AND SUBSIDIARIES
- -------------------------------------------------------------------------------
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Quarter Ended
------------------------
(unaudited) May 4, April 29,
(in thousands, except per share amounts) 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Net sales $370,248 $362,862
Cost of sales 270,985 261,552
Selling and administrative expenses 102,710 97,896
Amortization of reorganization value in
excess of amounts allocable to
identifiable assets 1,521 1,938
Impairment of long-lived assets (Note 5) 11,706 -
-------- --------
Operating earnings (loss) (16,674) 1,476
Interest expense, net (13,266) (9,492)
-------- --------
Loss before income taxes (29,940) (8,016)
Income tax benefit 15,202 3,679
-------- --------
Net loss $(14,738) $( 4,337)
======== ========
Primary loss per share (Note 3) $ (1.45) $ (0.45)
======== ========
Fully-diluted loss per share (Note 3) $ (1.45) $ (0.42)
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE> 5
HILLS STORES COMPANY AND SUBSIDIARIES
- -------------------------------------------------------------------------------
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Quarter Ended
---------------------
(unaudited) May 4, April 29,
(in thousands) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (14,738) $ (4,337)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization 8,822 7,248
Amortization of deferred financing costs 1,860 1,253
Amortization of reorganization value in excess
of amounts allocable to indentifiable assets 1,521 1,938
Loss on disposal of fixed assets 329 23
Impairment of long-lived assets 11,706 -
Increase in accounts receivable and other
current assets (3,399) (5,570)
Increase in inventories (78,633) (86,477)
Increase in other accounts payable and accrued
expenses 5,345 6,227
Other, net 79 100
--------- ---------
Net cash used for operating activities (67,108) (79,595)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,573) (16,316)
--------- ---------
Net cash used for investing activities (6,573) (16,316)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of 12 1/2% Senior Notes 195,000 -
Fees incurred with the issuance of
12 1/2% Senior Notes (8,100) -
Redemption of 10.25% Senior Notes (5,275) -
Cash restricted to redemption of
10.25% Senior Notes (153,762) -
Borrowings under revolving credit facility, net 43,000 -
Shares repurchased in self-tender - (75,000)
Principal payments under capital lease obligations (1,628) (1,471)
Cash distributions pursuant to the Plan of
Reorganization (1,081) (1,613)
Other financing activities 134 304
--------- ---------
Net cash provided by (used for)
financing activities 68,288 (77,780)
--------- ---------
Net decrease in cash and cash equivalents (5,393) (173,691)
Cash and cash equivalents at beginning of period 18,058 180,051
--------- ---------
Cash and cash equivalents at end of period $ 12,665 $ 6,360
========= =========
See Notes to Condensed Consolidated Financial Statements
</TABLE>
5
<PAGE> 6
HILLS STORES COMPANY AND SUBSIDIARIES
- ------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated. The information furnished reflects all normal
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of the results for the interim period.
The accompanying unaudited consolidated financial statements are presented in
accordance with the requirements of Form 10-Q and consequently do not include
all the disclosures normally required by generally accepted accounting
principles nor those normally made in the Company's annual Form 10-K filing.
Reference should be made to the Company's Annual Report on Form 10-K for
additional disclosures, including a summary of the Company's accounting
policies. Certain prior year amounts have been reclassified to conform to the
current year presentation. The Company's business is seasonal in nature and the
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full fiscal year. The fourth
quarter of each fiscal year provides the most significant portion of the
Company's annual sales and most of its operating earnings, with operating
earnings particularly concentrated in the Christmas selling season.
2. HILLS STORES SERIES A CONVERTIBLE PREFERRED STOCK
-------------------------------------------------
During the quarter ended May 4, 1996, 156,912 shares of the Company's Series A
Convertible Preferred Stock ($20 par value) were converted to the Company's
Common Stock on a share for share basis.
3. EARNINGS PER SHARE
------------------
Primary loss per share of the Company for the quarters ended May 4, 1996 and
April 29, 1995 was computed based on the weighted average number of common
shares assumed to be outstanding during the periods of 10,165,710 and 9,665,659
shares, respectively. Fully-diluted loss per share for the quarters ended May 4,
1996 and April 29, 1995 was computed based on the weighted average number of
common shares assumed to be outstanding during the periods of 10,165,710 and
10,399,194 shares, respectively.
4. SENIOR NOTES
------------
On April 19, 1996 the Company issued $195 million of unsecured 12 1/2% Senior
Notes (the "New Senior Notes") due 2003. The New Senior Notes are noncallable,
guaranteed by all the subsidiaries of the Company, with interest payable
semiannually. The New Senior Notes contain covenants regarding limitations on
debt incurrence and the issuance of preferred stock. Separate financial
statements of the Company's subsidiary guarantors have not been provided because
(1) the subsidiary guarantors constitute all of the Company's direct and
indirect subsidiaries, (2) they have fully and unconditionally guaranteed the
New Senior Notes on a joint and several basis, (3) their aggregate assets,
liabilities, earnings and equity are substantially equivalent to those of the
6
<PAGE> 7
HILLS STORES COMPANY AND SUBSIDIARIES
- -------------------------------------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. SENIOR NOTES (CONTINUED)
------------------------
Company on a consolidated basis, and (4) separate financial statements are not
deemed to be material to investors. Additionally, both the terms of the
Company's revolving credit facility and the New Senior Notes limit the ability
of the subsidiary's to pay dividends.
In connection with this sale of New Senior Notes, on April 19, 1996 the Company
offered to redeem by May 20, 1996, all of its outstanding 10.25% Senior Notes
(the "Old Senior Notes") due 2003 at a redemption price equal to 101% of the
principal amount, plus accrued interest, with $159.1 million of the proceeds
from the New Senior Notes placed in escrow for this purpose. As of May 4, 1996
and May 20, 1996, the Company had redeemed $5.3 million and $155.0 million,
respectively, of the Old Senior Notes with a portion of the proceeds from the
New Senior Notes. In May 1996, the Company called for the mandatory redemption
of all of the outstanding Old Senior Notes at the indenture-specified price of
104% of principal, plus accrued interest. As a result of these transactions, the
Company will recognize an extraordinary after-tax loss for early extinguishment
of debt of approximately $2.0 million in its second fiscal quarter. The
extraordinary loss includes the redemption premiums and the write-off of the
related deferred financing costs.
The pro forma balance sheet reflects the assumed redemption of that portion of
the Old Senior Notes still outstanding at May 4, 1996 plus redemption premiums
and accrued interest.
5. IMPAIRMENT OF LONG-LIVED ASSETS
-------------------------------
Effective February 4, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121: "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"). FAS 121
requires that the carrying value of long-lived tangible and certain intangible
assets be evaluated periodically in relation to the operating performance and
estimated future cash flows of the underlying assets. In accordance with FAS
121, the Company recognized a pre-tax charge of $11.7 million, $6.8 million
after tax, or $0.67 per share, in the first quarter of fiscal 1996 to reduce the
carrying value of certain of its long-lived tangible and intangible assets to
their estimated fair market value.
6. ACCOUNTING FOR STOCK-BASED COMPENSATION
---------------------------------------
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123: "Accounting for Stock-Based
Compensation," ("FAS 123") which is effective for the Company's fiscal year
beginning February 4, 1996. FAS 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages, but does not require
the recognition of compensation expense based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply APB
Opinion No. 25, which recognizes compensation expense based on the intrinsic
value of the equity instrument awarded. The Company will continue to apply APB
Opinion No. 25 to its stock-based compensation awards to employees and will
disclose the required pro forma effect on net income and earnings per share.
7
<PAGE> 8
HILLS STORES COMPANY AND SUBSIDIARIES
- ------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MAY 4, 1996 COMPARED WITH
QUARTER ENDED APRIL 29, 1995
The following discussion, as well as other portions of this document, includes
certain statements which are or may be construed as forward looking about the
Company's business, sales and expenses, and operating and capital requirements.
Any such statements are subject to risks that could cause the actual results or
requirements to vary materially.
Sales increased 2.0% compared with the same period in 1995. This increase was
primarily due to the opening of ten new stores during fiscal 1995. Sales
increases across all hardlines categories, particularly in areas associated with
the home and electronics, were partially offset by continued weakness in apparel
sales. Comparable store sales of stores open for a full fiscal year decreased by
1.7%.
Cost of sales as a percentage of sales was 73.2% in the first quarter of 1996
compared with 72.1% in the first quarter of 1995. The decrease in gross margin
percentage of 1.1% was due to competitive pricing pressures across all lines of
business, particularly in the hardlines categories, and from a shift in mix in
sales towards lower margin hardlines categories.
Selling and administrative expenses, including depreciation and other occupancy
expenses, as a percentage of sales were 27.7% compared with 27.0% in 1995, a
0.7% increase. The increase was due primarily to higher costs associated with
the new stores and the decline in sales at existing stores.
See Note 5 of the Notes to Condensed Consolidated Financial Statements regarding
the charge for the impairment of long-lived assets.
Interest expense, net was $13.3 million in the first quarter of 1996 compared
with $9.5 million in the same period of 1995. This $3.8 million increase was due
primarily to the net effect of a decline in interest income due to lower average
invested balances and higher borrowings on the revolving credit facility, and
increased interest expense on the 12 1/2% Senior Notes (see Note 4 of Notes to
Condensed Consolidated Financial Statements).
The effective tax rate was 50.8% in the first quarter of fiscal 1996 compared
with a rate of 45.9% in the first quarter of fiscal 1995. The increase in the
rate was due to an increase in the relationship between non-deductible
amortization of reorganization value and the related expected pre-tax earnings.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $27.3 million from February 3, 1996,
primarily due to $35.0 million of net additional proceeds received from the
issuance of long-term senior notes (see Note 4 of Notes to Condensed
Consolidated Financial Statements).
Net cash used for operating activities was $67.1 million for the quarter ended
May 4, 1996, compared with a use of $80.0 million for the same period last year,
8
<PAGE> 9
HILLS STORES COMPANY AND SUBSIDIARIES
- ------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
a decrease of $12.9 million. This use of cash in both periods was primarily due
to the seasonal nature of the Company's business. In addition, the prior year's
use of cash reflected the impact of inventory required for five new stores.
Net cash used for investing activities was $6.6 million compared with $16.3
million in the first quarter of 1995, a $9.7 million decrease. This decrease was
due to the Company substantially completing its chainwide remodeling in fiscal
1995. In addition, the prior year's use of cash reflected the impact of opening
five new stores. During fiscal year 1996, capital expenditures, primarily for
store remodeling and information technology upgrades, are expected to
approximate $35 million, with one new store opening.
On April 19, 1996 the Company issued $195 million of unsecured 12 1/2% Senior
Notes (the "Senior Notes") due 2003 and the Company offered to redeem by May 20,
1996 all of its outstanding 10.25% Senior Notes (the "Old Senior Notes") due
2003 at a redemption price equal to 101% of the principal amount, plus accrued
interest. In May 1996, the Company called for the mandatory redemption of all
outstanding Old Senior Notes at the indenture-specified price of 104% of
principal, plus accrued interest. See Note 4 of Notes to Condensed Consolidated
Financial Statements.
Net cash provided by financing activities was $68.3 million in the first quarter
of fiscal 1996 compared with a use of $77.8 million in the same period a year
ago, a $146.1 million increase. The difference was due to $27.8 million in net
proceeds received from the issuance of long-term debt in excess of the debt it
refinanced, a $43.0 million increase in borrowings under the revolving credit
facility, and the prior year payment of $75.0 million related to the Company's
self-tender offer (see Note 20 of Notes to Consolidated Financial Statements in
the Company's Annual Report for the year ended February 3, 1996 filed on Form
10-K). During the first quarter of fiscal 1996, average borrowings under the
revolving credit facility were $27.4 million at an average interest rate of
8.6%. There were no direct borrowings under the revolving credit facility in the
first quarter of fiscal 1995.
Management believes that amounts available under the Company's current borrowing
agreements, together with cash from operations, will enable the Company to fund
its current liquidity and capital expenditure requirements.
The terms of the Company's revolving credit facility and the New Senior Notes
limit the ability of the Company's subsidiary's to pay dividends. Any or all of
the restrictions, limitations or contingencies under the revolving credit
facility and the Senior Notes Indeture, as well as the Company's leverage, could
adversely affect the Company's ability to obtain additional financing in the
future, to make capital expenditures, to effect store expansions, to make
acquisitions, to take advantage of business opportunities that may arise, and to
withstand adverse general economic and retail industry conditions and increased
competitive pressures. Retail suppliers and their factors monitor carefully the
financial performance of retail companies such as the Company, and may reduce
credit availability quickly upon learning of actual or perceived deterioration
in the financial condition or results of operations of a retail company.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------ -----------------
In respect to the previously reported suit filed by the Company and HDSC against
Smith Barney, Inc., the court dismissed the Complaint on April 1, 1996. On May
9, 1996, the Company filed a Motion for Renewal or Re-argument in connection
with the dismissal of the Complaint. At the same time the Company filed in the
Appellate Division a Notice of Appeal of the trial court's dismissal of the
Complaint.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
a. The following documents are filed as part of this report:
3.1(1) Amended and Restated Certificate of Incorporation of the Company.
3.3(2) Amended and Restated By-Laws of the Company.
4.1(3) Certificate of the Voting Powers, Preferences and other
designated attributes of the Series A Convertible Preferred
Stock of the Company.
4.2(4) Form of Series 1993 Stock Right.
4.3(3) Indenture relating to the 10.25% Senior Notes Due 2003 of the
Company.
4.4(5) First Supplemental Indenture dated as of January 1, 1995 to the
Senior Note Indenture.
4.5(5) Second Supplemental Indenture dated as of August 1, 1995 to the
Senior Note Indenture.
4.6(6) Series 1993 Warrant Agreement dated October 4, 1993 between the
Company and Chemical Bank, as warrant agent.
4.7(6) Rights Agreement dated as of August 16, 1994 between the Company
and Chemical Bank, as Rights Agent.
4.8(7) Form of Certificate of the Voting Powers, Preferences and other
designated attributes of Series B Participating Cumulative
Preferred Stock of the Company (which is attached as Exhibit A to
the Rights Agreement incorporated by reference as Exhibit 4.7
hereto).
4.9(7) Form of Right Certificate (which is attached as Exhibit B to the
Rights Agreement incorporated by reference as Exhibit 4.7 hereto).
4.10 Indenture relating to the 12 1/2% Senior Notes due 2003 of the
Company.
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
- ------- --------------------------------------------
4.11 Registration Rights Agreement, dated as of April 19, 1996, relating
to the 12 1/2% Senior Notes due 2003 of the Company.
4.12 Purchase Agreement, dated April 17, 1996, relating to the 12 1/2%
Senior Notes due 2003 of the Company.
10.1(5) Credit Agreement dated as of August 21, 1995 among Hills Stores
Company, Hills Department Store Company, the Lenders named therein,
Chemical Bank as Administrative Agent and Fronting Bank, and
NatWest Bank, N.A., as Managing Agent.
10.2(8) First Amendment dated as of December 7, 1995 to the Credit
Agreement.
10.3(8) Second Amendment and Consent dated as of January 12, 1996 to the
Credit Agreement.
10.4 *(8) Employment Agreement made as of February 7, 1996 with Gregory K.
Raven.
10.5(8)* Consulting Agreement made as of February 8, 1996 with Chaim Y.
Edelstein.
10.6(5)* Employment Agreement made as of July 6, 1995 with William K.
Friend.
10.7* Employment Agreement made as of March 25, 1996 with James E. Feldt.
10.8 Third Amendment and Consent dated as of April 16, 1996 to the
Credit Agreement dated as of August 21, 1995 among Hills Stores
Company, Hills Department Store Company, the Lenders named therein,
Chemical Bank as Administrative Agent and Fronting Bank, and
NatWest Bank, N.A., as Managing Agent.
11 Statements regarding computation of per share earnings.
16(9) Letters re: change in certifying accountant.
27 Financial Data Schedule.
- ---------------------
* Executive Compensation Plans and Arrangements.
1. Incorporated by reference from the Annual Report on Form 10-K
of the Company for the fiscal year ended January 28, 1995.
2. Incorporated by reference from the Report on Form 8-K of
the Company dated January 18, 1996.
3. Incorporated by reference from the Form 8-A of the Company
filed on October 5, 1993.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
- ------- --------------------------------------------
4. Incorporated by reference from the Annual Report on Form 10-K
of the Company for the fiscal year ended January 29, 1994.
5. Incorporated by reference from the Report on Form 10-Q of the
Company for the quarter ended July 29, 1995.
6. Incorporated by reference from the Report on Form 8-K of the
Company dated October 4, 1993.
7. Incorporated by reference from the Report on Form 8-K of the
Company dated August 23, 1994.
8. Incorporated by reference from the Annual Report on Form 10-K
of the Company for the fiscal year ended February 3, 1996.
9. Incorporated by reference from the Report on Form 8-K of the
Company dated November 8, 1995.
b. Reports on Form 8-K
A report on Form 8-K dated April 5, 1996 was filed by the Company, stating that
the Company proposed to offer $175,000,000 principal amount of new Senior Notes
in a registration exempt transaction, with substantially all of the proceeds to
be used to redeem its outstanding 10.25% Senior Notes. (On April 19, 1996, the
Company sold $195 million of new Senior Notes due 2003 and proceeds were applied
on or before May 20, 1996 to the purchase of $155 million of the 10.25% Senior
Notes.)
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HILLS STORES COMPANY
Date: June 5, 1996 /s/ C. Scott Litten
-------------------
C. Scott Litten
Executive Vice President-
Chief Financial Officer
Date: June 5, 1996 /s/ Kim D. Ahlholm
-------------------
Kim D. Ahlholm
Vice President - Controller
and Principal Accounting Officer
13
<PAGE> 14
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit Title
- ------- -----
4.10 Indenture relating to the 12 1/2% Senior Notes due 2003 of the
Company.
4.11 Registration Rights Agreement, dated as of April 19, 1996,
relating to the 12 1/2% Senior Notes due 2003 of the Company.
4.12 Purchase Agreement, dated April 17, 1996, relating to the 12
1/2% Senior Notes due 2003 of the Company.
10.7 Employment Agreement made as of March 25, 1996 with James E.
Feldt.
10.8 Third Amemdment and Consent dated as of April 16, 1996 to the
Credit Agreement dated as of August 21, 1995 among Hills Stores
Company, Hills Department Store Company, the Lenders named
therein, Chemical Bank as Administrative Agent and Fronting
Bank, and NatWest Bank, N.A., as Managing Agent.
11 Statements regarding computation of earnings per share.
27 Financial Data Schedule.
14
<PAGE> 1
Exhibit 4.10
================================================================================
---------------------------------------------------------
HILLS STORES COMPANY
12 1/2% SENIOR NOTES DUE 2003
-----------------
INDENTURE
Dated as of April 19, 1996
-----------------
-----------------
FLEET NATIONAL BANK
-----------------
Trustee
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1).............................................. 7.10
(a)(2)............................................. 7.10
(a)(3) ............................................ N.A.
(a)(4)............................................. N.A.
(a)(5)............................................. 7.10
(b) ............................................... 7.10
(c) ............................................... N.A.
311 (a) ................................................ 7.11
(b) ............................................... 7.11
(c) ............................................... N.A.
312 (a)................................................. 2.05
(b)................................................ 11.03
(c) ............................................... 11.03
313 (a) ................................................ 7.06
(b)(1) ............................................ N.A.
(b)(2) ............................................ 7.06
(c) ............................................... 7.06;11.02
(d)................................................ 7.06
314 (a) ................................................ 4.03;4.04
(b) ............................................... N.A
(c)(1) ............................................ 11.04
(c)(2) ............................................ 11.04
(c)(3) ............................................ N.A.
(d)................................................ N.A.
(e) .............................................. 11.05
(f)................................................ N.A.
315 (a)................................................. 7.02,11.02
(b)................................................ 7.05,11.02
(c) .............................................. 7.01
(d)................................................ 7.01
(e)................................................ 6.11
316 (a)(last sentence) ................................. 2.09
(a)(1)(A).......................................... 6.05
(a)(1)(B) ......................................... 6.04
(a)(2) ............................................ N.A.
(b) ............................................... 6.07
(c) ............................................... N.A.
317 (a)(1) ............................................. 6.08
(a)(2)............................................. 6.09
(b) ............................................... 2.04
318 (a)................................................. 11.01
(b)................................................ N.A.
(c)................................................ 11.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................................ 1
Section 1.02. Other Definitions...................................... 11
Section 1.03. Incorporation by Reference of Trust Indenture Act...... 12
Section 1.04. Rules of Construction.................................. 12
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating........................................ 13
Section 2.02. Execution and Authentication........................... 13
Section 2.03. Registrar and Paying Agent............................. 14
Section 2.04. Paying Agent to Hold Money in Trust.................... 14
Section 2.05. Holder Lists........................................... 14
Section 2.06. Transfer and Exchange.................................. 14
Section 2.07. Replacement Notes...................................... 20
Section 2.08. Outstanding Notes...................................... 20
Section 2.09. Treasury Notes......................................... 20
Section 2.10. Temporary Notes........................................ 21
Section 2.11. Cancellation........................................... 21
Section 2.12. Defaulted Interest..................................... 21
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee..................................... 22
Section 3.02. Selection of Notes to Be Redeemed...................... 22
Section 3.03. Notice of Redemption................................... 22
Section 3.04. Effect of Notice of Redemption......................... 23
Section 3.05. Deposit of Redemption Price............................ 23
Section 3.06. Notes Redeemed in Part................................. 24
Section 3.07. Optional Redemption.................................... 24
Section 3.08. Mandatory Redemption................................... 24
Section 3.09 Special Mandatory Redemption........................... 24
Section 3.10. Offer to Purchase by Application of Excess Proceeds.... 25
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes....................................... 26
Section 4.02. Maintenance of Office or Agency........................ 27
Section 4.03. Reports................................................ 27
Section 4.04. Compliance Certificate................................. 27
Section 4.05. Taxes.................................................. 28
Section 4.06. Stay, Extension and Usury Laws......................... 28
Section 4.07. Restricted Payments.................................... 28
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Page
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries............................................ 30
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock................................................... 30
Section 4.10. Asset Sales............................................. 32
Section 4.11. Transactions with Affiliates............................ 32
Section 4.12. Liens................................................... 33
Section 4.13. Continued Existence..................................... 33
Section 4.14. Offer to Redeem Upon Change of Control.................. 33
Section 4.15. Additional Subsidiary Guarantees........................ 35
Section 4.16. Limitation on Issuances and Sales of Capital Stock of
Wholly Owned Subsidiaries............................... 35
Section 4.17. No Senior Subordinated Debt of Guarantors............... 35
Section 4.18. Sale and Leaseback Transactions......................... 35
Section 4.19. Payments For Consent.................................... 35
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets................ 36
Section 5.02. Successor Corporation Substituted....................... 37
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default....................................... 37
Section 6.02. Acceleration............................................ 39
Section 6.03. Other Remedies.......................................... 39
Section 6.04. Waiver of Past Defaults................................. 39
Section 6.05. Control by Majority..................................... 40
Section 6.06. Limitation on Suits..................................... 40
Section 6.07. Rights of Holders of Notes to Receive Payment........... 40
Section 6.08. Collection Suit by Trustee.............................. 40
Section 6.09. Trustee May File Proofs of Claim........................ 41
Section 6.10. Priorities.............................................. 41
Section 6.11. Undertaking for Costs................................... 41
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee....................................... 42
Section 7.02. Rights of Trustee....................................... 43
Section 7.03. Individual Rights of Trustee............................ 43
Section 7.04. Trustee's Disclaimer.................................... 43
Section 7.05. Notice of Defaults...................................... 44
Section 7.06. Reports by Trustee to Holders of the Notes.............. 44
Section 7.07. Compensation, Reimbursement and Indemnity............... 44
Section 7.08. Replacement of Trustee.................................. 45
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<PAGE> 5
Page
Section 7.09. Successor Trustee by Merger, etc. ...................... 46
Section 7.10. Eligibility; Disqualification........................... 46
Section 7.11. Preferential Collection of Claims Against Company....... 46
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance.............................................. 46
Section 8.02. Legal Defeasance and Discharge.......................... 46
Section 8.03. Covenant Defeasance..................................... 47
Section 8.04. Conditions to Legal or Covenant Defeasance.............. 47
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions........... 48
Section 8.06. Repayment to the Company................................ 49
Section 8.07. Reinstatement........................................... 49
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes..................... 50
Section 9.02. With Consent of Holders of Notes........................ 50
Section 9.03. Compliance with Trust Indenture Act..................... 51
Section 9.04. Revocation and Effect of Consents....................... 52
Section 9.05. Notation on or Exchange of Notes........................ 52
Section 9.06. Trustee to Sign Amendments, etc. ....................... 52
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantees................................... 52
Section 10.02. Subordination of Guarantees............................. 53
Section 10.03. Notice to Holders of Senior Debt........................ 54
Section 10.04. Execution and Delivery of Subsidiary Guarantees......... 54
Section 10.05. Guarantors May Consolidate, etc., on Certain Terms...... 55
Section 10.06. Releases Following Sale of Assets....................... 55
Section 10.07. Limitation on Guarantor Liability....................... 56
Section 10.08. "Trustee" to Include Paying Agent....................... 56
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls............................ 56
Section 11.02. Notices................................................. 56
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes........................................ 58
Section 11.04. Certificate and Opinion as to Conditions Precedent...... 58
Section 11.05. Statements Required in Certificate or Opinion........... 58
Section 11.06. Rules by Trustee and Agents............................. 58
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Page
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders............................ 58
Section 11.08. Governing Law......................................... 59
Section 11.09. No Adverse Interpretation of Other Agreements......... 59
Section 11.10. Successors............................................ 59
Section 11.11. Severability.......................................... 59
Section 11.12. Counterpart Originals................................. 59
Section 11.13. Table of Contents, Headings, etc. .................... 59
iv
<PAGE> 7
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B CERTIFICATE OF TRANSFEROR
Exhibit C GUARANTORS
Exhibit D FORM OF SUBSIDIARY GUARANTEE
Exhibit E FORM OF PLEDGE AND ESCROW AGREEMENT
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<PAGE> 8
INDENTURE dated as of April 19, 1996 among Hills Stores Company, a Delaware
corporation (the "Company"), Hills Department Store Company, a Delaware
corporation, C.R.H. International, Inc., an Ohio corporation, Canton
Advertising, Inc., a Massachusetts corporation, Corporate Vision, Inc., a
Massachusetts corporation, HDS Transport, Inc., an Ohio corporation, and Hills
Distributing Company, a Delaware corporation (the "Guarantors"), as guarantors
and Fleet National Bank, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 12 1/2% Senior Notes due 2003 (the "Senior Notes") of the Company and the 12
1/2% New Senior Notes due 2003 of the Company (the "New Senior Notes" and,
together with the Senior Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Allowable Investments" means (a) obligations that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America (such obligations,
collectively, the "U.S. Government Obligations"), which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of principal
of or interest on the U.S. Government Obligation evidenced by such depository
receipt or (b) any mutual fund maintained by the Escrow Agent that (i)
<PAGE> 9
is rated AAA by Moody's Investors Service or Standard & Poors and (ii) contains
only U.S. Government Obligations.
"Asset Sale" means (i) the sale (other than sales of inventory), lease,
conveyance or other disposition of any assets (including, without limitation, by
way of a sale and leaseback) other than in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole shall be governed by Section 4.14 and Article
5 hereof), and (ii) the issue or sale by the Company or any of its Subsidiaries
of Equity Interests of any of the Company's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $2.5 million or (b)
for net proceeds in excess of $2.5 million. Notwithstanding the foregoing: (i) a
transfer of assets by the Company to a Wholly Owned Subsidiary or by a Wholly
Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, (ii) an
issuance of Equity Interests by a Wholly Owned Subsidiary to the Company or to
another Wholly Owned Subsidiary, and (iii) a Restricted Payment that is
permitted by Section 4.07 hereof will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board" means the Board of Directors, any managers or other similar
governing entity of the Company, the members of which are, in each case, elected
by the equityholders of the Company, including any duly authorized committee of
the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
75% of all accounts receivable of the Company and its Subsidiaries as of such
date that are not more than 45 days past due (including accounts receivable
relating to any layaway or similar plan), plus (ii) 75% of the book value of all
inventory owned by the Company and its Subsidiaries as of such date, in each
case calculated on a consolidated basis and in accordance with GAAP. To the
extent that information is not available as to the amount of accounts receivable
or inventory as of a specific date, the Company may utilize the most recent
available information for purposes of calculating the Borrowing Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
2
<PAGE> 10
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar and time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500.0 million and a Thomson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition.
"Certificated Notes" means Notes that are in the form of the Notes attached
hereto as Exhibit A, that do not include the information called for by footnotes
1 and 2 thereof.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the filing by any "person" (as defined above) with the SEC of a
report under or in response to Schedule 13D or 14D-1 (or any successor schedule,
form or report) and the delivery of such report to the Company, which report
discloses that such "person" (as defined above) has become the beneficial owner
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of
more than 50% of the voting stock of the Company or the Company otherwise
becomes aware that any "person" (as defined above) has become the beneficial
owner (as defined above) of more than 50% of the voting stock of the Company,
(iii) the first day on which a majority of the members of the Board of the
Company are not Continuing Directors or (iv) the first day on which the Company
ceases to own 100% of the outstanding Equity Interests of Hills Department Store
Company.
"Company" means Hills Stores Company, a Delaware corporation.
"Consolidated Cash Flow" 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
(a) an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income) or (b) the disposition of any securities or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries,
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
included in computing such Consolidated Net Income, plus (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles) and other non-cash charges (excluding any such non-cash charge to
the extent that it represents an accrual of or reserve for cash charges in any
future period) of such Person and its Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, plus (v) with respect to any quarter of
the Company ending on or prior to the date of the
3
<PAGE> 11
Indenture, all expenses shown on the Company's income statement under the
caption "Costs related to change of control," in each case, on a consolidated
basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iii) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of the Company who (i) was a member of such Board on the date of
this Indenture or (ii) was nominated for election or elected to such Board with
the approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature.
"Escrow Account" has the meaning given in the Senior Note Pledge and Escrow
Agreement.
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<PAGE> 12
"Escrow Agent" means Fleet National Bank in its capacity as Escrow Agent
pursuant to the Pledge and Escrow Agreement.
"Escrow Funds" means $159.1 million of the net proceeds of the Offering,
held in the Escrow Account pursuant to the Pledge and Escrow Agreement.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that shall be made by the Company
pursuant to the Registration Rights Agreement to exchange New Senior Notes for
Senior Notes.
"Exchange Offer Registration Statement" means the registration statement
relating to the Exchange Offer to be filed by the Company pursuant to the
Registration Rights Agreement.
"Existing Indebtedness" means all Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Revolving Credit Facility) in
existence on the date hereof, until such amounts are repaid.
"Existing Notes" means those certain 10.25% Senior Notes due 2003 of the
Company issued pursuant to an indenture dated as of October 1, 1993, as last
amended as of January 15, 1996, among the Company, Hills Department Store
Company and Fleet Bank of Massachusetts, N.A., as Trustee (the "Existing Note
Indenture").
"Existing Note Change of Control Offer" means the obligation of the Company
to redeem Existing Notes pursuant to Section 1103 of the Existing Note Indenture
following the 1995 change of control.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Subsidiaries that was capitalized during
such period, and (iii) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Subsidiaries or secured by a
Lien on assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all cash dividend
payments (and non-cash dividend payments in the case of a Person that is a
Subsidiary) on any series of preferred stock of such Person, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for
5
<PAGE> 13
such period. In the event that the Company or any of its Subsidiaries incurs,
assumes, Guarantees or redeems any Indebtedness (other than borrowings under the
Revolving Credit Facility or other revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but on or prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions involving consideration in excess of $1.0 million
that have been made by the Company or any of its Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (ii)
of the proviso set forth in the definition of Consolidated Net Income, and (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges shall not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date.
"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 have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Note" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 2 to the form of
the Note attached hereto as Exhibit A.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) Hills Department Store Company, HDS
Transport, Inc., C.R.H. International, Inc., Canton Advertising, Inc., Corporate
Vision, Inc. and Hills Distributing Company and (ii) any other Subsidiary of the
Company that executes a Subsidiary Guarantee in accordance with the provisions
of this Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar
6
<PAGE> 14
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade or other payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the Guarantee by such Person
of any indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees of Indebtedness or other obligations), advances or
capital contributions (excluding commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities together will all other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
an acquisition of assets, Equity Interests or other securities by the Company
for consideration consisting of common equity securities of the Company shall
not be deemed to be an Investment. If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interest of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of.
"Legal Holiday" means a Saturday, a Sunday or a day on which the Trustee or
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary gain (but not loss), together with any related provision
for taxes on such extraordinary gain (but not loss).
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<PAGE> 15
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"New Senior Notes" means the 12 1/2% Senior Notes due 2003 of the Company
issued pursuant to the Exchange Offer.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fee,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Senior Notes by the Company.
"Officer" means, (a) with respect to any Person that is a corporation, the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice-President of such Person
and (b) with respect to any other Person, the individuals selected by the Board
of such Person to perform functions similar to those of the officers listed in
clause (a).
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the Chief Executive Officer,
the Chief Financial Officer, the Treasurer or the principal accounting officer
of the Company that meets the requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Permitted Investments" means (a) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company; (b) any Investments in Cash Equivalents;
(c) any Investments by the Company or any Subsidiary of the Company in a Person,
if as a result of such Investments (i) such Person becomes a Wholly Owned
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company (d) any Restricted Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance Section 4.10 hereof; (e) any obligations or shares of Capital Stock
received in connection with or as a result of a bankruptcy, workout or
reorganization of the issuer of such obligations or shares of Capital Stock; (f)
any Investment received involuntarily; and (g) other Investments in any Person
(other than an Affiliate of the Company that is not also a Subsidiary of the
Company) having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other
8
<PAGE> 16
Investments made pursuant to this clause (g) that are at the time outstanding,
not in excess of $10.0 million.
"Permitted Liens" means (i) Liens on assets of the Company or any of its
Subsidiaries securing Indebtedness under the Revolving Credit Facility that was
permitted by the terms of the Indenture to be incurred; (ii) Liens securing
Existing Indebtedness; (iii) Liens in favor of the Company or any of its
Subsidiaries; (iv) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or any Subsidiary of
the Company; (v) Liens on property existing at the time of acquisition thereof
by the Company or any Subsidiary of the Company, provided that such Liens were
in existence prior to the contemplation of such acquisition and do not extend to
any assets other than those so acquired by the Company or any Subsidiary of the
Company; (vi) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature and
mechanics', carriers', warehousemen's, materialmen's and vendors' Liens, in each
case incurred in the ordinary course of business; (vii) Liens to secure Purchase
Money Debt permitted to be incurred by any provision of Section 4.09 hereof
covering only the assets constructed, improved upon or acquired with such
Indebtedness and only to the extent that such Liens attach to the assets so
constructed, improved upon or acquired within 180 days of construction,
improvement or acquisition or, in the case of refinanced property, within 180
days of refinancing; (viii) Liens existing on the date of the Indenture; (ix)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (x) Liens on manufactured products as security for any
drafts or bills of exchange drawn in connection with the importation of such
products in the ordinary course of business and Liens incurred in connection
with agreements with customs brokers in the ordinary course of business; (xi)
Liens representing interests of retail buyers in layaway goods being sold in the
ordinary course of business; (xii) Liens in favor of credit card processing
companies in the ordinary course of business; (xiii) leases, subleases and
license agreements arising in the ordinary course of business and not otherwise
prohibited by this Indenture; and (xiv) other Liens incurred in the ordinary
course of business of the Company or any Subsidiary of the Company with respect
to obligations that do not exceed $5.0 million at any one time outstanding.
"Permitted Refinancing Debt" means any Indebtedness of the Company 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 Indebtedness
of the Company or any of its Subsidiaries; provided that: (i) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing Debt
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable premiums and expenses incurred in connection
therewith); (ii) such Permitted Refinancing Debt has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Debt has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on terms
at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Subsidiary
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<PAGE> 17
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof (including
any subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
"Pledge and Escrow Agreement" means that certain Pledge and Escrow
Agreement dated as of April 19, 1996 by and among the Company, the Guarantors,
the Trustee, as trustee, and the Trustee, as collateral agent.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of April 19, 1996, by and among the Company, the Guarantors and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration department of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Revolving Credit Facility" means that certain Credit Agreement, dated as
of August 21, 1995, among the Company, Hills Department Store Company, the
lenders named therein and Chemical Bank, as administrative agent and as fronting
bank, including any related notes, guarantees, collateral documents, instruments
and agreements executed in connection therewith and, in each case, any amendment
thereof, restatement thereof, supplement thereto or other modification thereof
or any superseding or other replacement credit agreement or agreements entered
into from time to time, including any credit agreement or agreements extending
the maturity of, refinancing, modifying, increasing, substituting for or
otherwise restructuring (including the addition of one or more Subsidiaries as
borrowers thereunder or the inclusion of additional or substitute lenders or
agents thereunder) all or any portion of the Indebtedness, including changing
the borrowing limits, under any such agreement or any successor or replacement
credit agreement or agreements.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means, with respect to any Guarantor, all borrowings or
Guarantees by such Guarantor under the Revolving Credit Facility or any
successor credit facility or facilities. Notwithstanding the foregoing, Senior
Debt will not include trade payables or any Indebtedness that is incurred in
violation of this Indenture.
"Senior Notes" means the Company's 12 1/2% Senior Notes due 2003 issued
pursuant to this Indenture.
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<PAGE> 18
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock 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 such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means the Guarantees of (i) HDS Transport, Inc.,
C.R.H. International, Inc., Canton Advertising, Inc., Corporate Vision, Inc. and
Hills Distributing Company and (ii) any other subsidiary that executes a
Guarantee in accordance with the provisions of this Indenture, and their
respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. [sections]
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Total Assets" means, as of any date, the Company's total consolidated
assets as of such date, as determined in accordance with GAAP.
"Transfer Restricted Securities" means securities that bear or are required
to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"........................................ 4.11
"Asset Sale Offer"............................................. 3.10
"Change of Control Offer"...................................... 4.14
"Change of Control Payment".................................... 4.14
"Change of Control Payment Date"............................... 4.14
</TABLE>
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<PAGE> 19
<TABLE>
<S> <C>
"Covenant Defeasance".......................................... 8.03
"Event of Default"............................................. 6.01
"Excess Proceeds".............................................. 4.10
"incur"........................................................ 4.09
"Legal Defeasance" ............................................ 8.02
"Offer Amount"................................................. 3.10
"Offer Period"................................................. 3.10
"Paying Agent"................................................. 2.03
"Purchase Date"................................................ 3.10
"Purchase Money Debt".......................................... 4.09
"Registrar".................................................... 2.03
"Restricted Payments".......................................... 4.07
</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:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes and the Subsidiary Guarantees means the Company, as
joint and several obligors, the Guarantors, respectively, and any successor
obligor upon the Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(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;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) provisions apply to successive events and transactions; and
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<PAGE> 20
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Subsidiary Guarantees shall
be substantially in the form of Exhibit D hereto, the terms of which are
incorporated in and made part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each
Senior Note shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form of Exhibit A
attached hereto (including the text referred to in footnotes 1 and 2 thereto).
Notes issued in certificated form shall be substantially in the form of Exhibit
A attached hereto (but without including the text referred to in footnotes 1 and
2 thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer of the Company shall sign the Notes for the Company by manual
or facsimile signature. The seal of the Company shall be reproduced on the Notes
and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Senior Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Senior Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for original issue up to the
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
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<PAGE> 21
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes 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 an Agent to deal with the Company or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Paying Agent not a party to
this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
the Guarantors may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
of and premium, if any, interest and Liquidated Damages, if any, on the Notes,
and will notify the Trustee of any default by the Company or any Guarantor in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company, or a Guarantor) shall have no further liability for the money. If the
Company or a Guarantor acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company or a Guarantor, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER 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
all Holders and shall otherwise comply with TIA [section] 312(a). If the Trustee
is not the Registrar, the Company and/or the Guarantors shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Holders of Notes and the Company and the Guarantors shall otherwise
comply with TIA [section] 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
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<PAGE> 22
(a) Transfer and Exchange of Certificated Notes. When Certificated Notes
are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Certificated Notes; or
(y) to exchange such Certificated Notes for an equal principal amount
of Certificated Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Certificated Notes presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney,
duly authorized in writing; and
(ii) in the case of a Certificated Note that is a Transfer
Restricted Security, such request shall be accompanied by
the following additional information and documents, as
applicable:
(A) if such Transfer Restricted Security is being delivered
to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification
to that effect from such Holder (in substantially the
form of Exhibit B hereto); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in
accordance with Rule 144 or Rule 904 under the
Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to
that effect from such Holder (in substantially the form
of Exhibit B hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto) and an
Opinion of Counsel from such Holder or the transferee
reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in
compliance with the Securities Act.
(b) Transfer of a Certificated Note for a Beneficial Interest in a Global
Note. A Certificated Note may not be exchanged for a beneficial interest in a
Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Certificated Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Certificated Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form of
Exhibit B hereto) to the effect that such Certificated Note is being
transferred by such Holder to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act or to an "Accredited Investor," (as
defined in Rule 501(a)(1), (2), (3) or
15
<PAGE> 23
(7) under the Securities Act) in accordance with Regulation D under
the Securities Act; and
(ii) whether or not such Certificated Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing the
Trustee to make, or to direct the Note Custodian to make, an
endorsement on the Global Note to reflect an increase in the aggregate
principal amount of the Notes represented by the Global Note,
in which case the Trustee shall cancel such Certificated Note in accordance with
Section 2.11 hereof and cause, or direct the Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Note Custodian, the aggregate principal amount of Notes
represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and exchange of
Global Notes or beneficial interests therein shall be effected through
the Depositary, in accordance with this Indenture and the procedures
of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required
by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for a Certificated
Note.
(i) Any Person having a beneficial interest in a Global Note may upon
request exchange such beneficial interest for a Certificated
Note. Upon receipt by the Trustee of written instructions or such
other form of instructions as is customary for the Depositary,
from the Depositary or its nominee on behalf of any Person having
a beneficial interest in a Global Note, and, in the case of a
Transfer Restricted Security, the following additional
information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the
beneficial owner, a certification to that effect from
such Person (in substantially the form of Exhibit B
hereto); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule
144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144
or Rule 904 under the Securities Act or pursuant to an
effective registration statement under the Securities
Act, a certification to that effect from the transferor
(in substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to
that effect from the transferor (in substantially the
form of Exhibit B hereto) and an Opinion of Counsel
from the transferee or transferor reasonably acceptable
to the Company and to the Registrar to the effect that
such transfer is in compliance with the Securities Act,
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<PAGE> 24
in which case the Trustee or the Note Custodian, at the
direction of the Trustee, shall, in accordance with the
standing instructions and procedures existing between
the Depositary and the Note Custodian, cause the
aggregate principal amount of Global Notes to be
reduced accordingly and, following such reduction, the
Company shall execute and, upon receipt of an
authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate and deliver to
the transferee a Certificated Note in the appropriate
principal amount.
(ii) Certificated Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section
2.06(d) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants
or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Certificated Notes to the Persons in
whose names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
any other provision of this Indenture (other than the provisions set forth in
subsection (f) of this Section 2.06), a Global Note may not be transferred as a
whole except by the Depositary to a nominee of the Depositary or by a nominee of
the Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary.
(f) Authentication of Certificated Notes in Absence of Depositary. If at
any time:
(i) the Depositary for the Notes notifies the Company that
the Depositary is unwilling or unable to continue as
Depositary for the Global Notes and a successor
Depositary for the Global Notes is not appointed by the
Company within 90 days after delivery of such notice;
or
(ii) the Company, at its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance
of Certificated Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Certificated Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii)
and (iii), each Note certificate evidencing Global
Notes and Certificated Notes (and all Notes issued in
exchange therefor or substitution thereof) shall bear a
legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
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SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Note) pursuant to Rule 144 under
the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that
is a Certificated Note, the Registrar shall permit
the Holder thereof to exchange such Transfer
Restricted Security for a Certificated Note that does
not bear the legend set forth in (i) above and
rescind any restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
legend set forth in (i) above, but shall continue to
be subject to the provisions of Section 2.06(c)
hereof; provided, however, that with respect to any
request for an exchange of a Transfer Restricted
Security that is represented by a Global Note for a
Certificated Note that does not bear the legend set
forth in (i) above, which request is made in reliance
upon Rule 144, the Holder thereof shall certify in
writing to the Registrar that such request is being
made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Company shall issue and, upon receipt
of an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate New Senior Notes in
exchange for Senior Notes accepted for exchange in the
Exchange Offer, which New Senior Notes shall not bear the
legend set forth in (i) above, and the Registrar shall
rescind any restriction on the transfer of such Senior
Notes, in each case unless the Holder of such Senior Notes
is either (A) a broker-dealer, (B) a Person participating
in the distribution of the Senior Notes or (C) a Person
who is an affiliate (as defined in Rule 144A) of the
Company.
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(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in Global Notes have been exchanged for Certificated Notes,
redeemed, repurchased or cancelled, all Global Notes shall be returned to or
retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for Certificated Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note, by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate
Certificated Notes and Global Notes at the Registrar's
request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer
pursuant to Sections 3.07, 4.10, 4.14 and 9.05 hereto).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or
in part, except the unredeemed portion of any Note being
redeemed in part.
(iv) All Certificated Notes and Global Notes issued upon any
registration of transfer or exchange of Certificated Notes
or Global Notes shall be the valid obligations of the
Company and the Guarantors, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the
Certificated Notes or Global Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange
Notes during a period beginning at the opening of
business 15 days before the day of any selection of
Notes for redemption under Section 3.02 hereof and
ending at the close of business on the day of
selection; or
(B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part;
or
(C) to register the transfer of or to exchange a Note
between a record date and the next succeeding interest
payment date.
(vi) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Notes, and
neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
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(vii) The Trustee shall authenticate Certificated Notes and
Global Notes in accordance with the provisions of Section
2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or either the Company
or the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of each of the Company, shall
authenticate a replacement Note if the Trustee's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Note is replaced. The Company may
charge for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and the
Guarantors and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of either
of the Company holds the Note.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by either
of the Company, by any Guarantor or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
either of the Company or any Guarantor, shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that a Trustee knows are so owned shall be so disregarded. The Company
agrees to notify the Trustee of the existence of any Treasury Notes.
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SECTION 2.10. TEMPORARY NOTES.
Until Certificated Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of Certificated Notes but may have variations that the
Company consider appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate Certificated Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that have
been paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If either the Company or any Guarantor defaults in a payment of interest on
the Notes, they shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Senior Note and the date of the proposed payment. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
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ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company is required to make an offer to redeem Notes pursuant to the
provisions of Section 3.10 or 4.14 hereof, it shall furnish to the Trustee at
least 30 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the redemption shall occur, (ii) the redemption date, (iii) the principal amount
of Notes to be redeemed and (iv) the redemption price, including, accrued
interest and Liquidated Damages, if any.
If the Company is required to make an offer to redeem Notes pursuant to the
provisions of Section 3.09 hereof, it shall furnish to the Trustee at least 7
days before the redemption date, an Opinion of Counsel and an Officers'
Certificate setting forth (i) the information required in clauses (i) through
(iv) above with respect to offers to redeem Notes pursuant to Section 3.10 and
4.14 hereof and (ii) a statement to the effect that (a) the Existing Note Change
of Control Offer has not occurred or will not occur or (b) the Company has not
applied, or by May 24, 1996 will not have applied, an amount equal to or greater
than 90% of the Escrow Funds to repurchase or redeem Existing Notes pursuant to
the Existing Note Change of Control Offer or otherwise.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.10 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address; provided, however that in
the case of redemption of Notes pursuant to Section 3.09 hereof, such notice
shall be mailed or caused to be mailed by first class mail at least 7 days
before the redemption date.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
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(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed;
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes; and
(i) in the case of notice of redemption of Notes pursuant to Section 3.09
hereof, a statement to the effect that if either the Existing Note Change of
Control Offer has not occurred or will not occur, or any Escrow Funds remain in
the Escrow Account as of the close of business on May 24, 1996 as to which
transfer or disbursement instructions have not been received by the Trustee,
then the Company shall redeem, on May 31, 1996, the maximum aggregate principal
amount of Notes that can be redeemed utilizing such remaining Escrow Funds, at a
redemption price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages (if any) thereon to the date of
redemption.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Opinion of Counsel and an Officers' Certificate requesting that the
Trustee give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent or at the direction of the
Company in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Notes to be redeemed.
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If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Notes will not be redeemable at the Company's option prior to maturity.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 3.09, 4.10 and 4.14 hereof, the Company
shall not be required to make mandatory redemption payments with respect to the
Notes.
SECTION 3.09 SPECIAL MANDATORY REDEMPTION.
(a) The Escrow Funds shall be held by the Trustee in the Escrow Account
pursuant to the Pledge and Escrow Agreement. The Escrow Funds shall be invested
in U.S. Government Obligations as directed from time to time by the Company.
(b) In addition to any payments required by Section 4.10 and 4.14 hereof,
if either the Existing Note Change of Control Offer has not occurred or will not
occur, or any Escrow Funds remain in the Escrow Account as of the close of
business on May 24, 1996 as to which transfer or disbursement instructions have
not been received by the Trustee, then the Company shall redeem, on May 31,
1996, the maximum aggregate principal amount of Notes that can be redeemed
utilizing such remaining Escrow Funds, at a redemption price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages (if any) thereon to the date of redemption.
(c) Immediately upon receipt by the Paying Agent of the Escrow Funds, the
Trustee shall set a date for redemption of all of the Notes to be redeemed
pursuant to this Section 3.09, which date shall not be more than 7 days from the
receipt of such Escrow Funds by the Paying Agent. Once a date for any such
redemption has been publicly announced, it shall not be changed. The Trustee
shall promptly notify the Holders of the date fixed for any redemption pursuant
to this Section 3.09.
(d) The Company shall issue a press release stating the amount of Notes
that will be subject to the Special Mandatory Redemption pursuant to this
Section 3.09.
(e) Other than as specifically provided in this Section 3.09, any
redemption pursuant to this Section 3.09 shall be made pursuant to the
provisions of Section 3.01 through 3.06 hereof.
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SECTION 3.10. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), they shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the Asset Sale
Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.10
and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed,
or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
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<PAGE> 33
the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.10. The Company or the Paying Agent, as the case may be,
shall promptly (but in any case not later than five days after the Purchase
Date) mail or deliver to each tendering Holder an amount equal to the purchase
price of the Notes tendered by such Holder and accepted by the Company for
purchase, and the Company shall promptly issue a new Note, and the Trustee, upon
written request from the Company shall authenticate and mail or deliver such new
Note to such Holder, in a principal amount equal to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.10, any purchase
pursuant to this Section 3.10 shall be made pursuant to the provisions of
Sections 3.02 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium, if
any, interest and Liquidated Damages, if any, on the Notes on the dates and in
the manner provided in the Notes. Principal, premium, if any, and interest shall
be considered paid on the date due if the Paying Agent, if other than the
Company or any Guarantor, holds as of 12:00 noon Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
at the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
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SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03. The
Trustee may resign such agency at any time by giving written notice to the
Company no later than 30 days prior to the effective date of such resignation.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the SEC, so long as
any of the Notes are outstanding, the Company shall furnish to the Holders of
the Notes, within 15 days after they are or would have been required to file
such with the SEC, (i) all quarterly and annual financial information that would
be required to be contained in filings with the SEC on Forms 10-Q and 10-K if
the Company were required to file such forms, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to annual consolidated financial statements and schedules only, a report thereon
by the independent auditors of the Company, and (ii) all information that would
be required to be contained in filings with the SEC on Form 8-K if the Company
was required to file such form. In addition, whether or not required by the
rules and regulations of the SEC, the Company shall file a copy of all such
information and reports with the SEC for public availability (unless the SEC
will not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company agrees
that, for so long as any Notes remain outstanding, it shall furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 105 days after the end
of each fiscal year, an Officers' Certificate further stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company and the Guarantors have kept, observed,
performed and fulfilled their obligations under this Indenture and the
Subsidiary Guarantees, as applicable, in all material respects, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company and the Guarantors have kept, observed,
performed and fulfilled each and every covenant contained in the Indenture in
all material respects and are not in Default in the performance or
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observance of any of the terms, provisions and conditions of this Indenture
(and, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge) and that to
the best of his or her knowledge no event has occurred and remains in existence
by reason of which payments on account of the principal of or interest, if any,
on the Notes is prohibited or if such event has occurred, a description of the
event.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith (and in any event within five calendar days) upon any
Officer of the Company becoming aware of any Default or Event of Default an
Officers' Certificate specifying such Default or Event of Default.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of their Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution to the holders of the Company's Equity Interests in
their capacity as such (including, without limitation, any payment in connection
with any merger or consolidation involving the Company) or to the direct or
indirect holders of the Company's Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company; (ii) purchase, redeem or otherwise acquire
or retire for value any Equity Interests of the Company or any direct or
indirect parent or other Affiliate of the Company; (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being
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collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company or the relevant Subsidiary would, at the time of such
Restricted Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
hereof (excluding Restricted Payments permitted by clauses (x) and (y) of
the next succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date hereof to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) 100% of
the aggregate net cash proceeds received by the Company from the issue or
sale since the date hereof of Equity Interests of the Company or of debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock or
debt securities that have been converted into Disqualified Stock), plus
(iii) to the extent that any Restricted Investment that was made after the
date hereof is sold for cash or otherwise liquidated or repaid for cash,
the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (iv) $5.0 million.
The foregoing provisions shall not prohibit (w) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of this
Indenture; (x) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c) (ii) of the preceding paragraph; (y) defeasance, redemption or
repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Debt or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the Company
(other than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; and (z) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement entered into in the ordinary course of business; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $750,000 in any twelve-month period plus, to
the extent not included in clause (c)(ii) of the immediately preceding
paragraph, the aggregate cash proceeds received by the Company during such
twelve-month period from any reissuance of Equity Interests by the Company to
members of management of the Company and its
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Subsidiaries; and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board set forth in an Officers'
Certificate delivered to the Trustee) on the date of the Restricted Payment of
the asset(s) proposed to be transferred by the Company or such Subsidiary, as
the case may be, pursuant to the Restricted Payment. Not later than the date of
making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed, which calculations may be based upon the Company's latest
available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to
(i)(a) pay dividends or make any other distributions to the Company or any of
its Subsidiaries (1) on its Capital Stock or (2) with respect to any other
interest or participation in, or measured by, its profits, or (b) pay any
Indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date hereof, (b) the Revolving Credit Facility
as in effect from time to time, provided that such provisions are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in the Revolving Credit Facility as in effect on the date
hereof, (c) this Indenture and the Notes, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (f) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, or (h) Permitted Refinancing Debt, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Debt are no more restrictive than those contained in the agreements governing
the Indebtedness being refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guaranty or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company and any of its Subsidiaries may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.5 to 1.0, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional
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Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to the incurrence of the following
Indebtedness:
(i) the incurrence by the Company and its Subsidiaries of Indebtedness and
letters of credit pursuant to the Revolving Credit Facility (with letters of
credit being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Subsidiaries thereunder); provided that the
aggregate principal amount of all Indebtedness outstanding under the Revolving
Credit Facility does not exceed the amount of the Borrowing Base as of any date
of incurrence;
(ii) the incurrence by the Company and its Subsidiaries of the Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of additional
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
or refinancing all or any part of the purchase price or cost of acquisition,
construction or improvement of property, plant or equipment used in the business
of the Company or such Subsidiary (collectively, "Purchase Money Debt"), in an
aggregate principal amount at any time outstanding (excluding Existing
Indebtedness) not to exceed 10% of Total Assets;
(v) the incurrence by the Company or any of its Subsidiaries of Permitted
Refinancing Debt in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund, Indebtedness (other than
Indebtedness incurred pursuant to clause (i) of this paragraph) that was
permitted by this Indenture to be incurred;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Subsidiaries; provided, however, that (i) if the Company is the obligor of
such Indebtedness, such Indebtedness is expressly subordinate to the payment in
full of all Obligations with respect to the Notes and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such Indebtedness
being held by a Person other than the Company or a Wholly Owned Subsidiary and
(B) any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Subsidiary shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate Indebtedness that is permitted by the
terms of this Indenture to be outstanding;
(viii) Guarantees by the Guarantors of Indebtedness of the Company
permitted by this Indenture to be incurred;
(ix) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of this
paragraph) in an aggregate principal amount (or accreted value, as applicable)
at any time outstanding not to exceed $25.0 million;
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(x) the incurrence by the Company or any of its Subsidiaries of
Indebtedness arising from Guarantees to suppliers, lessors, licensees,
contractors, franchisees or customers, in each case incurred in the ordinary
course of business;
(xi) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of performance bonds provided in the ordinary course of
business, and refinancings thereof; and
(xii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of standby letters of credit incurred in the ordinary
course of business.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in an Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board set forth in an
Officers' Certificate delivered to the Trustee, provided that such Officer's
Certificate shall be delivered only in the event of any Asset Sale involving
$10.0 million or more of consideration) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 85% of the consideration
therefor received by the Company or such Subsidiary is in the form of cash or
Cash Equivalents; provided that (x) the amount of any liabilities (as shown on
the Company's or such Subsidiary's most recent balance sheet), of the Company or
any Subsidiary (other than contingent liabilities and liabilities that are by
their terms subordinated to the Notes or any guarantee thereof) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Subsidiary from further liability, and (y) the
amount of any notes or other obligations received by the Company or any such
Subsidiary from such transferee that are immediately converted by the Company or
such Subsidiary into cash (to the extent of the cash received), shall be deemed
to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Subsidiary may apply such Net Proceeds, at its
option, (a) to reduce Indebtedness under the Revolving Credit Facility, (b) to
permanently reduce Existing Indebtedness or (c) to the acquisition of a
controlling interest in another business, the making of a capital expenditure or
the acquisition of other long-term assets, in each case in the same or a similar
line of business as the Company and its Subsidiaries were engaged in on the date
of such Asset Sale. Pending the final application of any such Net Proceeds, the
Company or the applicable subsidiary may temporarily reduce Indebtedness under
the Revolving Credit Facility or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10.0 million, the Company will be required to
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth in
Section 3.10 hereof. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company,
or the applicable subsidiary may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
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The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
transactions involving aggregate consideration in excess of $3.0 million, a
resolution of the Board set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board and (b) with respect to any Affiliate Transaction or series
of related Affiliate transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing experienced in the appraisal or
similar review of similar types of transactions (or if an opinion is unavailable
as to the fairness from a financial point of view of any transaction for which a
fairness opinion is not customarily rendered, then an opinion that such
transaction meets the requirements of clause (i) above); provided that (w)
indemnification of officers and directors of the Company or its Subsidiaries in
accordance with the charters and by-laws of the Company and its Subsidiaries,
(x) any employment or consulting agreement entered into by the Company or any of
its Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Subsidiary, (y) transactions between or among
the Company and/or its Subsidiaries and (z) Permitted Investments and the
Restricted Payments that are permitted by Section 4.07 hereof shall not be
deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to create, incur, assume or suffer to exist any Lien
securing Indebtedness on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
SECTION 4.13. CONTINUED EXISTENCE.
Subject to Article 5 hereof, each of the Company and each of the Guarantors
shall do or cause to be done all things necessary to preserve and keep in full
force and effect (i) its corporate, partnership, limited liability company or
other existence in accordance with the respective organizational documents (as
the same may be amended from time to time) of the Company or any such Guarantor
and (ii) the rights (charter and statutory), licenses and franchises of the
Company and the Guarantors.
SECTION 4.14. OFFER TO REDEEM UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Company to redeem all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes (a "Change of Control
Offer") at an offer price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase (the "Change of Control Payment"). The Change of Control Offer
shall be made in compliance with all applicable laws, including, without
limitation, Rule 14e-1 under the Exchange Act and all applicable federal and
state securities laws, and shall include all instructions and materials
necessary to enable Holders to tender their Notes.
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Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder stating:
(1) the transaction or transactions that constitute the Change of
Control, providing information regarding the Person or Persons
acquiring control, and stating that the Change of Control Offer
is being made pursuant to this Section 4.14 and that, to the
extent lawful, all Notes tendered will be accepted for payment;
(2) the redemption price and the purchase date, which shall be no
earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that Holders electing to have any Notes redeemed pursuant to a
Change of Control Offer will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Notes completed, to the Paying Agent at the
address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment
Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of Notes
delivered for redemption, and a statement that such Holder is
withdrawing his election to have the Notes redeemed; and
(7) that Holders whose Notes are being redeemed only in part will be
issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must
be equal to $1,000 in principal amount or an integral multiple
thereof.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided, that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Prior to purchasing the Notes in compliance with the terms hereof, but in
any event within 60 days of a Change of Control, the Company shall either (i)
repay in full all Indebtedness under the Revolving Credit Facility and any
successor credit facility or facilities or (ii) obtain the requisite consents
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of the lenders party to the Revolving Credit Facility and any successor credit
facility or facilities to permit the offer to redeem Notes required by this
Section.
The Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section made by the Company and purchases all Notes validly tendered and
not withdrawn under such Change of Control Offer.
SECTION 4.15. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company shall, after the date hereof, create or acquire any new
Subsidiary, then such newly created or acquired Subsidiary shall execute a
Subsidiary Guarantee and deliver an opinion of counsel acceptable to the
Trustee.
SECTION 4.16. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly Owned Subsidiary
of the Company to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Wholly Owned Subsidiary of the Company to any Person (other
than the Company or a Wholly Owned Subsidiary of the Company), unless (a) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock of such Wholly Owned Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with Section 4.10 hereof and (ii) shall not permit any Wholly Owned Subsidiary
of the Company to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Company or a Wholly Owned Subsidiary of the Company.
SECTION 4.17. NO SENIOR SUBORDINATED DEBT OF GUARANTORS.
No Guarantor shall incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any other Indebtedness of such Guarantor and senior in any respect in
right of payment to any Subsidiary Guarantee.
SECTION 4.18. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company or any
of its Subsidiaries may enter into a sale and leaseback transaction if (i) the
Company could have incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction either pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof or pursuant to subparagraph (iv) or (ix) of Section 4.09 hereof,
(ii) the total consideration received in such sale and leaseback transaction is
at least equal to the fair market value (as determined in good faith by the
Board and set forth in an Officers' Certificate delivered to the Trustee,
provided that such Officers' Certificate shall be delivered only in the event of
any sale and leaseback transaction involving consideration in excess of $10.0
million) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company or the applicable Subsidiary
applies the proceeds of such transaction in compliance with, Section 4.10
hereof.
SECTION 4.19. PAYMENTS FOR CONSENT.
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Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
(a) The Company shall not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving entity or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of the
Company with or into a Wholly Owned Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) shall have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
(b) No Guarantor shall consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person), another corporation, Person or
entity whether or not affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Notes and this
Indenture, (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) the Company would be permitted by virtue
of its pro forma Fixed Charge Coverage Ratio, immediately after giving effect to
such transaction, to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in Section 4.09; provided that
clauses (ii) and (iii) above shall not apply with respect to a merger of one
Guarantor with and into another Guarantor.
(c) In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
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consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of the this Indenture.
(d) The Company or the Guarantor, as the case may be, shall deliver to the
Trustee prior to the consummation of the proposed transaction pursuant to the
foregoing paragraphs (a) and (b) an Officer's Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture comply with this Indenture.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company or the Guarantors default in the payment when due of
interest, or Liquidated Damages, on the Notes and such default
continues for a period of 30 days;
(b) the Company or the Guarantors default in the payment when due of
principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption (including
in connection with an offer to redeem) or otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.09 or 4.10 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or
the Notes and such failure to observe or perform continues for a
period of 60 days after notice thereof;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness
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for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its
Subsidiaries), whether such Indebtedness or guarantee now exists,
or is created after the date of this Indenture, which default (a)
is caused by a failure to pay principal or premium, if any, or
interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration
of such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has
been so accelerated, aggregates $15.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against
the Company or any of its Subsidiaries and such judgment or
judgments remain unpaid or undischarged for a period (during
which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such unpaid, undischarged or
unstayed judgments exceeds $15.0 million;
(g) except as otherwise permitted hereunder, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or
invalid, or with respect to any Guarantor that is a Significant
Subsidiary, the Subsidiary Guarantee of such Guarantor ceases to
be in full force and effect, or any Person acting on behalf of
any Guarantor (or its successors or assigns), shall deny or
disaffirm its obligations under its Subsidiary Guarantee;
(h) the Company, any Guarantor, any Subsidiary of the Company or a
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary:
(i) commences a voluntary case under any Bankruptcy Law,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a custodian or receiver of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company, a Guarantor or any of the
Company's Subsidiaries or any group of Subsidiaries that,
taken together, would constitute a Significant Subsidiary in
an involuntary case;
(ii) appoints a custodian or receiver of the Company or any of
its Subsidiaries or for all or substantially all of the
property of the Company or any of its Subsidiaries; or
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(iii) orders the liquidation of the Company or any of its
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in clause
(h) or (i) of Section 6.01 hereof with respect to the Company, any Guarantor,
any Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary) occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Upon any such
declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause
(h) or (i) of Section 6.01 hereof occurs with respect to the Company or any
Significant Subsidiary or group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Notes shall be due and
payable immediately without further action or notice. The Holders of a majority
in aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
In addition, the Company shall promptly notify holders of Senior Debt of
the Guarantors if payment of the Notes is accelerated because of an Event of
Default.
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, premium, if any, interest
or Liquidated Damages, if any, on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Senior Note 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. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, interest, or Liquidated Damages,
if any, on the Notes (including in connection with an offer to redeem)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
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SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability and shall be entitled to the benefit of Section 7.01(c)(iii)
and (e) hereof.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, or premium, if any,
interest or Liquidated Damages, if any, on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
redeem), 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 written
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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 (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents (including accountants,
experts or such other professionals as the Trustee deems necessary, advisable or
appropriate) and counsel (including the allocated costs of inside counsel)) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company or any of the Guarantors (or any other obligor upon the Notes), its
creditors or its property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a special record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
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 a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party
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litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Senior Note pursuant to Section 6.07 hereof, or a suit by Holders of
more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise thereof, as a prudent man
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the TIA and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture or the TIA against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, without investigation, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any statements,
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform on their
face to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own gross
negligent action, its own gross negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to this Section
7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or expense
which might be incurred by it in compliance with such request or direction.
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(f) 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. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely and shall be protected in acting or
refraining from acting upon 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 or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys, accountants, experts and
such other professionals as the Trustee deems necessary, advisable or
appropriate and shall not be responsible for the misconduct or negligence of any
attorney, accountant, expert or other such professional appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor shall be
sufficiently evidenced by a written order signed by two Officers of the Company
or Guarantor issuing such demand, request, direction or notice.
(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 unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company, the Guarantors or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest within the meaning of the TIA it shall be required to eliminate such
conflict within 90 days, and if necessary apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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, the Notes or the Subsidiary
Guarantees, it shall not be accountable for the Company's use of the proceeds
from the Notes or any money paid to the Company or upon the
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Company's direction under any provision of this Indenture, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Notes or any other document in connection
with the sale of the Notes or pursuant to this Indenture other than its
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs; provided, however,
except for Defaults or Events of Default in payment of principal of or premiums,
if any, on the Notes, the Trustee shall not be deemed to have knowledge of a
Default or Event of Default unless the Company, any Guarantor or a Holder shall
have delivered written notice thereof to The Trustee. Except in the case of a
Default or an Event of Default in payment of principal of or premium, if any, on
any Senior Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA [section] 313(a) (but if no event described in TIA
[section] 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
[section] 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA [section] 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA [section] 313(d). The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.07. COMPENSATION, REIMBURSEMENT AND INDEMNITY.
The Company and the Guarantors shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and the rendering
by it of the services required hereunder. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company and the Guarantors shall reimburse the Trustee promptly upon request for
all reasonable disbursements, advances and expenses incurred or made by or on
behalf of it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's attorneys, accountants, experts and such other professionals as the
Trustee deems necessary, advisable or appropriate.
The Company and the Guarantors, jointly and severally, shall indemnify the
Trustee against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture (including its duties under Section 9.06 hereof),
including the costs and expenses of enforcing this Indenture against the Company
and the Guarantors (including this Section 7.07) and defending itself against or
investigating any claim (whether asserted by the Company, the Guarantors or any
Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss,
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liability or expense may be attributable to its gross negligence or willful
misconduct. The Trustee shall notify the Company and the Guarantors promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
the Company and the Guarantors shall not relieve the Company or the Guarantors
of their obligations hereunder. The Company and the Guarantors shall defend any
claim or threatened claim asserted against the Trustee, and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Company
and the Guarantors shall pay the reasonable fees and expenses of such counsel.
The Company and the Guarantors need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Guarantors under this Section 7.07
shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Guarantors' payment obligations in this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture. However, the Trustee shall not
have a Lien on the Escrow Account except in its capacity as Escrow Agent
thereunder.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian, receiver or public officer takes charge of the Trustee
or its property for the purpose of rehabilitation, conservation or
liquidation; or
(d) the Trustee 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 Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount
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of the then outstanding Notes may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Senior Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
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 Company shall mail a notice of its succession to Holders of the
Notes. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA [section] 310(a)(1), (2) and (5). The Trustee is subject to TIA [section]
310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA [section] 311(a), excluding any creditor
relationship listed in TIA [section] 311(b). A Trustee who has resigned or been
removed shall be subject to TIA [section] 311(a) to the extent indicated
therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board evidenced by a resolution set
forth in an Officers' Certificate, at any time, elect to have either Section
8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the
conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
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Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and each of the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be deemed to have been discharged from their obligations with respect to all
outstanding Notes and Subsidiary Guarantees on the date the conditions set forth
below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all their other obligations under such Notes and
this Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, or premium,
if any, interest and Liquidated Damages, if any, on such Notes when such
payments are due, (b) the Company's and Guarantors' obligations with respect to
such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of their option under
Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each of the Guarantors shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from their obligations under the covenants contained in Sections
4.07 - 4.12 and 4.14 - 4.18 hereof with respect to the outstanding Notes on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in United States
dollars, non-callable Government Securities, or
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a combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, and premium, if any, interest
and Liquidated Damages, if any, on the outstanding Notes on the stated
date for payment thereof or on the applicable redemption date, as the
case may be and the Company must specify whether the Notes are being
defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of 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 Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal 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 Legal Defeasance had
not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event
of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Section 6.01(h) or (i) hereof is concerned, at
any time in the period ending on the ninety-first day after the date
of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the ninety-first day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors
of the Company, or with the intent of defeating, hindering, delaying
or defrauding any other creditors of the Company.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be
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held in trust and applied by the Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Company and the Guarantors shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof or
the principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium or Liquidated
Damages, if any, or interest on any Note and remaining unclaimed for two years
after such principal, and premium or Liquidated Damages, if any, or interest has
become due and payable shall be paid to the Company on its request or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Senior Note shall thereafter, as a secured creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national editions), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Company and the Guarantors under this
Indenture, the Notes and the Subsidiary Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03 hereof, as the case may be;
provided, however, that, if either the Company or any Guarantor makes any
payment of principal of, premium, if any, or interest on any Senior Note
following the reinstatement of its obligations, the Company or such Guarantor
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
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AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and
the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's or any Guarantor's
obligations to the Holders of the Notes in the case of a merger or
consolidation pursuant to Article Five hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Notes; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company or any of the Guarantors, accompanied by a
resolution of the Board of the Company and each of the Guarantors, as the case
may be, authorizing the execution of any such amended or supplemental Indenture,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture (including Section 3.10,
4.10, 4.14 and Article 10 hereof, and including the defined terms used therein)
and the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, interest or Liquidated Damages, if any, on the
Notes) or compliance with any provision of this Indenture or the Notes may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for the Notes).
Without the consent of the Holders of at least 66 2/3% in principal amount
of the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for such Notes), no waiver or amendment to this
Indenture may make any change in the provisions of Section 4.10 or 4.14,
including the defined terms used therein, that adversely affects the rights of
any Holder of Notes.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
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(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of
the Notes except as provided above with respect to Section 4.10 and 4.14
hereof;
(c) reduce the rate of or change the time for payment of interest or
Liquidated Damages, if any;
(d) waive a Default or Event of Default in the payment of principal
of, or premium, if any, interest or Liquidated Damages, if any, on the
Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the then outstanding
Notes and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, interest or Liquidated
Damages, if any, on the Notes;
(g) waive a redemption payment with respect to any Senior Note (except
as provided above with respect to Section 4.10 and 4.14 hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
Upon the written request of the Company accompanied by a resolution of the
Board of the Company and each of the Guarantors, as the case may be, authorizing
the execution of any such amended or supplemental Indenture, and upon the filing
with the Trustee of evidence satisfactory to the Trustee of the consent of the
Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of such amended or supplemental Indenture unless
such amended or supplemental Indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may
in its discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
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SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Senior Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
(accompanied by a notation of the Subsidiary Guarantees duly endorsed by the
Guarantors) that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. Neither the
Company nor any Guarantor may sign an amendment or supplemental Indenture until
their respective Board approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive an Officer's Certificate and
an Opinion of Counsel stating that (i) the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture, (ii) no
Event of Default shall occur as a result of the execution of such Officer's
Certificate or the delivery of such Opinion of Counsel and (iii) the amended or
supplemented indenture complies with the terms of this Indenture.
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01. SUBSIDIARY GUARANTEES.
Each of the Guarantors hereby, jointly and severally, unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the Obligations of the
Company hereunder or thereunder, that: (a) the principal of, premium, if any,
interest and Liquidated Damages, if any, on the Notes shall be promptly paid in
full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of and interest and Liquidated Damages, if
any, on the Notes, if lawful, and all other Obligations of the Company to the
Holders or the Trustee hereunder or thereunder shall be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
Obligations, that same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed
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for whatever reason, the Guarantors shall be jointly and severally Obligated to
pay the same immediately. The Guarantors hereby agree that their Obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenant that this Subsidiary Guarantee shall not be
discharged except by complete performance of the Obligations contained in the
Notes and this Indenture. If any Holder of Notes or the Trustee is required by
any court or otherwise to return to the Company or Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either the
Company or Guarantors, any amount paid either to the Trustee or such Holder,
this Subsidiary Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that it shall not be
entitled to any right of subrogation in relation to the Holders of Notes in
respect of any Obligations guaranteed hereby until payment in full of all
Obligations guaranteed hereby. Each Guarantor further agrees that, as between
the Guarantors, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated
as provided in Article 6 for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantors for the purpose of this Subsidiary
Guarantee. The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under the Subsidiary Guarantees.
SECTION 10.02. SUBORDINATION OF GUARANTEES.
Each of the Guarantors agrees, and each Holder by accepting a Note and the
related Subsidiary Guarantees agrees, that the payment of principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes pursuant to
the Subsidiary Guarantees is subordinated in right of payment, to the extent and
in the manner provided in Article 10 hereof, to the prior payment of all Senior
Debt of such Guarantor and that the subordination set forth herein is for the
benefit of and enforceable by the holders of Senior Debt. Each Holder by
accepting a Note authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Holders and the holders of Senior Debt as provided in
Section 10.02 hereof and appoints the Trustee as attorney-in-fact for any and
all such purposes.
Upon any distribution to creditors of any Guarantor in a liquidation or
dissolution of any Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to any Guarantor or its property, an
assignment for the benefit of creditors or any marshalling of any Guarantor's
assets and liabilities, the holders of Senior Debt of such Guarantor will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the Holders of Notes
will be entitled to receive any payment with respect to any Subsidiary
Guarantee, and until all Obligations with respect to all Senior Debt of such
Guarantor are paid in full, any distribution to which the Holders of Notes would
be entitled shall be made to the holders of Senior Debt of such Guarantor
(except that Holders of Notes may receive securities that are subordinated at
least to the same extent as the Subsidiary Guarantees of the Notes to Senior
Debt of such Guarantor and any securities issued in exchange for Senior Debt of
such Guarantor).
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In addition, no Guarantor may make any payment upon or in respect of the
Notes, whether by way of a deposit pursuant to Article 8 hereof or by way of
repurchase, redemption, other retirement or otherwise (except in such
subordinated securities) if (i) a default in the payment of the principal of,
premium, if any, or interest on Senior Debt of such Guarantor occurs and is
continuing beyond any applicable period of grace (or is not paid at maturity) or
(ii) any other default occurs and is continuing with respect to Senior Debt of
such Guarantor that permits holders of such Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment Blockage
Notice") from such Guarantor or the holders of any Senior Debt of such
Guarantor. Payments in respect of such Subsidiary Guarantee of the Notes may and
shall be resumed (a) in the case of a payment default, upon the date on which
such default is cured or waived in writing and (b) in case of a nonpayment
default, the earlier of the date on which such nonpayment default is cured or
waived in writing or 179 days after the date on which the applicable Payment
Blockage Notice is received, in each case unless the maturity of any Senior Debt
of such Guarantor has been accelerated. No new period of payment blockage may be
commenced unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been cured or waived in writing for a period of
not less than 90 days.
If a distribution is made to any Holder that, to the knowledge of such
Holder, should not have been made because of this Section 10.02, the Holder who
receives the distribution shall hold it in trust for holders of Senior Debt and
pay it over to them as their interests may appear.
Each Holder by accepting a Note acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Debt, whether such Senior Debt was
created or acquired before or after the issuance of the Notes, to acquire and
continue to hold, or to continue to hold, such Senior Debt and such holder of
Senior Debt shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, such Senior Debt. No right of
any holder of Senior Debt to enforce the subordination of the Indebtedness
evidenced by the Notes shall be impaired by any act or failure to act by the
Company or any Guarantor by the failure of any of them to comply with this
Indenture.
SECTION 10.03. NOTICE TO HOLDERS OF SENIOR DEBT.
The Company shall prompting notify holders of Senior Debt of the Guarantors
if payment of the Notes is accelerated because of an Event of Default.
SECTION 10.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES.
To evidence its Subsidiary Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form of Exhibit D (executed by the manual or facsimile
signature of two of its Officers) shall be endorsed by an officer of such
Guarantor on each Note authenticated and delivered by the Trustee and that this
Indenture shall be executed on behalf of such Guarantor by its President or one
of its Vice Presidents and attested to by an Officer.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Subsidiary Guarantee.
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If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall
be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Guarantors.
SECTION 10.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an entirety, to
the Company.
(b) Except as set forth in Articles 4 and 5, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into a corporation or corporations other than the Company or
another Guarantor (whether or not affiliated with the Guarantor), or successive
consolidations or mergers in which a Guarantor or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety, to a
corporation other than the Company (whether or not affiliated with the
Guarantor) authorized to acquire and operate the same. Subject to Section 10.04
of this Indenture, in case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary Guarantees so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Subsidiary Guarantees theretofore and thereafter issued in accordance
with the terms of this Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
SECTION 10.06. RELEASES FOLLOWING SALE OF ASSETS.
Subject to Section 7.07 hereof, concurrently with any sale of assets
(including, if applicable, all of the capital stock of any Guarantor), any Liens
in favor of the Trustee in the assets sold thereby shall be released; provided
that in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section 4.10
hereof. In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor in
accordance with the provisions of this Indenture) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Guarantor), shall be released and relieved of its obligations under its
Subsidiary Guarantee or Section 10.03 hereof, as the case may be; provided that
in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section 4.10
hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate
and an Opinion of Counsel to the effect that such sale or other disposition was
made by the Company in accordance with the provisions of this Indenture,
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including without limitation Section 4.10 hereof, the Trustee shall execute any
documents reasonably required in order to evidence the release of any Guarantor
from its obligations under its Subsidiary Guarantee. Any Guarantor not released
from its obligations under its Subsidiary Guarantee shall remain liable for the
full amount of principal of and interest on the Notes and for the other
obligations of any Guarantor under this Indenture as provided in this Article
11. The release of any Guarantor pursuant to this Section shall be effective
whether or not such release shall be noted on any Note then outstanding or
thereafter authenticated and delivered.
SECTION 10.07. LIMITATION ON GUARANTOR LIABILITY.
For purposes hereof, each Guarantor's liability shall be that amount from
time to time equal to the aggregate liability of such Guarantor thereunder, but
shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Notes and this Indenture and (ii) the amount, if any,
which would not have (A) rendered such Guarantor "insolvent" (as such term is
defined in the federal Bankruptcy Law and in the Debtor and Creditor Law of the
State of New York) or (B) left it with unreasonably small capital at the time
its Subsidiary Guarantee of the Notes was entered into, after giving effect to
the incurrence of existing Indebtedness immediately prior to such time; provided
that, it shall be a presumption in any lawsuit or other proceeding in which such
Guarantor is a party that the amount guaranteed pursuant to its Subsidiary
Guarantee is the amount set forth in clause (i) above unless any creditor, or
representative of creditors of such Guarantor, or debtor in possession or
trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that
the aggregate liability of such Guarantor is limited to the amount set forth in
clause (ii). In making any determination as to the solvency or sufficiency of
capital of a Guarantor in accordance with the previous sentence, the right of
such Guarantor to contribution from other Guarantors and any other rights such
Guarantor may have, contractual or otherwise, shall be taken into account.
SECTION 10.08. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article 11 shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article 11 in place of the Trustee.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision hereof limits, qualifies or conflicts with a provision of
the TIA or another provision that would be required or deemed under such Act to
be part of and govern this Indenture if this Indenture were subject thereto, the
latter provision shall control. If any provision of this Indenture modifies or
excludes any provision of the TIA that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
SECTION 11.02. NOTICES.
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Any notice or communication by the Company or the Trustee to others is duly
given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company or any Guarantors:
Hills Stores Company
15 Dan Road
Canton, Massachusetts 02021
Telecopier No.: (617) 821-6966
Attention: Vice President -- Secretary
With a copy to:
Foley, Hoag & Eliot
One Post Office Square (17th Floor)
Boston, Massachusetts 02109-2170
Telecopier No.: (617) 832-1000
Attention: Barry B. White
If to the Trustee:
Fleet National Bank
Corporate Trust Department
111 Westminster Street (19th Floor)
Providence, Rhode Island 02903
Attention: Vice President
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA [section] 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
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SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA [section] 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA [section] 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company or such Guarantor
shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 11.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA [section] 314(a)(4)) shall comply with the provisions of TIA
[section] 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she 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
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, this Indenture, the Pledge and Escrow
Agreement or the Subsidiary Guarantees, or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes by
accepting
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a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture and the Subsidiary Guarantees.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind
their successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12. COUNTERPART 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.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture, which have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
HILLS STORES COMPANY
By: /s/ Gregory K. Raven
-------------------------------
Name: Gregory K. Raven
Title: President and CEO
HILLS DEPARTMENT STORE COMPANY
By: /s/ Gregory K. Raven
-------------------------------
Name: Gregory K. Raven
Title: President and CEO
C.R.H. INTERNATIONAL, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary
CANTON ADVERTISING, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary/Clerk
CORPORATE VISION, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary/Clerk
HDS TRANSPORT, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary
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HILLS DISTRIBUTING COMPANY
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary
FLEET NATIONAL BANK, AS TRUSTEE
By: /s/ Paul D. Allen
-------------------------------
Name: Paul D. Allen
Title: Vice President
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================================================================================
EXHIBIT A
(Face of Note)
12 1/2% Senior Notes due 2003
HILLS STORES COMPANY
promise to pay to CEDE & CO or registered assigns, the principal sum of
___________________ Dollars on July 1, 2003.
Interest Payment Dates: January 1 and July 1
Record Dates: June 15 and December 15
Dated:
HILLS STORES COMPANY
By:
-------------------------------
Name:
Title:
This is one of the Global
Senior Notes referred to in
within-mentioned Indenture:
FLEET NATIONAL BANK,
as Trustee
By:
---------------------------------
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(Back of Note)
12 1/2% Senior Notes due 2003
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another 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 (55 Water Street, New York, New York) ("DTC"),
to the issuers or their 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 may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be 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.]1
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
- --------
1. To be included only if the Note is issued in Global form.
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SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.]2
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Hills Stores Company, a Delaware corporation (the "Company")
promises to pay interest on the principal amount of this Note at 12 1/2% per
annum from April 19, 1996 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages semi-annually on
January 1 and July 1 of each year, or if any such day is not a Business Day, on
the next succeeding Business Day (each an "Interest Payment Date"). Interest on
the Note will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of issuance; provided that if
there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be July 1, 1996. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is 1%
per annum in excess of the rate then in effect; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages, if any, (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the December 15 or June
15 next preceding the Interest Payment Date, even if such Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
Any such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the registered Holders on such Interest Payment
Date, and may be paid to the registered Holders at the close of business on a
special interest payment date to be fixed by the Trustee for the payment of such
defaulted interest, notice whereof shall be given to the registered Holders not
less than 10 days prior to such special interest payment date, or may be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture. The Notes will be payable as to principal, premium, interest and
Liquidated Damages, if any, at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders
of which shall have provided wire transfer instructions to the Company or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
- --------
2. This legend should be included on the Senior Notes and omitted from the
New Senior Notes.
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3. PAYING AGENT AND REGISTRAR. Initially, Fleet National Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of the Guarantors may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
April 19, 1996 (the "Indenture") between the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code [section] 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. The Notes are general obligations of the Company limited to
$195,000,000 in aggregate principal amount, plus amounts, if any issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION. The Notes will not be redeemable at the Company's
option prior to maturity.
6. MANDATORY REDEMPTION. Except as set forth in Paragraphs 7 and 8 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Senior Notes.
7. SPECIAL MANDATORY REDEMPTION. If the Existing Note Change of Control
Offer has not occurred and will not occur, or any Escrow Funds remain in the
Escrow Account as of the close of business on May 24, 1996 as to which transfer
or disbursement instructions have not been received by the Trustee, then the
Company shall redeem, on May 31, 1996, the maximum aggregate principal amount of
Notes that can be redeemed utilizing such remaining Escrow Funds, at a
redemption price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
redemption.
8. REDEMPTION AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to redeem all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a redemption
price equal to 101% of the principal amount thereof plus, in each case, accrued
and unpaid interest and Liquidated Damages, if any, to the date of redemption
(in either case, the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sale, within five
days of each date on which the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company shall commence an offer to all Holders of Notes (as "Asset
Sale Offer") pursuant to Section 3.10 of the Indenture to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds at an
offer price in cash in an amount equal to 100% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, to the date
fixed for the closing of such offer, in accordance with the procedures set forth
in the Indenture. To the extent that the aggregate principal amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Company prior
to any related purchase
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date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
9. NOTICE OF REDEMPTION. Subject to the provisions of Section 3.10 of the
Indenture, a notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder whose Notes are to be
redeemed at its registered address. Notes in denominations larger than $1,000
may be redeemed in part but only in whole multiples of $1,000, unless all of the
Notes held by a Holder are to be redeemed. On and after the redemption date
interest ceases to accrue on Notes or portions thereof called for redemption.
10. SUBORDINATION OF GUARANTEES. Each of the Guarantors agrees, and each
Holder by accepting a Note and the related Subsidiary Guarantees agrees, that
the payment of principal of, premium and interest and Liquidated Damages, if
any, on the Notes pursuant to the Subsidiary Guarantees is subordinated in right
of payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment of all Senior Debt of such Guarantor and that
the subordination set forth in the Indenture is for the benefit of and
enforceable by the holders of Senior Debt. Each Holder by accepting a Note
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination between
the Holders and the holders of Senior Debt as provided in Section 10.02 of the
Indenture and appoints the Trustee as attorney-in-fact for any and all such
purposes.
11. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
12. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
13. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's and Guarantors' obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
14. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest or Liquidated Damages, if any, on the
Notes; (ii) default in payment when due of
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principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise; (iii) failure by the Company to comply with Section
4.07, 4.09 or 4.10 of the Indenture; (iv) failure by the Company for 60 days
after notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Notes then outstanding to comply with certain other
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Company which default (a) is caused
by a failure to pay principal or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default) or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $15.0
million; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $15.0 million; (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant Subsidiaries
or a group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary; and (viii) any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid, or with respect to any
Guarantor that is a Significant Subsidiary, the Subsidiary Guarantee of such
Guarantor ceases to be in full force and effect, or any Person acting on behalf
of any Guarantor (or its successors or assigns), shall deny or disaffirm its
obligations under its Subsidiary Guarantee. If any Event of Default occurs and
is continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
15. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
16. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator
or stockholder, of the Company or the Guarantors, as such, shall not have any
liability for any obligations of the Company and the Guarantors under the Notes,
the Subsidiary Guarantees, the Indenture or the Pledge and Escrow Agreement or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. AUTHENTICATION. This Note shall not be valid until authenticated by the
manual signature of the Trustee or an authenticating agent.
A-6
<PAGE> 75
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement dated as of April 19, 1996, among the Company, the
Guarantors and the other parties named on the signature pages thereof (the
"Registration Rights Agreement").
20. 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 Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Hills Stores Company
15 Dan Road
Canton, Massachusetts 02021
Attention: Vice President -- Secretary
A-7
<PAGE> 76
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint____________________________________________________
to transfer this Note 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 face of this Note)
Signature Guarantee:
---------------------
A-8
<PAGE> 77
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.10 or 4.14 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.14
If you want to elect to have only part of the Note purchased by the Company
pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you
elect to have purchased:
$
-----------
Date: Your Signature:
---------------- ----------------------------------
(Sign exactly as your name appears
on the Note)
Tax Identification No.:
---------------------------
Signature Guarantee:
---------------------------
A-9
<PAGE> 78
SCHEDULE OF EXCHANGES OF CERTIFICATED SENIOR NOTES
<TABLE>
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------------- ----------------------- ------------------------ ------------------------ --------------------
<S> <C> <C> <C> <C>
</TABLE>
A-10
<PAGE> 79
================================================================================
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
NOTES
Re: 12 1/2% Senior Notes due 2003 of Hills Stores Company.
This Certificate relates to $_____ principal amount of Notes held in
* ________ book-entry or *_______ certificated form by ________________ (the
"Transferor").
The Transferor*:
/ / has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Note held by the Depositary a Note or
Notes in certificated, registered form of authorized denominations in an
aggregate principal amount equal to its beneficial interest in such Global Note
(or the portion thereof indicated above); or
/ / has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
/ / Such Note is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
the Indenture).
/ / Such Note is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A or to an "Accredited Investor," (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) in
accordance with Regulation D under the Securities Act (in satisfaction of
Section 2.06(a)(ii)(B), Section 2.06(b)(i) or Section 2.06(d)(i) (B) of the
Indenture) or pursuant to an exemption from registration in accordance with Rule
904 under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or
Section 2.06(d)(i)(B) of the Indenture.)
- ---------------
*Check applicable box.
B-1
<PAGE> 80
/ / Such Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
/ / Such Note is being transferred in reliance on and in compliance with an
exemption from the registration requirements of the Securities Act, other than
Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of Counsel to
the effect that such transfer does not require registration under the Securities
Act accompanies this Certificate (in satisfaction of Section 2.06(a)(ii)(C) or
Section 2.06(d)(i)(C) of the Indenture).
---------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
------------------------------------
Date:
---------------------------
- ---------------
*Check applicable box.
B-2
<PAGE> 81
EXHIBIT C
GUARANTORS
1. Hills Department Store Company
2. C.R.H. International, Inc.
3. Canton Advertising, Inc.
4. Corporate Vision, Inc.
5. HDS Transport, Inc.
6. Hills Distributing Company
C-1
<PAGE> 82
EXHIBIT D
SUBSIDIARY GUARANTEE
Each Guarantor hereby, jointly and severally, unconditionally guarantees to
each Holder of Notes authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of the Indenture, the Notes or the Obligations of the Company to
the Holders or the Trustee under the Notes or under the Indenture, that: (a) the
principal of, and premium and Liquidated Damages, if any, and interest on the
Notes shall be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on overdue principal of,
interest and Liquidated Damages, if any, on the Notes, if lawful, and all other
Obligations of the Company to the Holders or the Trustee under the Indenture or
under the Notes shall be promptly paid in full or performed, all in accordance
with the terms thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other Obligations, the same will be promptly
paid in full when due in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed, for whatever reason, the Guarantors will be
jointly and severally obligated to pay the same immediately.
The Obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture, and reference is hereby made to the
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 10 of the Indenture are incorporated herein by reference.
No director, officer, employee, incorporator or stockholder, as such, past,
present or future, of each of the Guarantors shall have any personal liability
under this Subsidiary Guarantee by reason of its status as such director,
officer, employee incorporator or stockholder.
Each of the Guarantors agrees, and each Holder by accepting a Note and the
related Subsidiary Guarantees agrees, that the payment of principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes pursuant to
the Subsidiary Guarantees is subordinated in right of payment, to the extent and
in the manner provided in Article 10 of the Indenture, to the prior payment of
all Senior Debt of such Guarantor and that the subordination set forth herein is
for the benefit of and enforceable by the holders of Senior Debt. Each Holder by
accepting a Note authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Holders and the holders of Senior Debt as provided in
Section 10.02 of the Indenture and appoints the Trustee as attorney-in-fact for
any and all such purposes.
Upon any distribution to creditors of any Guarantor in a liquidation or
dissolution of any Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to any Guarantor or its property, an
assignment for the benefit of creditors or any marshalling of any Guarantor's
assets and liabilities, the holders of Senior Debt of such Guarantor will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the Holders of Notes
will be entitled to receive any payment with respect to any Subsidiary
Guarantee, and until all Obligations with respect to all Senior Debt of such
Guarantor are paid in full, any distribution to which the Holders of Notes would
be entitled shall be made to the holders of Senior Debt of such Guarantor
(except that Holders of Notes may receive securities that are subordinated at
least to the same
D-1
<PAGE> 83
extent as the Subsidiary Guarantees of the Notes to Senior Debt of such
Guarantor and any securities issued in exchange for Senior Debt of such
Guarantor).
In addition, no Guarantor may make any payment upon or in respect of the
Notes, whether by way of a deposit pursuant to Article 8 of the Indenture or by
way of repurchase, redemption, other retirement or otherwise (except in such
subordinated securities) if (i) a default in the payment of the principal of,
premium, if any, or interest on Senior Debt of such Guarantor occurs and is
continuing beyond any applicable period of grace (or is not paid at maturity) or
(ii) any other default occurs and is continuing with respect to Senior Debt of
such Guarantor that permits holders of such Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment Blockage
Notice") from such Guarantor or the holders of any Senior Debt of such
Guarantor. Payments in respect of such Subsidiary Guarantee of the Notes may and
shall be resumed (a) in the case of a payment default, upon the date on which
such default is cured or waived in writing and (b) in case of a nonpayment
default, the earlier of the date on which such nonpayment default is cured or
waived in writing or 179 days after the date on which the applicable Payment
Blockage Notice is received, in each case unless the maturity of any Senior Debt
of such Guarantor has been accelerated. No new period of payment blockage may be
commenced unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice
unless such default shall have been cured or waived in writing for a period of
not less than 90 days.
If a distribution is made to any Holder that, to the knowledge of such
Holder, should not have been made because of Section 10.02 of the Indenture, the
Holder who receives the distribution shall hold it in trust for holders of
Senior Debt and pay it over to them as their interests may appear.
Each Holder by accepting a Note acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Debt, whether such Senior Debt was
created or acquired before or after the issuance of the Notes, to acquire and
continue to hold, or to continue to hold, such Senior Debt and such holder of
Senior Debt shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, such Senior Debt. No right of
any holder of Senior Debt to enforce the subordination of the Indebtedness
evidenced by the Notes shall be impaired by any act or failure to act by the
Company or any Guarantor by the failure of any of them to comply with this
Indenture.
This is a continuing Subsidiary Guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company' Obligations under the Notes and the
Indenture and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders of Notes and, in the event of any transfer or assignment
of rights by any Holder of Notes or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This a Subsidiary Guarantee of payment and not a guarantee of collection.
In certain circumstances more fully described in the Indenture, any
Guarantor may be released from its liability under this Subsidiary Guarantee,
and any such release will be effective whether or not noted hereon.
D-2
<PAGE> 84
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
For purposes hereof, each Guarantor's liability will be that amount from
time to time equal to the aggregate liability of such Guarantor hereunder, but
shall be limited to the lesser of (i) the aggregate amount of the Obligations of
the Company under the Notes and the Indenture and (ii) the amount, if any, which
would not have (A) rendered such Guarantor "insolvent" (as such term is defined
in the federal Bankruptcy Law and in the Debtor and Creditor Law of the State of
New York) or (B) left it with unreasonably small capital at the time its
Subsidiary Guarantee of the Notes was entered into, after giving effect to the
incurrence of existing Indebtedness immediately prior to such time; provided
that, it shall be a presumption in any lawsuit or other proceeding in which such
Guarantor is a party that the amount guaranteed pursuant to its Subsidiary
Guarantee is the amount set forth in clause (i) above unless any creditor, or
representative of creditors of such Guarantor, or debtor in possession or
trustee in bankruptcy of such Guarantor, otherwise proves in such a lawsuit that
the aggregate liability of such Guarantor is limited to the amount set forth in
clause (ii). The Indenture provides that, in making any determination as to the
solvency or sufficiency of capital of a Guarantor in accordance with the
previous sentence, the right of such Guarantor to contribution from other
Guarantors and any other rights such Guarantor may have, contractual or
otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the Indenture
unless otherwise indicated.
[GUARANTOR]
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
D-3
<PAGE> 85
EXHIBIT E
PLEDGE AND ESCROW AGREEMENT
E-1
<PAGE> 1
Exhibit 4.11
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Dated as of April 19, 1996
by and among
HILLS STORES COMPANY
HILLS DEPARTMENT STORE COMPANY
C.R.H. INTERNATIONAL, INC.
CANTON ADVERTISING, INC.
CORPORATE VISION, INC.
HDS TRANSPORT, INC.
HILLS DISTRIBUTING COMPANY
AND
LEHMAN BROTHERS INC.
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and entered
into as of April 19, 1996 by and among Hill Stores Company, a Delaware
corporation (the "Company"), Hills Department Store Company, a Delaware
corporation, C.R.H. International, Inc., an Ohio corporation, Canton
Advertising, Inc., a Massachusetts corporation, Corporate Vision, Inc., a
Massachusetts corporation, HDS Transport, Inc., an Ohio corporation, and Hills
Distributing Company, a Delaware corporation (each a "Guarantor" and
collectively, the "Guarantors"), and Lehman Brothers Inc. (the "Initial
Purchaser"), which has agreed to purchase the Company's 12 1/2% Senior Notes due
2003 (the "Senior Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated April 17,
1996 (the "Purchase Agreement"), by and among the Company, the Guarantors and
the Initial Purchaser. In order to induce the Initial Purchaser to purchase the
Senior Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchaser set forth in Section 2 of
the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms
shall have the following meanings:
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CLOSING DATE: The date of this Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration
Statement relating to the New Senior Notes to be issued in the Exchange
Offer, (ii) the maintenance of such Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less
than the minimum period required pursuant to Section 3(b) hereof, and (iii)
the delivery by the Company to the Registrar under the Indenture of New
Senior Notes in the same aggregate principal amount as the aggregate
principal amount of Senior Notes that were tendered by Holders thereof
pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: Each Interest Payment Date.
EFFECTIVENESS TARGET DATE: As defined in Section 5.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The registration by the Company under the Securities
Act of the New Senior Notes pursuant to a Registration Statement pursuant
to which the Company offers the Holders of all outstanding Transfer
Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities held by such Holders for New Senior Notes in
an aggregate principal amount equal to the aggregate principal amount of
the Transfer Restricted Securities tendered in such exchange offer by such
Holders.
1
<PAGE> 3
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the Prospectus which forms a part
thereof.
EXEMPT RESALES: The transactions in which the Initial Purchaser
proposes to sell the Senior Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Securities Act, and
to certain institutional "accredited investors," as such term is defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act
("Accredited Institutions").
HOLDERS: As defined in Section 2(b) hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The Indenture, dated as of April 19, 1996, among the
Company, the Guarantors and Fleet National Bank, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
INITIAL PURCHASER: As defined in the preamble hereto.
INTEREST PAYMENT DATE: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
NEW SENIOR NOTES: The Company's 12 1/2% Senior Notes due 2003 to be
issued pursuant to the Indenture in the Exchange Offer.
NOTES: The Senior Notes and the New Senior Notes.
PERSON: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
RECORD HOLDER: With respect to any Damages Payment Date relating to
Notes, each Person who is a Holder of Notes on the record date with respect
to the Interest Payment Date on which such Damages Payment Date shall
occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of New Senior Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, which is filed pursuant to
the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
SECURITIES ACT: The Securities Act of 1933, as amended.
2
<PAGE> 4
SHELF FILING DEADLINE: As defined in Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Senior Note, until the earliest
to occur of (a) the date on which such Senior Note is exchanged in the
Exchange Offer and entitled to be resold to the public by the Holder
thereof without complying with the prospectus delivery requirements of the
Securities Act, (b) the date on which such Senior Note has been effectively
registered under the Securities Act and disposed of in accordance with a
Shelf Registration Statement and (c) the date on which such Senior Note is
distributed to the public pursuant to Rule 144 under the Securities Act or
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by
the Exchange Offer Registration Statement (including delivery of the
Prospectus contained therein).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to one or more investment banking
firms, acting as underwriters, for reoffering to the public.
2. Securities Subject to This Agreement.
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed
to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with), the Company and the
Guarantors shall (i) cause to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 45 days
after the Closing Date, a Registration Statement under the Securities
Act relating to the New Senior Notes and the Exchange Offer, (ii) use
their best efforts to cause such Registration Statement to become
effective at the earliest possible time, but in no event later than 90
days after the Closing Date, (iii) in connection with the foregoing,
file (A) all pre-effective amendments to such Registration Statement
as may be necessary in order to cause such Registration Statement to
become effective, (B) if applicable, a Prospectus pursuant to Rule
430A under the Securities Act and (C) cause all necessary filings in
connection with the registration and qualification of the New Senior
Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit the Exchange Offer to be Consummated, and (iv)
upon the effectiveness of such Registration Statement, commence the
Exchange Offer. The Exchange Offer shall be on the appropriate form
permitting registration of the New Senior Notes to be offered in
exchange for the Transfer Restricted Securities and to permit resales
of New Senior Notes held by Broker-Dealers as contemplated by Section
3(c) below.
3
<PAGE> 5
(b) The Company and each of the Guarantors shall cause the
Exchange Offer Registration Statement to be effective continuously and
shall keep the Exchange Offer open for a period of not less than the
minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company and
each of the Guarantors shall cause the Exchange Offer to comply with
all applicable federal and state securities laws. No securities other
than the New Senior Notes shall be registered in the Exchange Offer
Registration Statement. The Company and each of the Guarantors shall
use their best efforts to cause the Exchange Offer to be Consummated
on the earliest practicable date after the Exchange Offer Registration
Statement has become effective, but in no event later than 30 business
days thereafter.
(c) The Company shall indicate in a "Plan of Distribution"
section contained in the Prospectus contained in the Exchange Offer
Registration Statement that any Broker-Dealer who holds Senior Notes
that are Transfer Restricted Securities and that were acquired for its
own account as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired
directly from the Company or an affiliate of the Company), may
exchange such Senior Notes pursuant to the Exchange Offer; however,
such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Securities Act and must, therefore, deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resales of the New Senior Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of
the Prospectus contained in the Exchange Offer Registration Statement.
Such "Plan of Distribution" section shall also contain all other
information with respect to such resales by Broker-Dealers that the
Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of New Senior Notes held by any
such Broker-Dealer except to the extent required by the Commission as
a result of a change in policy announced after the date of this
Agreement.
The Company and each of the Guarantors shall use their best efforts to keep
the Exchange Offer Registration Statement continuously effective, supplemented
and amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of New Senior Notes
acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the date on which the Exchange Offer Registration Statement is
declared effective.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time, subject to
Section 6(c)(i) hereof, during such one-year period in order to facilitate such
resales.
4. Shelf Registration.
(a) SHELF REGISTRATION. If (i) the Company is not required to
file an Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with) or (ii) if any Holder of
Transfer Restricted Securities that is a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) or an
"accredited investor" (as defined in Rule 501(A)(1), (2), (3) or (7)
under the Securities Act) shall
4
<PAGE> 6
notify the Company within 20 business days after the Exchange Offer is
Consummated (A) that such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer or (B) that
such Holder may not resell the New Senior Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that
the Prospectus contained in the Exchange Offer Registration Statement
is not appropriate or available for such resales by such Holder or (C)
that such Holder is a Broker-Dealer and holds Senior Notes acquired
directly from the Company or one of its affiliates, then the Company
and each of the Guarantors shall use their best efforts to:
(x) cause to be filed a shelf registration statement
pursuant to Rule 415 under the Securities Act, which may be an
amendment to the Exchange Offer Registration Statement (in either
event, the "Shelf Registration Statement") on or prior to the
earliest to occur of (1) the 30th day after the date on which the
Company determines that it is not required to file the Exchange
Offer Registration Statement or (2) the 30th day after the date
on which the Company receives notice from a Holder of Transfer
Restricted Securities as contemplated by clause (ii) above (such
earliest date being the "Shelf Filing Deadline"), which Shelf
Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided
the information required pursuant to Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before
the 60th day after the obligation to file the Shelf Registration
Statement arises.
The Company and each of the Guarantors shall use their best efforts to
keep such Shelf Registration Statement continuously effective,
supplemented and amended as required by the provisions of Sections 6(b)
and (c) hereof to the extent necessary to ensure that it is available
for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Securities Act
and the policies, rules and regulations of the Commission as announced
from time to time, for a period of at least three years (as extended
pursuant to Section 6(c)(i)) following the Closing Date or such shorter
period that will terminate when all Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION
WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Company in
writing, within 20 business days after receipt of a request therefor,
such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant
to Section 5 hereof unless and until such Holder shall have used its
best efforts to provide all such reasonably requested information.
Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all
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<PAGE> 7
information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially
misleading.
5. Liquidated Damages.
If (a) any of the Registration Statements required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (b) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) subject to the provisions of Section 6(c)(i) below, any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose (otherwise than as permitted hereunder) without being
succeeded within seven business days by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in clauses (a) through (d), a
"Registration Default"), the Company and each Guarantor hereby, jointly and
severally, agree to pay liquidated damages, as the sole remedy for any
Registration Default, to each Holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues. The amount of the
liquidated damages payable to any Holder of Transfer Restricted Securities shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities held by such Holder with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of liquidated damages of $.50 per week per $1,000 principal
amount of Transfer Restricted Securities. All accrued liquidated damages shall
be paid to Record Holders by the Company by wire transfer of immediately
available funds or by federal funds check on each Damages Payment Date, as
provided in the Indenture. Following the cure of all Registration Defaults
relating to any particular Transfer Restricted Securities, the accrual of
liquidated damages with respect to such Transfer Restricted Securities will
cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and each of the Guarantors shall comply with
all of the provisions of Section 6(c) below, shall use their best efforts
to effect such exchange to permit the sale of Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all of the following
provisions:
(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by
applicable law, the Company and each of the Guarantors hereby agree to
seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Guarantors to Consummate an
Exchange Offer for such Senior Notes. The Company and each of the
Guarantors hereby agree to pursue the issuance of such a decision to
the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of
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<PAGE> 8
Commission policy. The Company and each of the Guarantors hereby
agree, however, to (A) participate in telephonic conferences with the
Commission, (B) deliver to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursue a resolution (which need not be
favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the date on which the Exchange Offer is Consummated, a
written representation to the Company (which may be contained in the
letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an affiliate of the
Company (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to participate
in, a distribution of the New Senior Notes to be issued in the
Exchange Offer and (C) it is acquiring the New Senior Notes in its
ordinary course of business. In addition, all such Holders of Transfer
Restricted Securities shall otherwise cooperate in the Company's
preparations for the Exchange Offer. Each Holder hereby acknowledges
and agrees that any Broker-Dealer and any such Holder using the
Exchange Offer to participate in a distribution of the securities to
be acquired in the Exchange Offer (1) could not under Commission
policy as in effect on the date of this Agreement rely on the position
of the Commission enunciated in MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of New
Senior Notes obtained by such Holder in exchange for Senior Notes
acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the
Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above and (B) including a
representation that neither the Company nor any of the Guarantors has
entered into any arrangement or understanding with any Person to
distribute the New Senior Notes to be received in the Exchange Offer
and that, to the best of the Company's and the Guarantors' information
and belief, each Holder participating in the Exchange Offer is
acquiring the New Senior Notes in its ordinary course of business and
has no arrangement or understanding with any Person to participate in
the distribution of the New Senior Notes received in the Exchange
Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and each of the Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their best
efforts to effect such registration to permit the sale of
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<PAGE> 9
the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and pursuant thereto
the Company and each of the Guarantors will as expeditiously as possible
prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Securities Act, which
form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof.
(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit
resales of Notes by Broker-Dealers), the Company and the Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Securities Act or any regulation
thereunder, financial statements of the Guarantors) for the period
specified in Section 3 or 4 of this Agreement, as applicable; upon the
occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company and the Guarantors shall file
promptly an appropriate amendment to such Registration Statement, in
the case of clause (A), correcting any such misstatement or omission,
and, in the case of either clause (A) or (B), use their best efforts
to cause such amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter. Notwithstanding
the foregoing, if the Board of Directors of the Company determines in
good faith that it is in the best interests of the Company and the
Guarantors not to disclose the existence of or facts surrounding any
proposed or pending material corporate transaction involving the
Company or the Guarantors, the Company and the Guarantors may allow
the Shelf Registration Statement or the Exchange Offer Registration
Statement to fail to be effective and usable as a result of such
nondisclosure for up to 90 days during the three year period of
effectiveness required by Section 4 hereof, but in no event for any
period in excess of 45 consecutive days, provided, that in the event
the Exchange Offer is Consummated, the Company and the Guarantors
shall not allow the Exchange Offer Registration Statement to fail to
be effective and usable for a period in excess of 30 days during the
one year period of effectiveness required by Section 3 hereof;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as applicable,
or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Securities Act in a timely
manner; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
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<PAGE> 10
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities commission
of the qualification of the Transfer Restricted Securities for
offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by
reference therein untrue, or that requires the making of any additions
to or changes in the Registration Statement or the Prospectus in order
to make the statements therein not misleading, including, without
limitation, under circumstances described in Section 6(c)(i) above. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky
laws, the Company and each of the Guarantors shall use their best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (excluding any documents incorporated by reference), which
documents will be subject to the review of such Holders and
underwriter(s), if any, for a period of at least five business days,
and the Company and the Guarantors will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (excluding any documents
incorporated by reference) to which a selling Holder of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within five business
days after the receipt thereof. A selling Holder or underwriter, if
any, shall be deemed to have reasonably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission;
(v) promptly after the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Company's representatives (and
representatives of the Guarantors) available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such
selling Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or
accountant retained by such selling Holders or any of the
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<PAGE> 11
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Guarantors and cause
the Company's and the Guarantors' officers, directors, managers and
employees to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to
its effectiveness, provided that the Company may require any such
selling Holder to enter into a confidentiality agreement in
appropriate form with respect to information provided pursuant to this
clause (vi) or any other provision of this Agreement;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or
Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase
price being paid therefor and any other terms of the offering of the
Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Notes covered thereby or the underwriter(s), if
any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the
Company and the Guarantors hereby consent to the use of the Prospectus
and any amendment or supplement thereto by each of the selling Holders
and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) enter into, and cause the Guarantors to enter into, such
agreements (including an underwriting agreement), and make, and cause
the Guarantors to make, such representations and warranties, and take
all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement,
all to such extent as may be reasonably requested by any Holder of
Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to any Registration Statement contemplated by
this Agreement; and if the registration is an Underwritten
Registration, the Company and each of the Guarantors shall:
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<PAGE> 12
(A) upon request, furnish to each selling Holder and each
underwriter in such substance and scope as they may request and as are
customarily made by issuers to underwriters in primary underwritten
offerings, upon the closing date of such underwritten offering:
(1) a certificate, dated as of such closing date, signed by
(y) the Chairman of the Board or the President and (z) the Chief
Financial Officer of the Company and each of the Guarantors
confirming, as of the date thereof, the matters set forth in
paragraph (f) of Section 7 of the Purchase Agreement and such
other matters as such parties may reasonably request;
(2) an opinion, dated as of such closing date, of counsel
for the Company and the Guarantors covering, to the extent
applicable, the matters covered by the opinion delivered pursuant
to paragraph (i) of Section 7 of the Purchase Agreement and such
other matters as such parties may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company and the Guarantors, and
representatives of the independent public accountants for the
Company and the Guarantors, and in connection with the
preparation of such Registration Statement and the related
Prospectus and have considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy, completeness
or fairness of such statements; and that such counsel advises
that, on the basis of the foregoing (relying as to materiality to
a large extent upon facts provided to such counsel by officers
and other representatives of the Company and the Guarantors and
without independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that
the Prospectus contained in such Registration Statement as of its
date contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter addressed to the
underwriters, dated as of such closing date, from the Company's
independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters by
underwriters in connection with primary underwritten offerings,
and affirming the
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<PAGE> 13
matters set forth in the comfort letters delivered pursuant to
paragraph (k) of Section 7 of the Purchase Agreement, without
exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement entered into by the Company and the Guarantors
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
the Guarantors contemplated in clause (A)(1) above cease to be true and
correct, the Company and the Guarantors shall so advise the Initial
Purchaser and the underwriter(s), if any, and each selling Holder promptly
and, if requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with, and cause the Guarantors to cooperate with, the selling
Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however,
that neither the Company nor any of the Guarantors shall be required to
register or qualify as a foreign corporation where they are not now so
qualified or to take any action that would subject them to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where they are
not now so subject;
(xiii) shall issue, upon the request of any Holder of Senior Notes
covered by the Shelf Registration Statement, New Senior Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Senior Notes surrendered to the Company by such Holder in exchange therefor
or being sold by such Holder; such New Senior Notes to be registered in the
name of such Holder or in the name of the purchaser(s) of such Notes, as
the case may be; in return, the Senior Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xiv) cooperate with, and cause the Guarantors to cooperate with, the
selling Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable
such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
request at least two business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s);
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<PAGE> 14
(xv) use its best efforts to cause the Transfer Restricted Securities
covered by the Registration Statement to be registered for sale under the
securities or Blue Sky laws of such jurisdictions as may be necessary to
enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) subject to Section 6(c)(i), if any fact or event contemplated by
clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of Transfer Restricted Securities, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and provide
the Trustee under the Indenture with certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
for the twelve-month period (A) commencing at the end of any fiscal quarter
in which Transfer Restricted Securities are sold to underwriters in a firm
or best efforts Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate, and cause the
Guarantors to cooperate, with the Trustee and the Holders of Notes to
effect such changes to the Indenture as may be required for such Indenture
to be so qualified in accordance with the terms of the TIA; and execute,
and cause the Guarantors to execute, and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities
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<PAGE> 15
issued by the Company are then listed if requested by the Holders of a
majority in aggregate principal amount of Senior Notes or the managing
underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
7. Registration Expenses.
(a) All expenses incident to the Company's or the Guarantors' performance
of or compliance with this Agreement will be borne by the Company and the
Guarantors regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the New Senior Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company and the Guarantors will, in any event, bear their internal
expenses (including, without limitation, all salaries and expenses of their
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company and the Guarantors. The Company and the
Guarantors shall not be required to pay the costs and expenses of any Holder
relating to underwriters' discounts and commissions or brokerage fees relating
to the Transfer Restricted Securities to be sold by such Holder.
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(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchaser and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared, provided that such fees
and disbursements shall not exceed $20,000 in the aggregate.
8. Indemnification and Contribution.
(a) Each of the Company and each of the Guarantors, jointly and severally,
agrees to indemnify and hold harmless (i) each Holder and (ii) each person, if
any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any Holder (any of the persons referred to in
this clause (ii) being referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii), or (iii) may hereinafter be referred to as an "Indemnified Holders"), from
and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof to which such Indemnified Holder may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse each Indemnified Holder for on a quarterly basis any legal or
other expenses reasonably incurred by such Indemnified Holder in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company and the Guarantors shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Registration Statement or Prospectus or in any
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company through the Holders by or on behalf of any
Holder (or its related Indemnified Holder) specifically for inclusion therein.
The foregoing indemnity agreement is in addition to any liability which the
Company and the Guarantors may otherwise have to any Indemnified Holder.
(b) Each Holder, severally and not jointly, shall indemnify and hold
harmless each of the Company, the Guarantors, their respective directors, their
respective officers and each person, if any, who controls the Company or any of
the Guarantors within the meaning of the Securities Act or the Exchange Act,
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company, the Guarantors or any such
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus, or in any amendment or supplement thereto or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
15
<PAGE> 17
conformity with written information furnished to the Company through the Holders
by or on behalf of any Holder or its related Indemnified Holder specifically for
inclusion therein, and shall reimburse the Company, the Guarantors or director,
officer or controlling person, as the case may be, on a quarterly basis for any
legal or other expenses reasonably incurred by the Company, the Guarantors or
director, officer or controlling person, as the case may be, in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Holder may
otherwise have to the Company, the Guarantors or any such director, officer or
controlling person. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of Transfer Restricted Securities giving rise to
such indemnification obligation.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify the
indemnifying party pursuant to this Section 8 shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that any indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties, which firm shall be designated in writing
by the Holders, if the indemnified parties under this Section 8 consist of any
Holder or any of their related Indemnified Holders, or by the Company if the
indemnified parties under this Section 8 consist of the Company, or any of the
Company's or any Guarantor's respective directors, officers or controlling
persons. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 8(a) and 8(b), shall use its best
16
<PAGE> 18
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall be liable for any settlement of any
such action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
and the Guarantors on the one hand and any Holder on the other from such
Holder's sale of Transfer Restricted Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect the relative fault of the Company and
the Guarantors on the one hand and such Holder on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors on the one
hand and of such Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company and the Guarantors on the one hand, or such Holder, on
the other hand, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and each Holder of Transfer Restricted Securities
agree that it would not be just and equitable if contributions pursuant to this
Section 8(d) were to be determined by pro rata allocation (even if the Holders
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include, for purposes
of this Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(d), none of the
Holders (or any of their related Indemnified Holders) shall be required to
contribute any amount in excess of the amount by which the total discount
received by such Holder with respect to the Notes exceeds the amount of any
damages which such Holder has otherwise paid or become liable to pay by reason
of any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11
of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Holders' obligations to
contribute as provided in this Section 8(d) are several in proportion to the
respective principal amount of Notes held by each of the Holders hereunder and
not joint.
9. Rule 144A.
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted
17
<PAGE> 19
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
11. Selection of Underwriters.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
12. Miscellaneous.
(a) REMEDIES. The Company and the Guarantors agree that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Agreement otherwise than with respect to
Registration Defaults and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not, and will cause
the Guarantors not to, on or after the date of this Agreement enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. Neither the Company nor the Guarantors have
previously entered into any agreement granting any registration rights with
respect to their securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company's or any of the
Guarantors' securities under any agreement in effect on the date hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company and the Guarantors
will not take any action, or permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the
Holders to Consummate any Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company
has obtained the written consent of Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does
not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders
18
<PAGE> 20
of a majority of the outstanding principal amount of Transfer Restricted
Securities being tendered or registered.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company and the Guarantors:
Hills Stores Company
15 Dan Road
Canton, Massachusetts 02021
Telecopier No.: (617) 821-6966
Attention: William K. Friend
With a copy to:
Foley, Hoag & Eliot
One Post Office Square (19th Floor)
Boston, Massachusetts 02109-2170
Telecopier No.: (617)832-1000
Attention: Barry B. White
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
19
<PAGE> 21
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein with respect to the registration rights granted
by the Company and the Guarantors with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[signature page follows]
20
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HILLS STORES COMPANY
By: /s/ Gregory K. Raven
-------------------------------
Name: Gregory K. Raven
Title: President and CEO
HILLS DEPARTMENT STORE COMPANY
By: /s/ Gregory K. Raven
-------------------------------
Name: Gregory K. Raven
Title: President and CEO
C.R.H. INTERNATIONAL, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary
CANTON ADVERTISING, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary/Clerk
CORPORATE VISION, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary/Clerk
21
<PAGE> 23
HDS TRANSPORT, INC.
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary
HILLS DISTRIBUTING COMPANY
By: /s/ William K. Friend
-------------------------------
Name: William K. Friend
Title: Vice President-Secretary
LEHMAN BROTHERS INC.
By: /s/ Robert D. Redmond
-------------------------------
Name: Robert D. Redmond
Title: Managing Director
22
<PAGE> 1
Exhibit 4.12
EXECUTION COPY
$195,000,000
HILLS STORES COMPANY
HILLS DEPARTMENT STORE COMPANY
HDS TRANSPORT, INC.
CRH INTERNATIONAL, INC.
CANTON ADVERTISING, INC.
CORPORATE VISION, INC.
HILLS DISTRIBUTING COMPANY
12 1/2% SENIOR NOTES DUE 2003
PURCHASE AGREEMENT
------------------
April 17, 1996
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Hills Stores Company, a Delaware corporation (the "Company"), proposes to
issue and sell to Lehman Brothers Inc. (the "Initial Purchaser") $195,000,000 in
aggregate principal amount of the Company's 12 1/2% Senior Notes due 2003 (the
"Senior Notes"). The payment of principal, premium, interest and Liquidated
Damages on the Senior Notes and the Company's 12 1/2% Senior Notes due 2003 to
be issued in the Exchange Offer referred to below (the "New Senior Notes" and,
together with the Senior Notes, the "Notes") will be unconditionally guaranteed
on a subordinated basis by each of (i) Hills Department Store Company, a
Delaware corporation ("HDSC"), HDS Transport, Inc., an Ohio corporation, CRH
International, Inc., an Ohio corporation, Canton Advertising, Inc., a
Massachusetts corporation, Corporate Vision, Inc., a Massachusetts corporation,
and Hills Distributing Company, a Delaware corporation (each a "Guarantor," and
collectively, the "Guarantors") and (ii) each other Subsidiary of the Company
formed or acquired after the Closing Date (as defined below), and their
respective successors and assigns pursuant to their guarantees of the Notes (the
"Subsidiary Guarantees"). The Senior Notes are to be issued pursuant to an
indenture to be dated as of April 19, 1996 (the "Indenture") among the Company,
the Guarantors and Fleet National Bank, as trustee (the "Trustee").
Capitalized terms used herein and not otherwise defined are used as defined
in the Offering Memorandum (as defined below) or the Indenture.
Upon original issuance thereof, and until such time as the Company
determines (based upon an opinion of counsel, if the Company so requests) it to
be no longer required under the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Senior Notes (and all securities
issued in exchange therefor or in substitution thereof) shall bear the following
legend:
"THE SECURITY EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE
1
<PAGE> 2
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE."
The Senior Notes will be offered and sold to the Initial Purchaser without
being registered under the Securities Act in reliance on an exemption from such
registration requirements. The Company has prepared a preliminary offering
memorandum, dated April 10, 1996 (including the Annual Report on 10-K of the
Company constituting Annex B thereto, the "Preliminary Offering Memorandum"),
and will prepare a final offering memorandum to be dated the date hereof
(including the Annual Report on 10-K of the Company constituting Annex B
thereto, the "Offering Memorandum") setting forth or including a description of
the terms of the Senior Notes, the terms of the offering, a description of the
business of the Company and the Guarantors and any material developments
relating to the Company and the Guarantors occurring after April 10, 1996.
Copies of the Preliminary Offering Memorandum have been, and copies of the
Offering Memorandum will be, delivered by the Company to the Initial Purchaser
pursuant to the terms of this Agreement. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Senior Notes by the
Initial Purchaser in accordance with Section 3 hereof.
It is understood by the parties hereto that (i) on or prior to the Closing
Date (A) HDSC, as borrower, the Company, as guarantor, and the other parties
thereto will enter into an amendment to the Revolving Credit Facility (the
"Revolving Credit Facility Amendment") and (B) the Company, the Guarantors and
the Trustee will enter into the Pledge and Escrow Agreement, dated as of April
19, 1996 (the "Pledge and Escrow Agreement"), pursuant to which the Escrow Funds
(as defined below) will be pledged as collateral to secure the Company's
obligations with respect to the Senior Notes and (ii) following the Closing
Date, the Company will (A) use the Escrow Funds to repurchase a portion of the
Company's 10.25% Senior Notes due 2003 (such notes referred to herein as the
"Existing Notes," and such repurchase offer with respect to the Existing Notes
referred to herein as the "Existing Note Change of Control Offer") and (B) after
May 24, 1996, to the extent there are excess Escrow Funds following the Existing
Note Change of Control Offer redeem the maximum aggregate principal amount of
Senior Notes that can be redeemed utilizing such excess Escrow Funds, at a
redemption price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of
redemption (the "Special Mandatory Redemption.")
2
<PAGE> 3
The Initial Purchaser and its direct and indirect transferees will be
entitled to the benefits of the Registration Rights Agreement, substantially in
the form attached hereto as Exhibit A, pursuant to which the Company and the
Guarantors will agree to use their best efforts to commence an offer to exchange
the Senior Notes for New Senior Notes that have been registered under the
Securities Act, and that otherwise are identical in all respects to the Senior
Notes, or to cause a shelf registration statement to become effective under the
Securities Act and to remain effective for the period designated in such
Registration Rights Agreement.
1. Representations, Warranties and Agreements of the Company and
Guarantors. The Company and the Guarantors, jointly and not severally,
represent, warrant and agree that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum as of its date did not, and the Offering Memorandum as of the
Closing Date will not, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company and the Guarantors make no
representation or warranty as to information contained in or omitted from
the Preliminary Offering Memorandum or the Offering Memorandum, as amended
or supplemented, in reliance upon and in conformity with written
information furnished to the Company or any Guarantor by or on behalf of
the Initial Purchaser specifically for inclusion in the Preliminary
Offering Memorandum or the Offering Memorandum.
(b) Each of the Company and the Guarantors has been duly organized and
is validly existing and in good standing under the laws of its respective
jurisdiction of incorporation, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which its
ownership or leasing of property or the conduct of its business requires
such qualification (except where the failure to be so qualified and in good
standing would not have a Material Adverse Effect), and has all power and
authority necessary to own or hold its properties and to conduct the
business in which it is engaged. Each of the Guarantors is a wholly owned
subsidiary of the Company or a Guarantor. Neither the Company nor any of
the Guarantors owns or controls any subsidiaries other than the Guarantors.
As used herein, "Material Adverse Effect" means a material adverse effect
on the condition (financial or otherwise), results of operations, business
or prospects of the Company and the Guarantors, taken as a whole.
(c) Assuming the Senior Notes are issued, sold and delivered under the
circumstances contemplated by the Offering Memorandum and this Agreement,
that the representations and warranties and covenants of the Initial
Purchaser contained in Section 3 hereof are true, correct and complete, and
that the Initial Purchaser complies with its covenants in Section 3 hereof,
(i) registration under the Securities Act of the Senior Notes or
qualification of the Indenture in respect of the Senior Notes under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), is not
required in connection with the offer and sale of the Senior Notes to the
Initial Purchaser in the manner contemplated by the Offering Memorandum or
this Agreement and (ii) initial resales of the Senior Notes by the Initial
Purchaser on the terms and in the manner set forth in the Offering
Memorandum and Section 3 hereof are exempt from the registration
requirements of the Securities Act.
(d) The Company will give notice of redemption in proper form pursuant
to Section 1103 of the indenture governing the Existing Notes (the
"Existing Note Indenture") and
3
<PAGE> 4
consummate the Existing Note Change of Control Offer in accordance with the
terms of the Existing Note Indenture and such transaction will conform in
all material respects to the description thereof in the Offering
Memorandum.
(e) The authorized and outstanding capital stock of the Company at
February 3, 1996 was as set forth in the "Actual" column under the caption
"Capitalization" in the Offering Memorandum. All of the shares of capital
stock of the Company have been duly authorized and validly issued and are
fully paid and nonassessable.
(f) The Company or a Guarantor owns 100% of the outstanding shares of
capital stock of the Guarantors, and all of such shares of capital stock
are duly authorized and validly issued and are fully paid and
nonassessable. All of the shares of capital stock of the Guarantors are
owned by the Company or a Guarantor free and clear of any security
interest, claim, lien or encumbrance (except for liens arising from the
Revolving Credit Facility or the Revolving Credit Facility Amendment).
There are no outstanding rights, warrants or options to acquire, or
instruments convertible into or exchangeable for, the shares of capital
stock of any of the Guarantors.
(g) This Agreement has been duly authorized, executed and delivered by
the Company and each of the Guarantors and (assuming the due execution and
delivery thereof by the Initial Purchaser) is a legally valid and binding
agreement of the Company and each of the Guarantors, enforceable against
each of them in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and to general equitable principles (whether considered in a proceeding in
equity or at law).
(h) The Indenture has been duly authorized, executed and delivered by
the Company and each of the Guarantors and (assuming the due execution and
delivery thereof by the Trustee) is a legally valid and binding agreement
of the Company and each of the Guarantors, enforceable against each of them
in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law).
(i) The Senior Notes have been duly authorized, and, when duly
executed, authenticated, issued and delivered upon payment therefor as
provided herein, will be validly issued and outstanding, and will
constitute the legally valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and to general equitable principles (whether considered in a proceeding in
equity or at law).
(j) The New Senior Notes have been duly authorized, and, when duly
executed, authenticated, issued and delivered, will be validly issued and
outstanding, and will constitute the legally valid and binding obligations
of the Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other
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<PAGE> 5
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law).
(k) The Subsidiary Guarantees to be endorsed on the Senior Notes have
been duly authorized and, when duly executed, authenticated, issued and
delivered as provided herein and when the Senior Notes have been duly
executed, authenticated, issued and delivered, will be validly issued and
outstanding, and will constitute the legally valid and binding obligations
of each of the Guarantors, entitled to the benefits of the Indenture and
enforceable against the Guarantors in accordance with their terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and to general equitable principles.
(l) The Subsidiary Guarantees to be endorsed on the New Senior Notes
have been duly authorized and, when duly executed, authenticated, issued
and delivered and when the New Senior Notes have been duly executed,
authenticated, issued and delivered, will be validly issued and
outstanding, and will constitute the legally valid and binding obligations
of each of the Guarantors, entitled to the benefits of the Indenture and
enforceable against the Guarantors in accordance with their terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and to general equitable principles (whether
considered in a proceeding in equity or at law).
(m) The Pledge and Escrow Agreement has been duly authorized and, when
duly executed and delivered by the Company and each of the Guarantors and
(assuming the due execution and delivery thereof by the Trustee), will
constitute the legally valid and binding agreement of the Company and each
of the Guarantors, enforceable against each of them in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and to general equitable
principles (whether considered in a proceeding in equity or at law).
(n) Set forth on Schedule I hereto is an accurate listing of the
location of the Company's and each Guarantor's respective chief executive
offices and their respective federal taxpayer identification numbers. The
Pledge and Escrow Agreement is effective to create valid security interests
in favor of the Trustee to secure payment of the Senior Notes in all of the
Collateral (as defined in the Pledge and Escrow Agreement), and all such
Collateral, including, without limitation, all of the Escrow Proceeds (as
defined in the Pledge and Escrow Agreement), is free and clear of any
liens, pledges, security interests, mortgages, adverse claims or other
encumbrances except for the security interests of the Trustee granted
pursuant to the Pledge and Escrow Agreement to secure the payment of the
Notes. Assuming the Trustee's compliance with the terms of the Pledge and
Escrow Agreement, the security interests in favor of the Trustee granted
pursuant to the Pledge and Escrow Agreement constitute first priority
perfected security interests. The Company has not, nor have any of the
Guarantors, agreed to the waiver or subordination of any security interest
or lien purported to be granted by the Pledge and Escrow Agreement except
that any security interest or lien arising from the Pledge and Escrow
Agreement shall be subordinated to the security interests and liens arising
from the Revolving Credit Facility and the Revolving Credit Facility
Amendment.
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<PAGE> 6
(o) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors, and when duly executed and delivered by
the Company and each of the Guarantors (assuming the due execution and
delivery by the Initial Purchaser), will constitute the legally valid and
binding agreement of the Company and each of the Guarantors, enforceable
against each of them in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and to general equitable principles (whether considered in
a proceeding in equity or at law).
(p) The Revolving Credit Facility Amendment has been duly authorized,
executed and delivered by the Company and HDSC and constitutes the legally
valid and binding agreement of the Company and HDSC, enforceable against
each of them in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and to general equitable principles (whether considered in a proceeding in
equity or at law).
(q) The execution, delivery and performance of this Agreement, the
Indenture, the Pledge and Escrow Agreement and the Registration Rights
Agreement by the Company and the Guarantors, and the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the Existing Note Change of Control Offer and, if applicable,
the Special Mandatory Redemption), and the issuance and sale of the Notes
and the Subsidiary Guarantees by the Company and the Guarantors, as
applicable, will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument to which the Company or any of the Guarantors are a
party or by which the Company or any of the Guarantors are bound or to
which any of the property or assets of the Company or any of the Guarantors
are subject, nor will such actions result in any violation of the
provisions of the charter, by-laws, operating agreement or other
organizational documents of the Company or any of the Guarantors or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of the
Guarantors or any of their properties or assets (except to the extent any
such conflict, breach, violation or default does not or will not, as the
case may be, have a Material Adverse Effect); and except for such consents,
approvals, authorizations, registrations or qualifications as may be
required under applicable state securities laws in connection with the
purchase and distribution of the Senior Notes by the Initial Purchaser or
as set forth in the Registration Rights Agreement, no consent, approval,
authorization or order of, or filing or registration with, any such court
or governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Indenture, the Pledge and Escrow
Agreement and the Registration Rights Agreement by the Company and the
Guarantors, the consummation of the transactions contemplated hereby and
thereby (including the Existing Note Change of Control Offer and, if
applicable, the Special Mandatory Redemption), and the issuance and sale of
the Notes and the Subsidiary Guarantees by the Company and the Guarantors,
as applicable.
(r) Neither the Company nor any of the Guarantors is in breach or
violation of any of the terms or provisions of any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which the
Company or any of the Guarantors are a party or by which the Company or any
of the Guarantors are bound or to which any of the property or assets of
the Company or any of the Guarantors are subject, nor is the Company or any
of the Guarantors in violation of the provisions of its charter, by-laws,
operating agreement or other
6
<PAGE> 7
organizational documents or any statute or any judgment, order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any of the Guarantors or any of their properties or
assets (except to the extent any such conflict, breach, violation or
default is cured at or prior to the Closing Date and within the grace
period applicable thereto or would not have a Material Adverse Effect).
(s) The Notes, the Indenture, the Subsidiary Guarantees, the Pledge
and Escrow Agreement and the Registration Rights Agreement conform or will
conform, as applicable, in all material respects to the descriptions
thereof contained in the Offering Memorandum.
(t) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of the
Guarantors is a party or of which any property or assets of the Company or
any of the Guarantors is the subject which, if determined adversely to the
Company or any Guarantor, could reasonably be expected to have a Material
Adverse Effect, otherwise than as set forth or contemplated in the Offering
Memorandum.
(u) Except as set forth in the Registration Rights Agreement, there
are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities owned or to be owned by such person or to require the Company to
include such securities in any securities being registered pursuant to any
registration statement filed by the Company under the Securities Act,
except for an agreement by the Company to register securities owned by
Dickstein Partners Inc. and its affiliates.
(v) Neither the Company nor any of the Guarantors has sustained, since
the date of the latest audited financial statements included in the
Offering Memorandum, any material losses or interferences with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Offering
Memorandum; and, since such date, there have not been any material changes
in the capital stock or long-term debt of the Company or any of the
Guarantors or any material adverse changes in the condition (financial or
otherwise), results of operations, business or prospects of the Company and
the Guarantors, taken as a whole (a "Material Adverse Change"), or any
developments that could reasonably be expected to involve a prospective
Material Adverse Change, otherwise than as set forth or contemplated in the
Offering Memorandum.
(w) The consolidated financial statements (including the related
notes) of the Company which appear in Offering Memorandum comply as to form
in all material respects with the requirements of the Securities Act,
present fairly the financial condition and results of operations of such
entities purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, except as described in the notes thereto; the pro forma
information included in the Offering Memorandum presents fairly the
historical and proposed transactions contemplated by the Offering
Memorandum and this Agreement; and the other historical financial and
operating and other financial data set forth in the Offering Memorandum are
fairly presented.
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<PAGE> 8
(x) Each of Coopers & Lybrand L.L.P. and Deloitte & Touche, LLP, who
have certified certain financial statements of the Company, whose reports
appear in the Preliminary Offering Memorandum and the Offering Memorandum,
were independent public accountants under Rule 101 of AICPA's Code of
Professional Conduct and its interpretations and rulings during the periods
covered by the financial statements on which they reported contained in the
Preliminary Offering Memorandum and the Offering Memorandum.
(y) The Company and each of the Guarantors have good and marketable
title in fee simple to all real property and good title to all personal
property owned by each of them, in each case free and clear of all liens,
encumbrances and defects except (i) such as arise under the Revolving
Credit Facility, (ii) such as are described in the Offering Memorandum or
(iii) such as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and the Guarantors; and all real property and
buildings held under lease by the Company and each of the Guarantors are
held by them under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and the
Guarantors. The Company and each of the Guarantors enjoy peaceful and
undisturbed possession under all leases to which they are party as lessee,
except for such leases that, singly or in the aggregate, would not have a
Material Adverse Effect. No consent need be obtained from any person with
respect to any such lease in connection with the transactions contemplated
hereby and in the Offering Memorandum, except for such as have been
obtained. None of the properties or assets, the value of which is reflected
in the latest balance sheet referred to in Section 1(v) hereof, is held
under any lease (except for properties or assets held under capital leases
and leasehold improvements held under both capital leases and operating
leases). Except for such assets, plants and facilities as are not material
singly or in the aggregate to the business of the Company and the
Guarantors, taken as a whole, all tangible assets, plants and facilities of
the Company and the Guarantors are in good condition and repair (ordinary
wear and tear excepted) and are adequate, in the reasonable opinion of the
Company and the Guarantors, for the uses to which they are being put or
would be put in the ordinary course of business. The Company and the
Guarantors maintain such insurance as may be required by law and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated (which may include
self-insurance in the same form as is customarily maintained by companies
similarly situated).
(z) The Company and the Guarantors own or possess adequate rights to
use all material patents, patent applications, trademarks, service marks,
tradenames, trademark registrations, service mark registrations, copyrights
and licenses necessary for the conduct of their businesses, and to the
Company's knowledge, the conduct of their businesses will not conflict
with, and neither the Company nor any of the Guarantors has received any
notice of any claim of conflict with, any such rights of others (except in
any such case for any conflict that would not have a Material Adverse
Effect).
(aa) The Company and each of the Guarantors is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company or any Guarantor
would have any liability; none of the Company and the Guarantors has
incurred or expects to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or
8
<PAGE> 9
(ii) Section 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company or any Guarantor
would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the
loss of such qualification.
(ab) The Company and the Guarantors have filed all federal, state and
local income and franchise tax returns required to be filed through the
date hereof and have paid, or made adequate reserve or provision for the
payment of, all taxes shown as due thereon, and the Company has no
knowledge of any tax deficiency that has had (or could have) a Material
Adverse Effect, except as set forth or contemplated in the Offering
Memorandum.
(ac) The Company and the Guarantors (i) make and keep accurate books
and records and (ii) maintain internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance with
management's specific authorization, (B) transactions are recorded as
necessary to permit preparation of their consolidated financial statements
and to maintain accountability for their assets, (C) access to their assets
is permitted only in accordance with management's specific authorization
and (D) the reported accountability for their assets is compared with
existing assets at reasonable intervals.
(ad) Neither the Company nor any of the Guarantors, nor, to the
Company's or any Guarantor's knowledge, any director, officer, agent,
employee or other person associated with or acting on behalf of the Company
or any of the Guarantors, has used any corporate funds during the last five
years for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; made any unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(ae) Neither the Company nor any of the Guarantors is (i) an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a "subsidiary company" or
an "affiliate" of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(af) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Senior Notes are listed on any
national securities exchange registered under Section 6 of the Exchange Act
or quoted on an automated inter-dealer quotation system.
(ag) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act ("Regulation D")) of the Company
has, directly or through any agent (provided that no representation is made
as to the Initial Purchaser or any person acting on its behalf), (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of any security (as defined in the Securities Act) that is or will
be integrated with the offering and sale of the Senior Notes in a manner
that would require the registration of the Senior Notes under the
Securities Act or (ii) engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with
the offering of the Senior Notes.
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<PAGE> 10
(ah) Neither the Company nor any of the Guarantors has taken, nor will
any of them take, directly or indirectly, any action designed to, or that
could reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Senior Notes to facilitate the sale and
resale of the Senior Notes.
(ai) The Offering Memorandum and each amendment or supplement thereto,
as of its date, contains the information specified in Rule 144A(d)(4) under
the Act.
(aj) None of the Company or any of the Guarantors has taken, and none
of them will take, any action that might cause this Agreement or the
issuance or sale of the Notes or the Subsidiary Guarantees to violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System or analogous foreign laws and regulations.
(ak) Each of the Existing Note Change of Control Offer and the Special
Mandatory Redemption has been duly authorized by the Company and each of
the Guarantors.
(al) The order confirming the Company's (or its predecessor's) plan of
reorganization (the "Plan") under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code") is a valid and binding order (i) as
to which a notice of appeal or petition for certiorari can no longer be
timely filed and as to which no timely-filed appeal or certiorari
proceeding is pending and (ii) which has not been overturned by a court of
competent jurisdiction. There has been "substantial consummation" (as
defined in Section 1101(2) of the Bankruptcy Code) of the Plan.
2. Purchase of the Senior Notes by the Initial Purchaser.
On the basis of the representations and warranties contained in, and
subject to the terms and conditions of, this Agreement, the Company agrees to
sell to the Initial Purchaser and the Initial Purchaser agrees to purchase
$195,000,000 principal amount of Senior Notes at a purchase price equal to
95.85% of such principal amount thereof, plus accrued interest, if any, from
April 17, 1996.
The Company shall not be obligated to deliver any of the Senior Notes to be
delivered except upon payment for all the Senior Notes to be purchased as
provided herein.
3. Sale and Resale of the Senior Notes by the Initial Purchaser.
The Initial Purchaser represents and warrants to the Company that it will
offer the Senior Notes for resale only upon the terms and conditions set forth
in this Agreement and in the Offering Memorandum. The Initial Purchaser hereby
represents and warrants to, and agrees with, the Company that the Initial
Purchaser (i) is a qualified institutional buyer ("Qualified Institutional
Buyer") as defined in Rule 144A under the Securities Act, as such rule may be
amended from time to time ("Rule 144A"), and/or an institutional accredited
investor ("Accredited Investor") as defined in Rule 501(a)(1),(2),(3) or (7)
under Regulation D, (ii) is purchasing the Senior Notes pursuant to a private
sale exempt from registration under the Securities Act, (iii) will not solicit
offers for, or offer or sell, the Senior Notes by means of any form of general
solicitation or general advertising within the meaning of Regulation D or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act, and (iv) will solicit offers for the Senior Notes only from, and
will offer, sell or deliver the Senior Notes, as part of its initial offering,
only to (A) persons in the United States whom the Initial Purchaser reasonably
believes to be Qualified Institutional Buyers or, if any such person is buying
for one or more
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<PAGE> 11
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchaser that each such
account is a Qualified Institutional Buyer, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and to a limited
number of other Accredited Investors, and (B) in each case, in transactions
under Rule 144A or Regulation D in private sales exempt from registration under
the Securities Act.
4. Delivery of and Payment for the Senior Notes.
Delivery of and payment for the Senior Notes shall be made at the office of
Latham & Watkins, 885 Third Avenue, New York, NY 10022, at 9:00 A.M., New York
City time, on the second full business day following the date of this Agreement
or at such other date or place as shall be determined by agreement between the
Initial Purchaser and the Company. This date and time are sometimes referred to
as the "Closing Date." On the Closing Date, the Company shall deliver or cause
to be delivered the Senior Notes to the Initial Purchaser for the account of the
Initial Purchaser against payment to or upon the order of the Company of the
purchase price by wire transfer in federal (same-day) funds. Time shall be of
the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of the Initial Purchaser
hereunder. Upon delivery, the Senior Notes shall be in definitive fully
registered form and registered in such names and in such denominations as the
Initial Purchaser shall request in writing not less than two full business days
prior to the Closing Date. For the purpose of expediting the checking and
packaging of the Senior Notes, the Company shall make the Senior Notes available
for inspection by the Initial Purchaser in New York, New York, not later than
2:00 P.M., New York City time, on the business day prior to the Closing Date.
5. Further Agreements of the Company. The Company and the Guarantor
agree:
(a) To furnish to the Initial Purchaser, without charge, as many
copies of the Preliminary Offering Memorandum and the Offering Memorandum
and any supplements and amendments thereto as it may reasonably request.
(b) Prior to making any amendment or supplement to the Offering
Memorandum, the Company shall furnish a copy thereof to the Initial
Purchaser and counsel to the Initial Purchaser and will not effect any such
amendment or supplement to which the Initial Purchaser shall reasonably
object by notice to the Company after a reasonable period to review, which
shall not in any case be longer than five business days after receipt of
such copy.
(c) If, at any time prior to completion of the distribution of the
Senior Notes by the Initial Purchaser to purchasers, any event shall occur
or condition exist as a result of which it is necessary, in the opinion of
counsel for the Initial Purchaser or counsel for the Company, to amend or
supplement the Offering Memorandum in order that the Offering Memorandum
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in light of the circumstances existing at the time it is
delivered to a purchaser, or if it is necessary to amend or supplement the
Offering Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law and to furnish to the Initial
Purchaser such number of copies as it may reasonably request.
(d) So long as any Senior Notes are outstanding and are "Restricted
Securities" within the meaning of Rule 144(a)(3) under the Securities Act,
to furnish to holders
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<PAGE> 12
of the Senior Notes and prospective purchasers of Senior Notes designated
by such holders, upon request of such holders or such prospective
purchasers, the information, if any, required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
(e) For a period of five years following the Closing Date, to furnish
to the Initial Purchaser copies of any annual reports, quarterly reports
and current reports filed with the Commission on Forms 10-K, 10-Q and 8-K,
or such other similar forms as may be designated by the Commission, and
such other documents, reports and information as shall be furnished by the
Company to the Trustee or to the holders of the Notes pursuant to the
Indenture.
(f) To use its reasonable best efforts to qualify the Senior Notes for
sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchaser reasonably designates and to continue such qualifications
in effect so long as reasonably required for the distribution of the Senior
Notes. The Company will also arrange for the determination of the
eligibility for investment of the Senior Notes under the laws of such
jurisdictions as the Initial Purchaser reasonably requests. Notwithstanding
the foregoing, the Company shall not be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or to file
a general consent to service of process in any jurisdiction.
(g) To use its best efforts to permit the Senior Notes to be
designated Private Offerings, Resales and Trading through Automated
Linkages Market ("PORTAL") securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
relating to trading in the PORTAL market and to permit the Senior Notes to
be eligible for clearance and settlement through The Depository Trust
Company ("DTC").
(h) Not to, and will cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) in a transaction that could be
integrated with the sale of the Senior Notes in a manner which would
require the registration under the Securities Act of the Senior Notes.
(i) Except following the effectiveness of any Registration Statement
(as defined in the Registration Rights Agreement) and except for such
offers as may be made as a result of, or subsequent to, filing such
Registration Statement or amendments thereto prior to the effectiveness
thereof, not to, and will cause its affiliates not to, solicit any offer to
buy or offer to sell the Senior Notes by means of any form of general
solicitation or general advertising (as those terms are used in Regulation
D under the Securities Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act.
(j) To apply the net proceeds from the sale of the Senior Notes as set
forth in the Offering Memorandum.
(k) To take such steps as shall be necessary to ensure that neither
the Company nor any of the Guarantors shall become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or
(ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(l) Not to, and will cause its affiliates not to, take any actions
which would require the registration under the Securities Act of the Senior
Notes.
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<PAGE> 13
(m) To do all things necessary to satisfy the closing conditions set
forth in Section 7 hereof.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Notes and any issue or stamp
taxes payable in that connection; (b) the costs incident to the preparation and
printing of the Preliminary Offering Memorandum and the Offering Memorandum and
any amendments and exhibits thereto; (c) the costs of distributing the
Preliminary Offering Memorandum and the Offering Memorandum and any amendment or
supplement thereto or any document incorporated by reference therein; (d) the
fees and expenses of qualifying the Notes under the securities laws of the
several jurisdictions as provided in Section 5(f) and of preparing, printing and
distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Initial Purchaser); (e) the cost of printing the Notes; (f) the
fees and expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of any counsel for the Trustee in connection with the Indenture
and the Notes; (g) the fees and expenses of the Escrow Agent and any agent of
the Escrow Agent and the fees and disbursements of any counsel for the Escrow
Agent in connection with the Pledge and Escrow Agreement; (h) the fees paid to
rating agencies in connection with the rating of the Notes; (i) the costs and
expenses of DTC and its nominee, including its book-entry system; (j) all
expenses and listing fees incurred in connection with the application for
quotation of the Senior Notes on the PORTAL market; and (k) all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement.
7. Conditions of Initial Purchaser's Obligations.
The obligations of the Initial Purchaser hereunder are subject to each of
the following terms and conditions:
(a) The Initial Purchaser shall not have discovered and disclosed to
the Company on or prior to such Closing Date that the Preliminary Offering
Memorandum or the Offering Memorandum or any amendment or supplement
thereto contains an untrue statement of a fact which, in the opinion of
Latham & Watkins, counsel for the Initial Purchaser, is material or omits
to state a fact which, in the opinion of such counsel, is material and is
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) All of the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively. The
Company and the Guarantors shall have performed or complied with all of the
agreements herein contained and required to be performed or complied with
by them at or prior to the Closing Date.
(c) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchaser not later than 10:00 a.m., New York
City time, on the day following the date of this Agreement or at such later
date and time as to which the Initial Purchaser may agree, and no stop
order suspending the qualification or exemption from qualification of the
Senior Notes in any jurisdiction referred to in Section 5(f) shall have
been issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
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<PAGE> 14
(d) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, have a Material Adverse Effect;
no action, suit or proceeding shall have been commenced and be pending
against or affecting or, to the best knowledge of the Company and the
Guarantors, threatened against, the Company or any of the Guarantors before
any court or arbitrator or any governmental body, agency or official that,
if adversely determined, could reasonably be expected to result in a
Material Adverse Effect; and no stop order shall have been issued by the
Commission or any governmental agency of any jurisdiction referred to in
Section 5(f) preventing the use of the Offering Memorandum, or any
amendment or supplement thereto, or which could reasonably be expected to
have a Material Adverse Effect.
(e) Since the dates as of which information is given in the Offering
Memorandum and other than as set forth in the Offering Memorandum, (i)
there shall not have been any Material Adverse Change, or any development
that is reasonably likely to result in a Material Adverse Change, or any
material change in the long-term debt, or material increase in the
short-term debt, from that set forth in the Offering Memorandum; (ii) no
dividend or distribution of any kind shall have been declared, paid or made
by the Company on any class of its capital stock; (iii) the Company and the
Guarantors shall not have incurred any liabilities or obligations, direct
or contingent, that are material, individually or in the aggregate, to the
Company and the Guarantors, taken as a whole, and that are required to be
disclosed on a balance sheet or notes thereto in accordance with generally
accepted accounting principles and are not disclosed on the latest balance
sheet or notes thereto included in the Offering Memorandum.
(f) The Initial Purchaser shall have received a certificate, dated the
Closing Date, signed on behalf of the Company by (i) Gregory K. Raven,
President and Chief Executive Officer, (ii) Kim D. Ahlholm, Vice
President-Controller, and (iii) William K. Friend, Vice President-Secretary
and Corporate Counsel, confirming that (A) such officers, have participated
in conferences with other officers and representatives of the Company and
the Guarantors, representatives of the independent public accountants of
the Company and the Guarantors and representatives of counsel to the
Company and the Guarantors at which the contents of the Offering Memorandum
and related matters were discussed and (B) the matters set forth in
paragraphs (b), (c), (d) and (e) of this Section 7 are true and correct as
of the Closing Date.
(g) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Notes, the
Subsidiary Guarantees, the Indenture, the Registration Rights Agreement,
the Offering Memorandum and all other legal matters relating to this
Agreement and the transactions contemplated hereby including, without
limitation, the Existing Note Change of Control Offer and the Special
Mandatory Redemption, shall be satisfactory in all material respects to
counsel for the Initial Purchaser, and the Company and the Guarantors shall
have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(h) Foley, Hoag & Eliot, counsel for the Company and the Guarantors,
shall have furnished to the Initial Purchaser its written opinion, as
counsel to the Company and the Guarantors, addressed to the Initial
Purchaser and dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser, to the effect that:
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<PAGE> 15
(i) Each of the Company and the Guarantors is validly existing as a
corporation and in corporate good standing under the laws of its
jurisdiction of incorporation, is qualified to do business and is in
corporate good standing as a foreign corporation in each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such qualification (except where the failure to be so qualified
and in good standing would not have a Material Adverse Effect), and has
corporate power to own its properties and conduct its business;
(ii) Assuming that the representations and warranties of the Initial
Purchaser contained in Sections 2 and 3 hereof are true, correct and
complete and that the Company, the Guarantors and Initial Purchaser comply
with their respective covenants in Sections 3 and 5 hereof, (A)
registration under the Securities Act of the Senior Notes or qualification
of the Indenture under the Trust Indenture Act is not required in
connection with the offer and sale of the Senior Notes to the Initial
Purchaser in the manner contemplated by the Offering Memorandum and this
Agreement, and (B) initial resales of the Senior Notes by the Initial
Purchaser on the terms and in the manner set forth in the Offering
Memorandum and Section 3 hereof are exempt from the registration
requirements of the Securities Act;
(iii) Each of the Company and the Guarantors has corporate power to
execute and deliver, and to consummate the transactions contemplated by,
this Agreement; the Company has corporate power to issue, sell and deliver
the Senior Notes as contemplated by this Agreement; and each of the
Guarantors has corporate power to issue and deliver its respective
Subsidiary Guarantee as contemplated by the Indenture, the Offering
Memorandum and this Agreement;
(iv) The execution and delivery of this Agreement have been duly
authorized by all requisite corporate action of the Company and each of the
Guarantors, and this Agreement has been duly executed and delivered by the
Company and each of the Guarantors;
(v) The execution and delivery of the Indenture have been duly
authorized by all requisite corporate action of the Company and each of the
Guarantors; and the Indenture has been duly executed and delivered by the
Company and each of the Guarantors, and assuming due authorization,
execution and delivery by the Trustee, is a legal, valid and binding
agreement of the Company and each of the Guarantors, enforceable against
each of them in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and to general equitable principles (whether considered in a proceeding in
equity or at law);
(vi) The execution and delivery of the Senior Notes have been duly
authorized by all requisite corporate action of the Company; and the Senior
Notes have been duly executed and delivered by the Company and, assuming
due authentication by the Trustee, are legal, valid and binding obligations
of the Company, entitled to the benefits of the Indenture, enforceable
against the Company in accordance with their terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights
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<PAGE> 16
generally and to general equitable principles (whether considered in a
proceeding in equity or at law);
(vii) The execution and delivery of the New Senior Notes have been
duly authorized by all requisite corporate action of the Company; and, when
duly executed and delivered by the Company and duly authenticated by the
Trustee, will be legal, valid and binding obligations of the Company,
entitled to the benefits of the Indenture, enforceable against the Company
in accordance with their terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law);
(viii) The execution and delivery of the Subsidiary Guarantees
endorsed on the Senior Notes have been duly authorized by all requisite
corporate action of each of the Guarantors; all such Subsidiary Guarantees
have been duly executed and delivered by each of the Guarantors and are
legal, valid and binding obligations of each of the Guarantors, entitled to
the benefits of the Indenture, enforceable against the Guarantors in
accordance with their terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law);
(ix) The execution and delivery of the Subsidiary Guarantees to be
endorsed on the New Senior Notes have been duly authorized by all requisite
corporate action of each of the Guarantors; and, when the New Senior Notes
have been duly executed and delivered by the Company and duly authenticated
by the Trustee and when such Subsidiary Guarantees have been duly executed
and delivered by each of the Guarantors, such Subsidiary Guarantees will be
legal, valid and binding obligations of each of the Guarantors, entitled to
the benefits of the Indenture, enforceable against the Guarantors in
accordance with their terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law);
(x) The execution and delivery of the Pledge and Escrow Agreement have
been duly authorized by all requisite corporate action of the Company and
each of the Guarantors; the Pledge and Escrow Agreement has been duly
executed and delivered by the Company and each of the Guarantors and,
assuming due authorization, execution and delivery by the Trustee, is a
legal, valid and binding agreement of the Company and each of the
Guarantors, enforceable against each of them in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and to general equitable principles (whether
considered in a proceeding in equity or at law);
(xi) The execution and delivery of the Registration Rights Agreement
have been duly authorized by all requisite corporate action of the Company
and each of the Guarantors; the Registration Rights Agreement has been duly
executed and delivered by the Company and each of the Guarantors and,
assuming due authorization, execution and delivery by the Initial
Purchaser, the Registration Rights Agreement (other than the
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<PAGE> 17
indemnification and contribution provisions thereof, as to which such
counsel need express no opinion) is a legal, valid and binding agreement of
the Company and each of the Guarantors, enforceable against each of them in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law);
(xii) The execution and delivery of the Revolving Credit Facility
Amendment have been duly authorized by all requisite corporate action of
the Company and HDSC; and the Revolving Credit Facility Amendment has been
duly executed and delivered by the Company and HDSC and, assuming the due
authorization, execution and delivery by the lenders party thereto, is a
legal, valid and binding agreement of the Company and HDSC, enforceable
against each of them in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and to general equitable principles (whether considered in
a proceeding in equity or at law);
(xiii) All of the outstanding shares of capital stock of HDSC have
been duly authorized and validly issued, are fully paid and nonassessable,
and are held of record by the Company free and clear, to the knowledge of
such counsel, of any security interest, claim, lien, or encumbrance other
than those arising from the Revolving Credit Facility; all of the
outstanding shares of capital stock of each of the Guarantors other than
HDSC have been duly authorized and validly issued, are fully paid and
nonassessable, and are held of record by HDSC free and clear, to the
knowledge of such counsel, of any security interest, claim, lien or
encumbrance other than liens arising from the Revolving Credit Facility;
and, to the knowledge of such counsel, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock of any of the Guarantors;
(xiv) The execution and delivery by the Company and each of the
Guarantors of this Agreement, the Indenture, the Pledge and Escrow
Agreement and the Registration Rights Agreement, the consummation by the
Company and each of the Guarantors of the transactions contemplated hereby
and thereby (including the Existing Note Change of Control Offer and the
Special Mandatory Redemption), the issuance and sale of the Notes by the
Company, and the issuance of the Subsidiary Guarantees by the Guarantors
will not (A) to the knowledge of such counsel, conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan or credit
agreement, or other agreement or instrument known to such counsel to which
the Company or any of the Guarantors is a party or by which the Company or
any of the Guarantors or any of its or their property are subject, which
conflict, breach, violation or default has or would have a Material Adverse
Effect, or (B) result in any violation of the provisions of the charter or
bylaws of the Company or any of the Guarantors or, to the knowledge of such
counsel, any federal or Massachusetts statue, or any order, rule or
regulation of any federal or Massachusetts court or governmental agency or
body having jurisdiction over the Company or any of the Guarantors or any
of their properties or assets, which violation has or would have Material
Adverse Effect; and, except for such consents, approvals, authorizations,
registrations or qualifications as may be required under applicable states
securities laws in connection with the purchase and distribution of the
Notes by the Initial
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<PAGE> 18
Purchaser and as set forth in the Registration Rights Agreement, no
consent, approval, authorization or order of, or filing or registration
with, any federal or Massachusetts court or governmental agency or body
having jurisdiction over the Company or any of the Guarantors or any of
their properties or assets, is required in connection with the execution
and delivery by the Company and each of the Guarantors of this Agreement,
the Indenture, the Pledge and Escrow Agreement and the Registration Rights
Agreement, the consummation by the Company and each of the Guarantors of
the transactions contemplated hereby and thereby, the issuance and sale of
the Notes by the Company, and the issuance of the Subsidiary Guarantees by
the Guarantors;
(xv) The descriptions of the Indenture, the Notes, the Pledge and
Escrow Agreement and the Registration Rights Agreement in the Offering
Memorandum conform in all material respects to the terms thereof;
(xvi) To the knowledge of such counsel after inquiry of officers of
the Company and the Guarantors, but without investigating any governmental
records or court dockets, and except as set forth or referred to in the
Offering Memorandum, no legal or governmental proceedings are pending or
threatened to which the Company or any of the Guarantors is a party or of
which any property or assets of the Company or any of the Guarantors is the
subject that, if determined adversely to the Company or any Guarantor,
could reasonably be expected to have a Material Adverse Effect;
(xvii) Neither the Company nor any of the Guarantors is (i) an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a "subsidiary company" or,
to the knowledge of such counsel, an "affiliate" of a holding company
within the meaning of the Public Utility Holding Company Act of 1935, as
amended;
(xviii) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Senior Notes are listed on any
national securities exchange registered under Section 6 of the Exchange Act
or quoted on an automated inter-dealer quotation system;
(xix) The issuance or sale of the Notes, the issuance of the
Subsidiary Guarantees and the application by the Company of the net
proceeds thereof as set forth in the Offering Memorandum will not violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System; and
(xx) The provisions of the Pledge and Escrow Agreement are effective
to create valid security interests in favor of the Trustee in that portion
of the Collateral which is subject to Article 9 of the UCC as security for
the payment, to the extent set forth therein, of all obligations of the
Company and the Guarantors to the holders of Notes under the Indenture.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Company and the
Guarantors, representatives of the independent public accountants of the Company
and the Guarantors, representatives of the Initial Purchaser and representatives
of counsel for the Initial Purchaser at which the contents of the Offering
Memorandum and related matters were discussed and, although such counsel has not
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<PAGE> 19
undertaken to investigate or verify independently, and does not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum, on the basis of the foregoing (relying as
to materiality upon the opinions of officers and other representatives of the
Company and the Guarantors) no information has come to the attention of such
counsel that causes such counsel to believe that the Offering Memorandum (except
as to financial statements, including the notes thereto and other financial,
statistical and accounting data included therein or omitted therefrom, as to
which no belief need be expressed), as of its date or the Closing Date,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may (i) state that its opinion is
limited to matters governed by the federal laws of the United States of America,
the General Corporation Law of the State of Delaware and the laws of the
Commonwealth of Massachusetts and (ii) assume that all laws of the State of New
York to which its opinion may pertain are the same as the laws of the
Commonwealth of Massachusetts.
(i) You shall have received on the Closing Date an opinion of Latham &
Watkins, counsel for the Initial Purchaser, dated the Closing Date and
addressed to you, in form and substance reasonably satisfactory to you.
(j) With respect to the letter of Deloitte & Touche LLP delivered to
the Initial Purchaser concurrently with the execution of this Agreement
(the "initial letter"), the Company shall have furnished to the Initial
Purchaser a letter (as used in this paragraph, the "bring-down letter") of
such accountant, addressed to the Initial Purchaser and dated such Closing
Date (i) confirming that they are independent public accountants under the
guidelines of the American Institute of Certified Public Accountants, (ii)
stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Offering Memorandum,
as of a date not more than two days prior to the date of the bring-down
letter), the conclusions and findings of such firm with respect to the
financial information and other matters covered by the initial letter and
(iii) confirming in all material respects the conclusions and findings set
forth in the initial letter.
(k) The Company, Guarantors and the Trustee shall have entered into
the Indenture and the Initial Purchaser shall have received counterparts,
conformed as executed, thereof.
(l) The Company, Guarantors and the Trustee shall have entered into
the Pledge and Escrow Agreement and the Initial Purchaser shall have
received counterparts, conformed as executed, thereof.
(m) The Company, Guarantors and the Initial Purchaser shall have
entered into the Registration Rights Agreement and the Initial Purchaser
shall have received counterparts, conformed as executed, thereof.
(n) HDSC, the Company and each other party thereto shall have entered
into the Revolving Credit Facility Amendment (the form and substance of
which shall be reasonably acceptable to the Initial Purchaser) and the
Initial Purchaser shall have received counterparts,
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<PAGE> 20
conformed as executed, thereof and of all other documents and agreements
entered into in connection therewith.
(o) The Company shall have furnished to the Initial Purchaser a
certificate, dated such Closing Date, of its President and Chief Executive
Officer as to the solvency of the Company and the Guarantors following
consummation of the transactions contemplated hereby.
(p) The Company shall have given irrevocable instructions to the
trustee under the Existing Note Indenture to mail, prior to 5:00 P.M., New
York City time, on April 19, 1996, the Existing Note Change of Control
Offer, in form and substance reasonably satisfactory to the Initial
Purchaser, to the holders of the Existing Notes.
(q) (i) Neither the Company nor any of the Guarantors shall have
sustained since the date of the latest audited financial statements
included in the Offering Memorandum losses or interferences with their
businesses, taken as a whole, from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Offering Memorandum or (ii) since such date there
shall not have been any change in the capital stock or long-term debt of
the Company or any of the Guarantors or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and the Guarantors, taken as a whole, otherwise
than as set forth or contemplated in the Offering Memorandum, the effect of
which, in any such case described in clause (i) or (ii), is, in the
reasonable judgment of the Initial Purchaser, so material and adverse as to
make it impracticable or inadvisable to proceed with the offering or the
delivery of the Senior Notes being delivered on the Closing Date on the
terms and in the manner contemplated herein and in the Offering Memorandum.
(r) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or The Nasdaq Stock Market's
National Market or in the over-the-counter market shall have been suspended
or materially limited, or minimum prices shall have been established on
such exchange by the Commission, or by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the
reasonable judgment of the Initial Purchaser, impracticable or inadvisable
to proceed with the offering or delivery of the Senior Notes being
delivered on the Closing Date on the terms and in the manner contemplated
herein and in the Offering Memorandum.
(s) Subsequent to the execution and delivery of this Agreement, (i) no
downgrading shall have occurred in the rating accorded the Senior Notes by
a nationally recognized statistical rating organization, as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act, and (ii) no such organization shall have publicly announced
that it has under surveillance or review, with possible negative
implications, its rating of any of the Senior Notes.
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<PAGE> 21
(t) There shall exist at and as of the Closing Date no conditions that
would constitute a default (or an event that with notice or the lapse of
time, or both, would constitute a default) under the Revolving Credit
Facility or the Revolving Credit Facility Amendment. On the Closing Date,
the Revolving Credit Facility Amendment shall be in full force and effect
and shall not have been modified.
(u) Latham & Watkins shall have been furnished with such documents, in
addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 7 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(v) Prior to the Closing Date, the Company and the Guarantors shall
have furnished to the Initial Purchaser such further information,
certificates and documents as the Initial Purchaser may reasonably request.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchaser.
8. Indemnification and Contribution.
(a) The Company and each of the Guarantors, jointly and severally,
agree to indemnify and hold harmless the Initial Purchaser and each person,
if any, who controls the Initial Purchaser within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Senior Notes), to which the Initial Purchaser or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering
Memorandum or Offering Memorandum or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse the Initial Purchaser and each such
controlling person on a quarterly basis for any legal or other expenses
reasonably incurred by the Initial Purchaser or controlling person in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company and the Guarantors shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement
or alleged untrue statement or omission or alleged omission made in the
Preliminary Offering Memorandum or Offering Memorandum or in any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company and the Guarantors by or on behalf of
the Initial Purchaser specifically for inclusion therein; and provided
further that with respect to any such untrue statement or omission made in
the Preliminary Offering Memorandum, the indemnity agreement contained in
this Section 8(a) shall not inure to the benefit of the Initial Purchaser
or controlling person of such Initial Purchaser which sold the Senior Notes
to the person asserting any such loss, claim, damage, liability or action,
to the extent that such sale was an initial resale by such Initial
Purchaser and any such loss, claim, damage, liability or action of such
Initial Purchaser is demonstrated by the Company to be a result of the fact
that both (i) to the extent
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<PAGE> 22
required by applicable law, a copy of the Offering Memorandum was not sent
or given to such person at or prior to the written confirmation of the sale
of such Senior Notes to such person, and (ii) the untrue statement or
omission in the Preliminary Offering Memorandum was corrected in the
Offering Memorandum unless, in either case, such failure to deliver the
Offering Memorandum was a result of non-compliance by the Company with
Section 5(c) hereof. The foregoing indemnity agreement is in addition to
any liability which the Company and the Guarantors may otherwise have to
the Initial Purchaser or to any controlling person of the Initial
Purchaser.
(b) The Initial Purchaser shall indemnify and hold harmless the
Company and each of the Guarantors, each of their respective directors and
officers and each person, if any, who controls the Company or any Guarantor
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company, any Guarantor or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering
Memorandum or the Offering Memorandum, or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company and the Guarantors by or on behalf of
the Initial Purchaser specifically for inclusion therein, and shall
reimburse the Company, the Guarantors and any such director, officer or
controlling person on a quarterly basis for any legal or other expenses
reasonably incurred by the Company, any Guarantor or any such director,
officer or controlling person in connection with investigating or defending
or preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity agreement is
in addition to any liability which the Initial Purchaser may otherwise have
to the Company, the Guarantors or any such director, officer or controlling
person.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 8 except to the extent
it has been materially prejudiced by such failure and, provided further,
that the failure to notify the indemnifying party pursuant to this Section
8 shall not relieve it from any liability which it may have to an
indemnified party otherwise than under this Section 8. If any such claim or
action shall be brought against an indemnified party, and it shall notify
the indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any
other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall
not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that any indemnified party shall have the
right to employ separate counsel in any such action and to participate in
the defense thereof but the fees
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<PAGE> 23
and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment thereof has been specifically authorized by
the indemnifying party in writing, (ii) such indemnified party shall have
been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the indemnifying party and in the reasonable judgment of such counsel it
is advisable for such indemnified party to employ separate counsel or (iii)
the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which
case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party, it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all
such indemnified parties, which firm shall be designated in writing by the
Initial Purchaser, if the indemnified parties under this Section 8 consist
of the Initial Purchaser or any of its controlling persons, or by the
Company and the Guarantors, if the indemnified parties under this Section 8
consist of the Company, any Guarantor or any of their respective directors,
officers or controlling persons. Each indemnified party, as a condition of
the indemnity agreements contained in Sections 8(a) and 8(b), shall use its
best efforts to cooperate with the indemnifying party in the defense of any
such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Company and the Guarantors
on the one hand and the Initial Purchaser on the other from the offering of
the Senior Notes or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Guarantors on the one hand
and the Initial Purchaser on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guarantors on the one hand and the Initial Purchaser on the other with
respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Senior Notes purchased
under this Agreement (before deducting expenses) received by the Company
and the Guarantors, on the one hand, and the total discounts and
commissions received by the Initial Purchaser with respect to the Senior
Notes purchased under this Agreement, on the other hand, bear to the total
gross proceeds from the offering of the Senior Notes under this Agreement,
in each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied
by the
23
<PAGE> 24
Company and the Guarantors, on the one hand, or the Initial Purchaser, on
the other hand, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company, the Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contributions pursuant to this
Section 8(d) were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 8(d) shall be
deemed to include, for purposes of this Section 8(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), the Initial Purchaser shall not be
required to contribute any amount in excess of the amount by which the
total discounts and commissions with respect to the Senior Notes purchased
by it and distributed to the public was offered to the public exceeds the
amount of any damages which the Initial Purchaser has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Securities Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The Initial Purchaser confirms that the statements with respect to
the offering of the Senior Notes set forth on the cover page of, and under
the caption "Plan of Distribution" in, the Offering Memorandum are correct
and constitute the only information furnished in writing to the Company and
the Guarantors by or on behalf of the Initial Purchaser specifically for
inclusion in the Offering Memorandum.
9. Termination. The obligations of the Initial Purchaser hereunder may be
terminated by the Initial Purchaser by notice given to and received by the
Company prior to delivery of and payment for the Senior Notes if, prior to that
time, any of the events described in Sections 7(e) or 7(r) shall have occurred
or if the Initial Purchaser shall decline to purchase the Senior Notes for any
reason permitted under this Agreement.
10. Reimbursement of Initial Purchaser's Expenses. If (a) the Company shall
fail to tender the Senior Notes for delivery to the Initial Purchaser otherwise
than for any reason permitted under this Agreement or (b) the Initial Purchaser
shall decline to purchase the Senior Notes for any reason permitted under this
Agreement (other than termination of this Agreement pursuant to Section 7(r),
but including termination of this Agreement pursuant to Section 9 as a result of
events described in Section 7(e)), the Company shall reimburse the Initial
Purchaser for the reasonable fees and expenses of its counsel and for such other
out-of-pocket expenses as shall have been incurred by them in connection with
this Agreement and the proposed purchase of the Senior Notes, and upon demand
the Company shall pay the full amount thereof to the Initial Purchaser.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate Department
(Fax: 212-528-8822), with a copy to Latham & Watkins, 885 Third Avenue, New
York, New York 10022, Attention: Kirk A. Davenport (Fax: 212-751-4864);
24
<PAGE> 25
(b) if to the Company or the Guarantors, shall be delivered or sent by
mail, telex or facsimile transmission to the address of the Company set
forth in the Offering Memorandum, Attention: William K. Friend (Fax:
617-821-6966), with a copy to Foley, Hoag & Eliot, One Post Office Square,
Boston, Massachusetts 02109, Attention: Barry B. White (Fax: 617-832-7000);
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Company shall be entitled to act and rely upon any
request, consent, notice or agreement given or made on behalf of the Initial
Purchaser.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the Initial Purchaser, the Company, the
Guarantors and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the Company
and the Guarantors contained in this Agreement shall also be deemed to be for
the benefit of the person or persons, if any, who control the Initial Purchaser
within the meaning of Section 15 of the Securities Act and (B) the indemnity
agreement of the Initial Purchaser contained in Section 8(b) of this Agreement
shall be deemed to be for the benefit of directors of the Company and each of
the Guarantors, officers of the Company and each of the Guarantors and any
person controlling the Company or any Guarantor within the meaning of Section 15
of the Securities Act. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
12, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
13. Survival. The respective indemnities, representations, warranties and
agreements of the Company, the Guarantors and the Initial Purchaser contained in
this Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Senior Notes and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
14. Definition of "Business Day." For purposes of this Agreement, "business
day" means any day on which the New York Stock Exchange, Inc. is open for
trading.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF NEW YORK.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[Signature page follows]
25
<PAGE> 26
If the foregoing correctly sets forth the agreement between the Company,
the Guarantors and the Initial Purchaser, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
HILLS STORES COMPANY
By: /s/ Gregory K. Raven
----------------------------------------
Name: Gregory K. Raven
Title: President and CEO
HILLS DEPARTMENT STORE COMPANY
By: /s/ Gregory K. Raven
----------------------------------------
Name: Gregory K. Raven
Title: President and CEO
HDS TRANSPORT, INC.
By: /s/ William K. Friend
----------------------------------------
Name: William K. Friend
Title: Vice President-Secretary
CRH INTERNATIONAL, INC.
By: /s/ William K. Friend
----------------------------------------
Name: William K. Friend
Title: Vice President-Secretary
CANTON ADVERTISING, INC.
By: /s/ William K. Friend
----------------------------------------
Name: William K. Friend
Title: Vice President-Secretary/Clerk
CORPORATE VISION, INC.
By: /s/ William K. Friend
----------------------------------------
Name: William K. Friend
Title: Vice President-Secretary/Clerk
<PAGE> 27
HILLS DISTRIBUTING COMPANY
By: /s/ William K. Friend
----------------------------------------
Name: William K. Friend
Title: Vice President-Secretary
Accepted:
LEHMAN BROTHERS INC.
By: /s/ Robert D. Redmond
------------------------------
Name: Robert D. Redmond
Title: Managing Director
<PAGE> 28
EXHIBIT A
Registration Rights Agreement
<PAGE> 29
SCHEDULE I
1. HILLS DEPARTMENT STORE COMPANY -- #31-1153510
2. HDS TRANSPORT, INC. -- #31-0799137
3. CRH INTERNATIONAL, INC. -- #31-0843874
4. CANTON ADVERTISING, INC. -- #31-1110263
5. CORPORATE VISION, INC. -- #04-3033031
6. HILLS DISTRIBUTING COMPANY -- #04-3078935
PRINCIPAL OFFICE FOR THE COMPANY AND EACH GUARANTOR: 15 DAN ROAD, CANTON,
MASSACHUSETTS 02021
<PAGE> 1
EXHIBIT 10.7
JAMES E. FELDT
EMPLOYMENT AGREEMENT
This will confirm our agreement under which you are to serve as
EXECUTIVE VICE PRESIDENT-GENERAL MERCHANDISE MANAGER of Hills Department Store
Company, a Delaware corporation (the "Subsidiary") and of Hills Stores Company,
a Delaware corporation (the "Parent"), together collectively referred to as the
"Company."
1. Term. The Company will employ you, and you accept employment,
as provided herein, for a term beginning on the Effective Date (as defined in
paragraph 6) and ending on the third anniversary of the Effective Date, unless
sooner terminated as provided in paragraph 4.
2. Duties and Responsibilities. During the term of employment, you
shall be EXECUTIVE VICE PRESIDENT-GENERAL MERCHANDISE MANAGER of the Company and
your primary duties will be the SENIOR SUPERVISION OF ALL MERCHANDISING
activities on behalf of the Company.
3. Compensation and Benefits.
(a) Your compensation ("Base Compensation") during the term of this
agreement shall be at the rate of $355,000.00 per year. Base Compensation shall
be reviewed on an annual basis and increased if the Compensation Committee of
the Board of Directors deems it appropriate. No decrease in Base Compensation
will be permitted during the term of the Agreement. In accordance with the
Company's practice for its senior executives, you will be paid twice each month.
(b) You shall be entitled to participate in any bonus, stock option or
other incentive compensation plans, profit-sharing plans, retirement plans, life
and health insurance plans, vacation and other benefit plans which are made
generally available to executives of the Company at a level commensurate with
your position and/or years worked for the Company. You shall also be entitled to
such other perquisites as the Company or the Compensation Committee of the Board
of Directors deem appropriate.
(c) You shall be entitled to reimbursement for your ordinary and
necessary business expenses, travel and entertainment incurred in the
performance of your services hereunder. You shall provide the Company with
documentation of such expenses in accordance with the Company's normal
practices.
4. Termination.
(a) By the Company. Your employment hereunder shall terminate upon
your death and may be terminated at the option of the Company (x) forthwith upon
delivery of Notice of Termination for Cause, (y) upon 90 days' Notice of
Termination in the case of Disability or (z) upon 90 days' Notice of Termination
without Cause.
1
<PAGE> 2
(i) Upon termination by the Company for Cause, the Company shall have
no further obligations whatsoever to you hereunder, other than for payment of
any unpaid Base Compensation (as hereinafter defined) and vested benefits under
any retirement plans to which you are a participant in accordance with the terms
of the specific plans, accrued to the date of termination, and reimbursement of
any unused vacation pay accrued to the date of termination and any reimbursable
expenses incurred prior to the date of termination.
(ii) Upon termination by virtue of death or Disability, your Base
Compensation shall cease to accrue as of the effective date of termination, but
you or your estate shall be entitled to payment of: any unpaid Base Compensation
accrued to the date six (6) months following the date of termination; a pro rata
portion of any bonuses or other incentive compensation payable pursuant to
paragraph 3(b) with respect to the fiscal year of termination, determined on the
basis of the portion of such fiscal year during which you were employed
hereunder; and vested benefits under any retirement plans to which you are a
participant (in accordance with the terms of the specific plans) accrued prior
to date of termination; and reimbursement of any unused vacation pay accrued to
the date of termination and any reimbursable expenses incurred prior to the date
of termination.
(iii) Upon termination, by the Company without Cause (other than for
reasons of death or Disability) or by you, pursuant to paragraph 4(b), you
shall, subject to the following sentence, continue to receive your Base
Compensation twice a month in accordance with paragraph 3(a) and the Company
shall maintain in full force and effect Insurance Benefits (as defined and
limited below), in each case for the full term of this Agreement or the date
twelve (12) months after the date (the "Notice Date") on which a Notice of
Termination is given, whichever is later; and you shall be further entitled to
receive: (A) vested benefits under any retirement plans to which you are a
participant in accordance with the terms of the specific plans accrued prior to
date of termination; and (B) reimbursement of any unused vacation pay accrued to
the date of termination and any reimbursable expenses incurred prior to the date
of termination. Should your employment be terminated without Cause, you shall
have an obligation to use reasonable efforts to seek other employment
appropriate to your skill and experience, and to promptly notify the Company
upon obtaining any such employment; and your Base Compensation shall be reduced
by the amount of any direct compensation earned by you and paid to you. For
purposes of this paragraph 4(a)(iii) and paragraph 6, "Insurance Benefits" shall
mean all life and health insurance or other similar plans in which you were
entitled to participate immediately prior to the date of termination. If, your
continued participation in any or all such plans is not possible under the
general terms and provisions thereof because you are no longer deemed to be an
employee of the Company, the Company itself shall pay or provide for payment of
such Insurance Benefits.
(b) By the Employee. Subject to the conditions set forth below, you
may terminate your employment hereunder in the event of occurrence of any of the
following:
(i) A material breach by the Company of any of the provisions of this
Agreement, which failure or breach shall have continued for thirty days after
written notice from you to the Company specifying the nature of such failure or
breach; or
2
<PAGE> 3
(ii) The Company's failure to retain you as its EXECUTIVE VICE
PRESIDENT-GENERAL MERCHANDISE MANAGER (other than as a result of an effective
promotion); or
(iii) A significant change in the nature or scope of your
responsibilities, authorities, powers, functions or duties (other than a change
resulting from an effective promotion).
Your right to terminate your employment under paragraphs 4(b)(i),
(ii), (iii) is conditioned upon your giving written notice to the President,
with a copy to the Vice President-Secretary, of your decision to terminate
employment not later than three months after the occurrence of the event giving
rise to the right to terminate. Such termination of employment shall be
effective one month after your written notice has been delivered to the Company,
provided the occurrence specified in your notice shall then be continuing.
(c) In addition to the reasons set forth in paragraph 4(b), you may
terminate your employment hereunder at any time, with or without good cause,
upon 90 days' Notice of Termination to the Company. In the event of a
termination by you pursuant to this paragraph 4(c), the Company shall have no
further obligations whatsoever to you hereunder, other than for payment of any
unpaid Base Compensation accrued to the date of termination and vested benefits
under any retirement plans to which you are a participant in accordance with the
terms of the specific plans accrued prior to date of termination; and
reimbursement of any properly reimbursable expenses incurred prior to the date
of termination.
(d) As used herein:
- "Cause" shall mean (i) the willful failure by you to perform
your functions and assume your responsibilities in accordance with the terms of
this Agreement, which failure amounts to material neglect of your duties, after
a written demand for substantial performance is delivered to you by the Company,
(ii) the willful engagement by you in conduct which is materially injurious to
the Company or any of its subsidiaries or affiliates, monetarily or otherwise,
(iii) the misappropriation (including the unauthorized use or disclosure of
confidential or proprietary information of the Company or any of its
subsidiaries or affiliates) or embezzlement with respect to the Company or any
of its subsidiaries or affiliates, (iv) a conviction of or guilty plea or
confession by you to any fraud, conversion, misappropriation, embezzlement or
felony, or (v) your failure to substantially perform any material covenant to be
performed by you hereunder after a written demand for substantial performance is
delivered to you by the Company, or the taking of any action in the course of
your employment under this Agreement that is known by you to have been
prohibited by Company policy or by this Agreement.
- "Disability" shall mean that, as a result of any physical or
mental disability, you are unable to perform your major duties hereunder for a
continuous period of 120 days or a total of at least 180 days in any period of
365 consecutive days.
3
<PAGE> 4
(e) Any purported termination of your employment shall be communicated
by written Notice of Termination from one party to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
5. Covenants.
(a) You recognize that the knowledge of, information concerning and
relationship with customers, suppliers and agents, and the knowledge of the
Company's business methods, systems, plans and policies which you will
establish, receive or obtain as an employee of the Company, are valuable and
unique assets of the business of the Company. You will not, during or within two
(2) years after the term of your employment, disclose any such knowledge or
information pertaining to the Company, its customers, suppliers, agents,
policies or other aspects of its business, for any reason or purpose whatsoever,
except pursuant to your duties hereunder or as otherwise authorized by the
Company in writing. The foregoing restriction shall not apply, following
termination of your employment hereunder, to knowledge or information which (i)
is in or enters the public domain without violation of this Agreement or other
obligations of confidentiality by you or your agents or representatives, (ii)
you can demonstrate was in your possession on a non-confidential basis prior to
the commencement of your employment with the Company, or (iii) you can
demonstrate was received or obtained by you, on a non-confidential basis from a
third party who did not acquire it wrongfully or under an obligation of
confidentiality, subsequent to the termination of your employment hereunder.
(b) All memoranda, notes, records or other documents made or compiled
by you or made available to you while employed concerning customers, suppliers,
agents or personnel of the Company, or the Company's business methods, systems,
plans and policies, shall be the Company's property and shall be delivered to
the Company on termination of your employment or at any other time on request.
(c) During the term of your employment and for two (2) years
thereafter, you shall not, except pursuant to and in furtherance of your duties
hereunder, directly or indirectly solicit or contact any employee of the Company
with a view to inducing or encouraging such employee to leave the employ of the
Company for the purpose of being hired by you, an employer affiliated with you
or any competitor of the Company.
(d) You acknowledge that the provisions of this paragraph 5 are
reasonable and necessary for the protection of the Company and that the Company
will be irrevocably damaged if such covenants are not specifically enforced.
Accordingly, you agree that, in addition to any other relief to which the
Company may be entitled in the form of actual or punitive damages, the Company
shall be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction for the purposes of restraining you from any actual or threatened
breach of such covenants.
4
<PAGE> 5
(e) In the event that, following the termination of this Agreement,
you are entitled to receive any further payments other than for compensation or
other amounts accrued prior to termination or expiration of this Agreement, such
payments shall nonetheless cease and the Company shall no longer be obligated to
make such payments if there is a material breach of any of the covenants in this
paragraph 5 and you shall forthwith upon demand of the Company repay any such
amounts paid to you subsequent to the date such breach occurred.
6. Effective Date of Agreement. This Agreement shall be effective
(the "Effective Date") as of MARCH 25, 1996.
7. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the
parties hereto with regard to the subject matter hereof, superseding all prior
understandings and agreements whether written or oral. This Agreement may not be
amended or revised except by a writing signed by the parties.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns, but may not be assigned
by either party without the prior written consent of the other.
(c) Any notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly made when
delivered by fax and courier delivery, addressed as follows (or to such other
address as you or the Company may specify by notice hereunder to the other):
If to you:
JAMES E. FELDT
85 SKYLINE DRIVE
WESTWOOD, MA 02093
If to the Company and the Parent:
Hills Stores Company
15 Dan Road
Canton, Massachusetts 02021
Attention: Vice President-Secretary
(d) Captions have been inserted solely for convenience of reference
and in no way define, limit or describe the scope or substance of any provisions
of this Agreement.
(e) The provisions of this Agreement are severable, and the invalidity
of any provision shall not affect the validity of any other provision.
(f) This Agreement shall be construed under and governed by the
internal laws of the Commonwealth of Massachusetts.
5
<PAGE> 6
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument. If the foregoing correctly sets forth
our understanding on the subject matter hereof, kindly sign and return to the
Company the enclosed copy hereof, which will thereupon become our binding
agreement.
Sincerely,
Hills Department Store Company
By:/s/ Gregory K. Raven
-------------------------
Gregory K. Raven
President and Chief Executive Officer
Hills Stores Company
By:/s/ William K. Friend
-------------------------
William K. Friend
Vice President-Secretary
Agreed:
Employee
/s/ James E. Feldt
- -------------------------
James E. Feldt
6
<PAGE> 1
EXHIBIT 10.8
THIRD AMENDMENT AND CONSENT dated as of April 16, 1996 (this "Amendment")
to the Credit Agreement dated as of August 21, 1995, as amended (the "Credit
Agreement"), among Hills Stores Company, a Delaware corporation (the "Parent"),
Hills Department Store Company, a Delaware corporation (the "Borrower") and a
wholly owned subsidiary of the Parent, the financial institutions party thereto
(the "Lenders"), the Co-Agents and Managing Agent named in the Credit Agreement
and Chemical Bank, as agent for the Lenders (in such capacity, the
"Administrative Agent") and as Fronting Bank.
WHEREAS, the Borrower and the Parent have requested that the Lenders (a)
amend certain terms and provisions of the Credit Agreement and (b) consent to
the taking of certain actions by the Borrower and the Parent;
WHEREAS, all capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Credit Agreement; and
WHEREAS, the Lenders are willing, on the terms, subject to the
conditions and to the extent set forth below, to effect such amendments and
grant such consent.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Borrower, the Parent and the
Lenders hereby agree, on the terms and subject to the conditions set forth
herein, as follows:
SECTION 1. Amendments.
(a) The definition of the term "Change in Control" set forth in
Section 1.01 of the Credit Agreement is hereby amended by (i) adding the text
"(or the Parent otherwise becomes aware that any such person has become the
owner of such percentage of stock)" before the word "or" at the end of clause
(a)(i) thereof, (ii) by deleting the word "or" at the end of clause (b) of such
definition and (iii) by adding the following text at the end of such definition:
"or (d) a majority of the members of the board of directors of the Parent are
not Continuing Directors".
(b) The following new definition is added to Section 1.01 of the
Credit Agreement in appropriate alphabetical order:
1
<PAGE> 2
"Continuing Director" shall mean, as of any date of
determination, any member of the board of directors of the
Parent who (i) was a member of such board of directors on April
16, 1996, or (ii) was nominated for election or elected to such
board of directors with the approval of a majority of the
Continuing Directors who were members of such board of directors
at the time of such nomination or election.
(c) the definition of the term "Maturity Date" set forth in
Section 1.01 of the Credit Agreement is hereby deleted and replaced in its
entirety with the following text:
"Maturity Date" shall mean April 30, 1998.
(d) Section 6.04 of the Credit Agreement is hereby amended by
deleting clauses (h) and (i) thereof and substituting the following text
therefor:
"(h) promptly, a copy of any amendment or waiver of any
provision of the Senior Note Indenture, the Refinancing Note
Indenture, the Senior Notes, the Refinancing Notes or the
Deferred Tax Obligations;
(i) a copy of all notices (other than regarding any
scheduled or mandatory repayments), certificates, financial
statements and reports, as and when delivered by or on behalf of
the Parent or the Borrower to the holders of the Senior Notes
under the Senior Note Indenture or to the holders of the
Refinancing Notes under the Refinancing Note Indenture;"
(e) Section 7.01 of the Credit Agreement is hereby modified by
(i) deleting the amount of "$150,000,000" set forth in clause (i) thereof and
substituting the amount "$165,000,000" therefor and (ii) adding the following
text at the end of clause (d) thereof:
"provided that the aggregate amount of Indebtedness
under the Senior Notes and any Refinancing Notes shall not
exceed $200,000,000 at any time after May 31, 1996".
(f) Section 7.03 of the Credit Agreement is hereby amended by
(i) deleting the word "and" before the text "(ii) set forth therein and
substituting a comma therefor and (ii) adding the following text to the end of
such Section:
"and (iii) the total consideration received in such Sale
and Lease-Back Transaction is at least equal to the fair market
value (as determined in good faith by the Board of Directors of
the Parent, the Borrower or such Subsidiary, as the case may be)
of the property that is the subject of such Sale and Lease-Back
Transaction".
(g) Section 7.07 of the Credit Agreement is hereby amended (i)
by deleting the amount "$1,000,000" set forth therein and substituting the
amount "$2,000,000" therefor and (ii) by deleting the words "and Senior Notes"
in clause 7.07 (b)(i)(G) of such Section and substituting the text",
Refinancing Notes and Senior Notes" therefor.
2
<PAGE> 3
(h) Section 7.08(a) of the Credit Agreement is hereby amended by
(i) adding the text "(i)" after the text "provided that" set forth therein, (ii)
adding the text "a majority of the disinterested members of" before the text
"the Board of Directors" set forth therein and (iii) adding the following text
to the end of such clause (a):
"and (ii) if any such transaction or series of
transactions involves aggregate consideration in excess of
$10,000,000, the Borrower delivers to the Administrative Agent a
copy of an opinion as to the fairness to the Borrower or the
Parent of such transaction or series of transactions from a
financial point of view issued by an accounting, appraisal or
investment banking firm of national standing (or if an opinion
is unavailable as to fairness from a financial point of view
with respect to any transaction for which a fairness opinion is
not customarily rendered, then an opinion that such transaction
meets the requirements of this clause (a) other than the
requirement to provide an opinion as to fairness from a
financial point of view); provided that any employment or
consulting agreement entered into by the Parent or any of its
Subsidiaries in the ordinary course of business and consistent
with the past practice of the Parent or such Subsidiary shall
not be subject to this Section".
(i) Section 7.12 of the Credit Agreement is hereby amended by
deleting the table included in such Section and replacing such table with the
following table:
PERIOD RATIO
From July 29, 1995 through and including
October 28, 1995 1.6:1
October 29, 1995 through and including
November 1, 1997 1.5:1
After November 1, 1997 1.6:1
(j) Section 7.13 of the Credit Agreement is hereby amended by
deleting the table included in such Section and replacing such table with the
following table:
PERIOD RATIO
On July 29, 1995 1.5:1
From July 30, 1995, through and including
October 28, 1995 1.15:1
From October 29, 1995, through and including
February 3, 1996 1.35:1
From February 4, 1996, through and including
May 4, 1996 1.25:1
3
<PAGE> 4
From May 5, 1996, through and including
August 3, 1996 1.35:1
From August 4, 1996, through and including
May 3, 1997 1.45:1
From May 4, 1997, through and including
August 2, 1997 1.55:1
After August 2, 1997 1.65:1
(k) Section 7.14 of the Credit Agreement is hereby amended by
(i) deleting the text "January 30, 1998,.65" set forth therein and substituting
the text "January 30, 1997,.70" therefor and (ii) deleting the text "January
30, 1998,.60" set forth therein and substituting the text "January 30, 1997,
.65" therefor.
(l) Section 7.16 of the Credit Agreement is hereby amended by
(i) deleting the amount "$52,500,000" set forth therein and substituting the
amount "$60,000,000" therefor and (ii) deleting "$55,000,000" set forth therein
and substituting the amount "$63,000,000" therefor.
(m) Section 7.17 of the Credit Agreement is hereby amended by
adding the text: "or any comparable change of control provision of the
Refinancing Note Indenture" at the end of clause (b)(ii) of such Section.
SECTION 2. Consents.
The Lenders hereby consent (a) to the issuance by the Parent of
Refinancing Notes in an aggregate principal amount of up to $200,000,000
containing the terms and provisions described in Exhibit A hereto (and the
issuance of the Refinancing Notes shall be deemed to be in compliance with the
last paragraph of Section 7.01 of the Credit Agreement), (b) the repurchase by
the Parent out of the net proceeds of the issuance of the Refinancing Notes of
(i) any Senior Notes tendered pursuant to the offer of redemption (the
"Redemption Offer") to be mailed on or before April 19, 1996, in accordance with
Section 1103 of the Senior Note Indenture as a result of the 1995 Change of
Control, (ii) Senior Notes, if any, acquired by the Parent through open market
or other direct purchases or (iii) Senior Notes, if any, redeemed by the Parent
in accordance with the terms of Section 1101 of the Senior Note Indenture and
(c) the deposit of a portion of the proceeds of the Refinancing Notes into a
secured escrow account and the redemption of a portion of such Refinancing
Notes, all in the manner and in the amounts described in Exhibit A under the
heading "Escrow of Proceeds; Special Mandatory Redemption".
SECTION 3. Representations and Warranties. Each of the Borrower and
the Parent represents and warrants to each of the Lenders that:
(a) The execution, delivery and performance by the Borrower and
the Parent of this Amendment, the issuance of the Refinancing Notes described in
Exhibit A and the redemption or repurchase of Senior Notes with the proceeds of
the issuance of the Refinancing Notes (i) have been duly authorized by all
4
<PAGE> 5
requisite corporate and, if required, stockholder action and (ii) will not (A)
violate (1) any provision of law, statute, rule or regulation, or of the
certificate of articles of incorporation or other constitutive documents or
by-laws of the Parent or any of its Subsidiaries, (2) any order of any
Governmental Authority or (3) any provision of any indenture, agreement or other
instrument to which Parent or any of its Subsidiaries is a party or by which any
of them or any of their property is or may be bound, (B) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under any such indenture or any other material agreement or
other instrument or (C) result in the creation or imposition of any Lien upon
any property or assets of the Parent or any of its Subsidiaries.
(b) This Amendment has been duly executed and delivered by the
Borrower and the Parent and constitutes a legal, valid and binding obligation of
the Borrower and the Parent, as the case may be, enforceable against the
Borrower and the Parent, as the case may be, in accordance with its terms,
subject to, or except as enforceability may be limited by, applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought in a proceeding in equity or at law).
(c) Upon completion of the Redemption Offer, the Senior Notes
shall not be subject to any mandatory redemption or other obligation of the
Parent or the Borrower to puchase such Senior Notes as a result of the 1995
Change of Control pursuant to Section 1103 of the Senior Note Indenture or
otherwise.
(d) The representations and warranties set forth in Article IV
of the Credit Agreement are true and correct in all material respects on and as
of the date hereof with the same effect as though made on and as of the date
hereof, except to the extent that such representations and warranties expressly
relate to an earlier date.
SECTION 4. Loan Documents. This Amendment shall be a Loan Document
for all purposes.
SECTION 5. Effectiveness. This Amendment shall become effective as of
the date hereof when the Administrative Agent shall have received copies hereof
that, when taken together, bear the signatures of each of the Borrower, the
Parent and the Required Lenders, provided that the amendments to the Credit
Agreement set forth in Section 1(a), 1(b), 1(c), 1(e)(ii), 1(f), 1(h) and 1(m)
shall not become effective until the issuance by the Parent of the Refinancing
Notes described in Exhibit A.
SECTION 6. Notices. All notices hereunder shall be given in accordance
with the provisions of Section 11.01 of the Credit Agreement.
SECTION 7. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
5
<PAGE> 6
SECTION 8. No Novation. Except at expressly set forth herein, this
Amendment shall not by implication or otherwise limit, impair, constitute a
waiver of or otherwise affect the rights and remedies of any party under the
Credit Agreement, nor alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the Credit
Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect. This Amendment shall apply and be effective
only with respect to the provisions of the Credit Agreement specifically
referred to herein.
SECTION 9. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract. Delivery of an executed
counterpart of a signature page of this Amendment by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Amendment.
SECTION 10. Headings. Section headings used herein are for convenience
of reference only, are not part of this Amendment and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Amendment.
IN WITNESS WHEREOF, the Borrower, the Parent and the Required Lenders
have caused this Amendment to be duly executed by their duly authorized
officers, all as of the date and year first above written.
HILLS STORES COMPANY,
by /s/ William K. Friend
------------------------------
Name: William K. Friend
Title: Vice President-Secretary
and Corporate Counsel
HILLS DEPARTMENT STORE COMPANY,
by /s/ William K. Friend
------------------------------
Name: William K. Friend
Title: Vice President-Secretary
and Corporate Counsel
CHEMICAL BANK, individually, as
Administrative Agent and as
Fronting Bank,
by /s/ Neil R. Boylan
------------------------------
Name: Neil R. Boylan
Title: Vice President
6
<PAGE> 7
NATWEST BANK N.A., individually and
as Managing Agent,
by /s/ Therese M. Earley
-------------------------
Name: Therese M. Earley
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
individually and as Co-Agent,
by
-------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
individually and as Co-Agent,
by
-------------------------
Name:
Title:
INTERNATIONAL NEDERLANDEN (U.S.)
CAPITAL CORPORATION, individually
and as Co-Agent,
by /s/ Barry Iseley
-------------------------
Name: Barry Iseley
Title: Senior Vice President
THE CIT GROUP/BUSINESS CREDIT INC.,
individually and as Co-Agent,
by /s/ John J. Lee
-------------------------
Name: John J. Lee
Title: Vice President
7
<PAGE> 8
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES,
by /s/ Craig D. Meisner
-------------------------
Name: Craig D. Meisner
Title: Vice President
by /s/ Andrew K. Mittag
-------------------------
Name: Andrew K. Mittag
Title: Vice President
FIRST SOURCE FINANCIAL LLP,
by FIRST SOURCE FINANCIAL, INC.,
its agent and manager
by
-------------------------
Name:
Title:
NATIONAL CITY BANK,
by /s/ Robert C. Rowe
-------------------------
Name: Robert C. Rowe
Title: Vice President
SANWA BUSINESS CREDIT CORPORATION,
by /s/ Peter L. Skavla
-------------------------
Name: Peter L. Skavla
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION,
by /s/ Michael S. Burns
-------------------------
Name: Michael S. Burns
Title: Vice President
8
<PAGE> 9
BANKAMERICA BUSINESS CREDIT
CORPORATION,
by /s/ Lisa Palmieri
-------------------------
Name: Lisa Palmieri
Title: Sr. Account Executive
CONGRESS FINANCIAL CORPORATION, INC.,
by /s/ Ann M. Karcinsky
-------------------------
Name: Anna M. Karcinsky
Title: A.V.P.
DEUTSCHE FINANCIAL SERVICES
HOLDING CORPORATION,
by /s/ Robert E. McIntyre
-------------------------
Name: Robert E. McIntyre
Title: Vice President
LASALLE BUSINESS CREDIT, INC.,
by /s/ Joseph R. Costanza
-------------------------
Name: Joseph R. Costanza
Title: F.V.P.
MIDLANTIC BANK, N.A.,
by /s/ Susan M. Graham
-------------------------
Name: Susam M. Graham
Title: Vice President
9
<PAGE> 1
EXHIBIT 11
HILLS STORES COMPANY AND SUBSIDIARIES
<TABLE>
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Quarter Ended
-------------------------
May 4, April 29,
1996 1995
---------- -----------
<S> <C> <C>
Weighted average primary shares outstanding
- -------------------------------------------
Weighted average number of common shares
assumed to be outstanding during the period 10,165,710 9,665,659
Assumed conversion of preferred stock - -
Assumed exercise of stock options - -
Assumed exercise of stock rights - -
Assumed exercise of stock warrants - -
---------- ---------
10,165,710 9,665,659
========== =========
<CAPTION>
Weighted average fully-diluted shares outstanding (1)
- -----------------------------------------------------
Weighted average number of common shares assumed
to be outstanding during the period 10,254,944 10,399,194
Assumed conversion of preferred stock - -
Assumed exercise of stock options - -
Assumed exercise of stock rights - -
Assumed exercise of stock warrants - -
---------- ----------
10,254,944 10,399,194
========== ==========
<FN>
The calculation of the weighted average fully-diluted shares outstanding assumes
that actual conversions of Preferred Stock during the quarter occurred as of the
beginning of the period being reported on. The conversion of Preferred Stock,
and the exercise of stock options, stock rights, and stock warrants was not
assumed as the result would be anti-dilutive.
(1) This calculation is presented in accordance with Item 601 of Regulation
S-K although it is not required by APB Opinion No. 15.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> MAY-04-1996
<CASH> 166,427
<SECURITIES> 0
<RECEIVABLES> 31,596
<ALLOWANCES> (3,393)
<INVENTORY> 410,330
<CURRENT-ASSETS> 644,706
<PP&E> 228,414
<DEPRECIATION> (46,318)
<TOTAL-ASSETS> 1,079,808
<CURRENT-LIABILITIES> 470,285
<BONDS> 337,317
<COMMON> 103
21,498
0
<OTHER-SE> 243,069
<TOTAL-LIABILITY-AND-EQUITY> 1,079,808
<SALES> 370,248
<TOTAL-REVENUES> 370,248
<CGS> 270,985
<TOTAL-COSTS> 270,985
<OTHER-EXPENSES> 115,937
<LOSS-PROVISION> 487
<INTEREST-EXPENSE> 13,266
<INCOME-PRETAX> (29,940)
<INCOME-TAX> (15,202)
<INCOME-CONTINUING> (14,738)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,738)
<EPS-PRIMARY> (1.45)
<EPS-DILUTED> (1.45)
</TABLE>
